New Zealand's estimated liabilities under the Kyoto Protocol are looking a lot better than they were last year but the Government expects the figures to continue bouncing around until the day of reckoning arrives in 2015.

A Ministry for the Environment report released today showed the liability had swung from an estimated deficit of $546 million last year to an estimated surplus of $241 million this year.

The liability is an estimate of how much New Zealand will have to spend to buy carbon credits if climate change emissions are not reduced to levels agreed under the Kyoto Protocol, or how much its credits would be worth if its emissions reduce.

The cost is based on Kyoto Protocol units - a unit is equivalent to one tonne of greenhouse gas converted to its carbon dioxide equivalent.

Environment Minister Nick Smith said the latest estimate was positive but he was cautious about what was going to happen between now and 2015, when the liability becomes effective.

The report shows the main reasons for the swing from deficit to surplus was the 2007/08 drought and improved information on carbon storage in forests.

"It is good news that we may exceed our Kyoto target but we need to be cautious of these projections given their volatility," he said.

"It is difficult for the Government to make sound climate change policy when projections have ranged from a 55 million tonne surplus in 2002 to a 64 million tonne deficit in 2006, and when the figures over the past year have varied by 31 million tonnes."

Dr Smith said the drought caused significant reductions in animal emissions due to fewer cattle, sheep and deer.

Deforestation emissions were also down due to new data showing smaller trees being felled in land use changes.

Another improvement was the result of more accurate data on nitrous oxide agricultural emissions.

Dr Smith said there had been no significant change in emissions from the energy, transport and industrial sectors.

"These figures do not signal any progress in abating New Zealand's gross greenhouse gas emissions, which are 23 per cent above 1990 levels," he said.

"We are just fortunate that more than 600,000 hectares of new forests were planted in the 1990s that are growing strongly and offsetting our continued growth in energy and transport emissions."

Dr Smith said New Zealand still faced a major challenge to reduce its gross greenhouse gas emissions and the Government would continue to advance "pragmatic policies".

- NZPA