Prime Minister Jacinda Ardern is defending the proposed 5 percent tax on agriculture emissions if the sector is brought into the Emissions Trading Scheme (ETS).
The Government has put forward two short-term options for action on agriculture's climate pollution, one suggested by the Interim Climate Change Committee (ICCC) and one from the farming sector.
Farmers want to leave agriculture out of the ETS altogether, with the industry paying nothing for emissions until 2025. The agriculture sector would instead enter into a voluntary agreement with the Government.
- Dairy group calls on change to methane target
- Government reaches agreement with farming leaders on climate change
- Climate change risks to be assessed as New Zealand's emissions labelled 'disturbing'
The second option, presented by the ICCC, would bring agriculture into the ETS between 2021 and 2025, and charge processors like Fonterra for 5 percent of their agriculture emissions. That money would be funnelled back into the sector.
"We are now consulting on the options for what we do in the meantime while we build a fair system to price emissions from 2025," Agriculture Minister Damien O'Connor said on Tuesday.
In the long-term post-2025, the Government is proposing that farmers will not go into the ETS at all, but instead a separate levy-rebate scheme for their emissions would be created.
Greenpeace executive director Dr Russel Norman said while he welcomes the Government's proposal to tax emissions, he said the two options proposed in the Government's discussion document don't go far enough.
"It's truly astounding that the strongest option put forward by the Government to deal with our biggest emitter is to delay action for another two years, after which agribusiness will pay a paltry 5 percent of their emissions."
Ardern defended the proposal on Tuesday in Wellington when asked about the 95 percent discount. She said it's about "a transition".
"What we don't want to see is bringing something fully into the [Emissions Trading Scheme] and for that industry to then collapse under the weight of that.
"If we're going to take action on climate change, ultimately we have to find a way to reduce emissions, and with technological research and development, there are ways that we can do that, including with farming practice."
The ICCC estimated that the price incurred by farmers bringing agriculture into the ETS at 5 percent would be $0.01 per kilogram of milk solid.
Dr Norman labelled it "laughable". He said reducing agriculture emissions won't happen if farmers have to pay one cent per kilogram of milk solids.
"Agriculture must be immediately brought fully into the ETS so that New Zealand's biggest polluters are finally forced to start paying for their massive climate bill."
Victoria University of Wellington Professor of Climate Change, Dave Frame, agreed with Dr Norman. He said the approach of putting methane in the ETS with a 95 percent free allocation for farmers is a "poor idea".
"The price implied by the ICCC's recommended approach is too small a disincentive against further expansion of the dairy herd, because the price is simply too small to change behaviour."
Taxing agricultural emissions is part of the Government's plan to incentivise the agriculture sector to reduce its emissions. Currently emissions from all sectors, except methane and nitrous oxide from agriculture, are taxed.
Biological emissions from agriculture make up 48 percent of New Zealand's reported emissions - 92 percent of which are methane and nitrous oxide emissions from livestock and approximately 6 percent from nitrogen fertiliser.
In 2016, under the Paris Agreement, New Zealand committed to reducing emissions by 30 percent below 2005 levels by 2030. The Government hopes its Zero Carbon Bill will help it achieve this target.
The Government has committed any funds raised through pricing emissions to be recycled back to the sector to support farmers to reduce emissions.