Climate change: Farmers to pay for emissions from 2025 under proposed scheme, Jacinda Ardern says they'll benefit from being world-leading

Farmers will have to pay for agricultural emissions under a scheme proposed by the Government in response to advice from the sector and the Climate Change Commission.

It's proposed that farmers start paying levies on emissions from 2025. The price will be set by Cabinet based on advice from the Climate Change Commission and some input from the sector.

A consultation document released publicly on Tuesday shows the levies will apply to farmers and growers that are GST registered and meet certain livestock and fertiliser-use thresholds. The business owners will be legally responsible to report and pay the emissions. 

A centralised calculator will help farmers determine their emissions bill, based on their farm area, livestock numbers, livestock production and nitrogen fertiliser use.

There would be separate levy prices for long-lived gases and biogenic methane. 

Prices for long-lived gases - like carbon dioxide and nitrous oxide - would be set annually and linked to the New Zealand Unit price. This price would be discounted and phased down over time. The biogenic methane levy would be adjusted "based on progress towards domestic methane targets". The Government's looking for advice on how often the methane price should be reviewed.

The Zero Carbon Act, passed in 2019, set a domestic target of cutting greenhouse gases (except biogenic methane) to net-zero by 2050. Biogenic methane must be cut by 10 percent below 2017 levels by 2030 and to 24-47 percent below 2017 levels by 2050. 

An incentive payment would be created for farmers using different technologies and practices to reduce their emissions. 

"These incentives will attach a value to approved mitigations, and can help farmers and growers reduce their total emissions bill," the consultation document says. "We will incorporate new practices as new science and mitigations are proven or become available."

The consultation document says the Government considers the Emissions Trading Scheme (ETS) to be the "most appropriate mechanism to reward all sequestration from vegetation". 

"To support this, we propose a system where those willing can invest or co-invest in the necessary science and measurement required to include new vegetation categories into the NZ ETS and Aotearoa New Zealand’s international accounting.

"In the short term, the Government proposes a simple system that sits adjacent to the farm-level pricing system, and pays farmers and growers (from levy revenue) for additional sequestration occurring in riparian vegetation and arising from managing indigenous vegetation."

Revenue from the levies will fund the incentive and sequestration payment system, with any remaining money funding the administration of the pricing scheme and an advisory body.

However, the consultation document also shows the Government's aware it may be difficult to having the pricing system operating in three years. 

"While the Government is aiming to introduce a farm-level pricing system in 2025, this is likely to be challenging to achieve. As a contingency, the Government is seeking feedback on introducing an interim, processor-level levy in 2025 if the farm-level levy is not operational by then."

The Government released its proposal on Tuesday.
The Government released its proposal on Tuesday. Photo credit: Getty Images.

Prime Minister Jacinda Ardern said the proposal "is an important step forward in New Zealand's transition to a low emissions future and delivers on our promise to price agriculture emissions from 2025".

"The proposal aims to give New Zealand farmers control over their farming system, providing the ability to reduce costs through revenue raised from the system being recycled back to farmers, which will fund further research, tools and technology and incentives to reduce emissions," Ardern said. 

No other country has yet developed a system for pricing agricultural emissions, the Prime Minister said, so New Zealand farmers "are set to benefit from being first movers". 

"Cutting emissions will help New Zealand farmers to not only be the best in the world but the best for the world; gaining a price premium for climate-friendly agricultural products while also helping to boost export earnings," she said. 

The proposal is the Government's response to He Waka Eke Noa and advice from the Climate Change Commission. Consultation on the scheme is now open and runs until November 18.

He Waka Eke Noa is a partnership between government agencies, the primary sector and iwi. In June, it presented a set of recommendations for an alternative to the ETS for pricing agricultural emissions. It suggested a 'farm-level split-gas levy' and a package of incentives to support farmers bring down their emissions. 

Ministers considered the recommendations alongside advice from the Climate Change Commission, leading to the release of the consultation document on Tuesday.

In a statement on Tuesday, He Waka Eke Noa director Kelly Forster said those involved in the partnership are pleased key recommendations have been followed, but are concerned by some suggestions the Government has gone with alternatives to. 

"He Waka Eke Noa's recommendations were however designed as a carefully balanced package that was as equitable as possible across all parts of the primary sector," she said.  

"The Government has proposed alternative approaches in some areas, such as how sequestration is recognised, which may fundamentally alter the balance and could have significant implications for sheep, beef and deer farmers.   

"Partners will need to carefully work through the detail to understand the impact and it will be important to discuss these with their farmers and growers."

Beef + Lamb New Zealand also raised questions about how sequestration is recognised. Chairman Andrew Morrison said the categories of sequestration recognised have been reduced under the proposed scheme.

"We need to clarify these changes with the Government and understand the intent and practical impact," he said.

"New Zealand sheep and beef farmers have more than 1.4 million hectares of native forest on their land which is absorbing carbon and it’s only fair this is appropriately recognised in any framework from day one."

He Waka Eke Noa was established in 2019 after farmers expressed their desire to be involved in how the Government planned to tax agricultural emissions. If no alternative was developed, agriculture would fall into the ETS, but with a 95 percent discount. 

In May, the Emissions Reduction Plan (ERP) was released, detailing how different parts of the economy would cut down emissions over the coming decades. More than $700 million was allocated through the Climate Emergency Response Fund to the reducing agricultural emissions, including by accelerating the development of new technologies.

The plan said agricultural emissions make up 50 percent of New Zealand's gross emissions, including most nitrous oxide and biogenic methane.