Govt, farmers compromise on agri-emissions pricing plan

Cows (file photo).

A compromise of sorts has been reached between the Government and farming representatives over a controversial agricultural emissions reduction scheme.

The groups have been working together to try and reach an agreement, and had to report back by the end of this year.

A report released today has several changes to the proposed emissions pricing scheme, to appease farmers and better recognise on-farm sequestration.

"After listening to farmers and growers through our recent consultation, and engaging over recent months with industry leaders, today we have taken the next steps in establishing a proposed farm-level emissions reduction system as an alternative to the ETS backstop," Prime Minister Jacinda Ardern said.

"Our shared goal is supporting farmers to grow their exports, reduce emissions, and maintain our agricultural sector's international competitive edge into the future.

"By continuing to work through our different positions together, we move closer to achieving long-term consensus on a plan that works."

The key points from today's announcement:

  • The Government has worked alongside farming leaders to adapt the proposed system for reducing agricultural emissions.
  • Five-year price pathway established from 2025, providing certainty out to 2030.
  • Emissions levy to be set at lowest price possible to achieve outcomes.
  • Agriculture sector to help oversee the allocation of levy revenue raised through the system that will be recycled into incentivising good practice.
  • Agreement to recognise scientifically robust on-farm sequestration in the ETS.
  • Working with the agricultural sector on options for transitional support.
  • Work underway on enabling collectives to simplify reporting and payment obligations for farmers and growers.

Ten partners of the Ha Waka Eka Noa group, including DairyNZ, the Meat Industry Association and Horticulture NZ, signed an agreement on the proposals.

They say they are pleased with the Government's progress on the scheme, particularly:

  • Recognition that methane and nitrous oxide levy prices should be "the lowest possible to achieve outcomes" and fixed for a five-year period to give farmers certainty.
  • Agreement to take social, cultural and economic impacts into account when setting the prices.
  • Commitment in principle to recognise all categories of sequestration and to work together to see that implemented first under He Waka Eke Noa and ultimately the NZ ETS.

Important milestone

"This is a high-level, direction-setting report and does not have all the detail farmers and growers will need, but it is an important milestone," says He Waka Eke Noa independent chair Sarah Paterson.

"It confirms that He Waka Eke Noa has been successful in putting the case for a farm-level split-gas levy instead of including agriculture in the New Zealand Emissions Trading Scheme (NZ ETS).

"It shows the Government is listening to sector and Māori views and is taking action to address concerns. This shows the value of working together."

But the group say there are still improvements to be made, including around price setting.

It does not support the introduction of an interim processor-level levy.

The sector's response

DairyNZ chair Jim van der Poel said the Government's latest response is closer to what the sector had asked for through He Waka Eke Noa earlier this year.

“Although we have made good progress, there are still a number of issues we want to continue to work through with the Government, including legislative timelines, the retention of a processor-level backstop and the reduced role of the oversight body from what we understood had been agreed," he said.

“DairyNZ has real concerns that, because of delays in the process, there will not be enough time to implement the scheme before the Government’s intended start date of January 1, 2025, and that, as a result, farmers may end up in a processor-level system through no fault of their own."

Federated Farmers national president Andrew Hoggard remained opposed to the plan, citing the lack of detail.

He said methane reduction targets required for the gas to contribute to no additional warming needed to be reviewed.

Ardern said while Federated Farmers had taken an "alternate view", a "broad consensus" had been reached with most industry bodies over the fundamental principles of the plan.

The details will be worked through, she said.

National's acting agriculture spokesperson Todd Muller said today's announcement just muddied the water.

“Labour’s approach has not been a partnership - it has been about twisting farmers’ arms as far up their backs as the Government thought it could get away with. Now after feeling the brunt of the sector’s anger, Labour has announced changes to their emissions pricing scheme. This follows their earlier tweaks around carbon sequestration."

Muller said National will invest in new low-emissions technology and ensure carbon sequestered on-farm will count.

Final decisions on agricultural emissions pricing will be made by Cabinet in early 2023 with the aim to introduce legislation by the middle of the year.