Farmers will play a key part in deciding which agricultural emissions pricing framework the primary sector recommends to Government next year.
The Primary Sector Climate Action Partnership – He Waka Eke Noa - released a discussion document today, with two options for farmers to consider over the next three months, as alternatives to the NZ Emissions Trading Scheme (NZ ETS).
The cross-agrisector partnership includes Beef + Lamb New Zealand, DairyNZ and Federated Farmers, as well as Government and iwi/Māori.
It was critical to take this opportunity to develop a credible alternative framework, DairyNZ chair Jim van der Poel said.
"We've gone to the Government to say we think there's a better way of doing this...that's what He Waka Eke Noa is," Van der Poel told The Country's Jamie Mackay.
Both the farm-level levy and processor-level hybrid levy options in the discussion document take a split-gas approach.
DairyNZ chair Jim van der Poel. Photo / Supplied
They acknowledge short-lived gases like methane have a different warming impact to long-lived gases such as carbon dioxide, and the price for methane will be separate and unlinked from the carbon price.
In contrast, the NZ ETS pricing would be out of farmers control and there would be no recognition for a split gas approach, Van der Poel said.
"It doesn't recognise methane as a different warming impact than long-lived gases and it doesn't recognise some planting or sequestration that farmers have on-farm."
The new pricing framework isn't expected to come into force until January 1, 2025 - but it could be sooner if the NZ ETS is selected by the Government.
The Government has made it clear that agriculture will be included in the ETS if the partnership does not come up with a credible alternative.
Farmers will have the opportunity to have a say in February when B+LNZ, DairyNZ and Federated Farmers take a nationwide roadshow to the regions.
A more detailed information pack on the options will be released by the partnership early next year ahead of the roadshow.
Farmers will be able to give their feedback online then too.
It was important for farmers to "discuss and debate" the options at the February meetings, Van der Poel said.
"Farmers will have the opportunity to come with their views, their pros and cons and that will...help us and form our view when we go to Government with our final proposal."
The meetings were originally planned for "this side of Christmas" but Covid restrictions "put paid to that", however, getting information out to farmers now meant there was "plenty of time to reflect and think about it," Van der Poel said.
Feedback from engagement including the February roadshow and farmers' online feedback will form part of the partnership's recommendations to the Ministers of Climate Change and Agriculture in late April 2022.
The agriculture emissions pricing options
Option 1: Farm-level levy
This levy would calculate emissions using farm-specific data, and the farm would then pay a price for its net emissions.
This option would reward eligible on-farm sequestration additional to that currently included in the ETS that could offset some of the cost of the emissions levy.
Any additional revenue raised through the levy above the scheme costs would be invested back into the agricultural sector for further emissions reduction work and Research and Development (R&D).
This levy would calculate emissions at the meat, milk, and fertiliser processor level, based on the quantity of product received from farms, or in the case of fertiliser, sold to farms.
It would be paid at a processor level, and likely collected by the processor charging through to farmers, based on the quantity of product processed, or fertiliser supplied.
Farms (individually or in collectives) could choose to enter into an Emissions Management Contract (EMC) to get a payment for reducing emissions and/or for recognising sequestration on-farm.
NZ Emissions Trading Scheme
The Government will select this option if the primary sector doesn't come up with its own alternative pricing framework.
Within the NZ ETS, agricultural emissions would be calculated at a processor level initially, to create a financial incentive for farms to reduce their emissions.
Short-lived gases like methane, and long-lived gases such as carbon dioxide and nitrous oxide, would be treated the same using a carbon equivalence metric (CO2e).
Methane emissions would be priced on the prevailing carbon price, multiplied by a factor of 28 to reflect its carbon dioxide equivalence.
Costs for farmers would continue to increase each year, alongside increases in the carbon price, despite work to reduce emissions.
Also, most on-farm vegetation is not currently recognised in the NZ ETS, e.g. riparian areas, shelter belts and small woodlots, which farmers would not receive recognition for.
More about He Waka Eke Noa
The Primary Sector Climate Action Partnership – He Waka Eke Noa, consists of 10 primary sector organisations, as well as the Federation of Māori Authorities, the Ministry for Primary Industries and the Ministry for the Environment.
The partnership was formed in 2019 after the Government proposed legislation to put agriculture into the NZ ETS.
DairyNZ, B+LNZ, Federated Farmers and others negotiated to set up the partnership to identify an alternative that would be fairer, meet environmental objectives and enable farmers to continue running successful businesses.
