Friday, July 1, 2022

Farm gate emissions scheme cuts ETS link

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The scheme requires farmers to “know their numbers” in terms of on farm methane and nitrous oxide emissions, from which those losses will have a value placed on them.

The He Waka Eke Noa (HWEN) choice of a farm-based emissions reduction plan recognises agriculture’s unique greenhouse gas profile where methane, a shorter-lived gas than carbon dioxide, dominates emissions profiles.

The scheme requires farmers to “know their numbers” in terms of on farm methane and nitrous oxide emissions, from which those losses will have a value placed on them, with the incentive being to reduce the cost through mitigation and vegetative offsetting (sequestration).

Facing the possibility of being forced into the emissions trading scheme (ETS), HWEN presented two options to farmers. 

They were the farm-based emissions approach, or an averaged industry emissions levy, charged by processors back to their farmer suppliers.

Rather than be based on national averages, under the proposed scheme individual farms’ gas footprints will be calculated and charged.

Reliance upon the ETS scheme to charge farmers for carbon emissions would have had farm profiles based on longer lived carbon dioxide emissions, only a small portion (15%) of pastoral farming’s actual GHG losses. 

To link farm emissions to carbon dioxide levels failed to recognise that despite farmers’ efforts to reduce methane output in the future, being coupled to the ETS risked them continuing to pay more as carbon prices continued to rise, dominated by carbon dioxide.

The partnership has recommended a base charge of 11c a kilogram for methane, held for three years to give some budgeting certainty. 

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On average a dairy cow produces 98kg of methane a year and a beef animal about 60kg. 

Earlier modelled costings had the scheme costing 4c/kg milk solids and 8c-23c/kg for red for the first three years from 2025.

Farmers will be credited for sequestration (storing) carbon over a wider range of vegetation than what the ETS allows for. 

While still being finalised, this will include the likes of riparian planting, shelter belts and non-ETS woodlots.

Alternatively, employing methane mitigation technology will see farmers receive incentive payments for lowering emissions, with those funds being recycled back into the sector for research and development.

Farmer meetings overwhelmingly rejected the ETS option, while feedback also had changes built into the current proposal. 

These included moving the farm vegetation sequestration baseline right back to 1990 from 2008, as long as farmers can prove vegetation was added after that date. 

Allowances have also been made for farm systems where sequestration or mitigation may prove more difficult. 

For example, deer farmers unable to plant exotic trees due to landscape regulations or wilding pine rules will be able to gain some relief on emissions charges.

Estimates are that two thirds of dry stock farmers now “know their numbers” on GHG emissions and more than 90% of dairy farmers, with the scheme kicking in from 2025.

Agriculture minister Damien O’Connor said with global consumers demanding higher levels of sustainability there was the potential for a real competitive advantage if NZ can get the scheme right.

It also comes after government committed almost $380 million over four years in the 2022 budget to accelerate lowering agricultural emissions.

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