DairyNZ chair Jim van der Poel says it’s critical farmers grab the opportunity and develop a credible alternative framework as the Government has already legislated to put agriculture into the NZ ETS if that does not happen.
There are now two options on the table for farmers to consider if they want agriculture to stay out of the emissions trading scheme (ETS).
One of those is a farm-level levy, the other is a processor-level hybrid levy.
A third option, not favoured by many, is being drawn into the ETS.
On Tuesday morning primary sector climate action partnership He Waka Eke Noa released a discussion document with two options for an alternative greenhouse gas emissions pricing framework to being included in the ETS for farmers to consider during the next three months.
The farm-level levy would calculate emissions using farm-specific data, where 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.
That would include smaller lots, such as riparian planting and shelter belts, as well as pre-1990 plantings.
Any additional revenue raised through the levy above scheme costs would be invested back into the agricultural sector for further emissions reductions work and research and development.
The processor-level hybrid 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 would likely be collected by the processor charging 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 to get a payment for reducing emissions and/or for recognising sequestration on-farm.
Both levy options take a split-gas approach. They acknowledge short-lived gases like methane have a different warming impact to long-lived gases like carbon dioxide, and the price for methane will be separate and not linked to the carbon price.
DairyNZ chair Jim van der Poel says it’s critical farmers grab the opportunity and develop a credible alternative framework as the Government has already legislated to put agriculture into the NZ ETS if that does not happen.
“The NZ ETS pricing would be out of farmers’ control and they would face a broad-based tax. Also, farmers wouldn’t get recognition for on-farm work to reduce emissions, he says.
“We’re working to get a better deal for farmers while still meeting environmental goals.”
Beef + Lamb NZ chair Andrew Morrison says B+LNZ wants the framework farmers choose to incentivise work already under way on-farm, including sequestration and riparian planting.
“The two options would ensure any revenue raised by the pricing system would go back into R&D for innovative solutions and support farmers’ on-farm work to mitigate their warming impact,” he says.
Farmers will have an opportunity to have a say in February when B+LNZ, DairyNZ and Federated Farmers take a nationwide roadshow to the regions.
“We’re releasing the draft discussion document now so farmers have time to consider the options,” Morrison says.
“At the roadshow meetings, we’ll explain what the options mean for different farming systems, and most importantly answer questions and hear farmers’ views.”
A more detailed information pack on the options will be released by the partnership early next year ahead of the roadshow. Farmers will also be able to give their feedback online.
Van der Poel says the meetings will be genuine consultation, with pros and cons of both options discussed, rather than setting out a preferred option.
If farmers want more details about other options that have been at this stage put to one side because of a lack of a clear pathway, they can also be discussed.
Work on the two options, including modelling, is ongoing and van der Poel says it will continue right up to the meetings, so farmers will be presented with the most up-to-date information possible.
He says it’s important farmers get involved now so they can have their input in February.
If the sector cannot come up with an approach that can get Government support, the way the Climate Change Response Act is set up will mean agriculture will automatically go into the ETS and the split gas approach will not be recognised.
“We’re committed to finding a solution that works for farmers and keeps the sector in control of where and how it uses funds for the benefit of farmers.”
Those funds could be either invested into R&D to find new forms of mitigation, or recycled back to farmers themselves if they are reducing their emissions.
The new pricing framework isn’t expected to come into force until January 1 2025 but it could be sooner if the Government choses to put agriculture into the ETS.
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.
