The Climate Change Commission fought to the end trying to convince the government not to include farm-level sequestration in pricing agricultural greenhouse gas emissions.
Documents released by the Ministry for Primary Industries under the Official Information Act show the CCC had major reservations with several aspects of the He Waka Eke Noa primary sector partnership agreement, including doubts it would be able to be implemented by January 1 2025, which was earlier than the industry wanted.
The commission advocated for the introduction of a simplified pricing system, of which no details were released, or a processor levy from the 2025 deadline.
The documents show the government intended finalising the policy in early 2023 with legislation introduced later in the year, but sector leaders doubt that deadline will be achieved.
At a July 29 2022 meeting of the Climate Response Ministerial Group, the CCC raised concerns about the calculation of an emissions price, not wanting sequestration at farm level, and wanted fertiliser priced at the processor level “to reduce the complexity of farm-level pricing”.
It said pricing fertiliser at processor-level would allow broader coverage of nitrogen emissions.
The commission advised against recognising on-farm sequestration because of the administration complexity for relatively little carbon benefit.
It also wanted full marginal pricing for emissions, using free allocation, with the commission noting it does not view the funding of mitigation through revenue recycling an enduring model for pricing emissions.
“A high price signal would be the most efficient way to incentivise emissions reductions,” it said.
While transition assistance was needed, it noted such measures would be complex to implement and require significantly more reporting from farmers.
Government officials were at odds with the commission and more aligned to the primary sector on several points.
They supported a farm-level, split-gas approach as it would recognise and reward the widest range of mitigation actions, along with recycling revenue to fund mitigation research.
They also supported the pricing of fertiliser at farm-level, believing it would encourage greater reduction of emissions.
This support is despite an assessment of pricing options that found the farm-level levy rated the lowest, meeting just one of nine stipulated principles it was scored against, that being that it was adaptable.
It scored neutral for the remainder.
The processor levy met two principles, being considered effective and transparent; and being part of the ETS scored three: efficient, adaptable and transparent.
Minutes from an October meeting between officials and sector leaders reveal the government was still consulting on the merits of an interim processor levy as a contingency should the farm-level levy not be operational by 2025.
By early December the final agreement had been reached apart from pricing fertiliser, with the commission still wanting it set at the processor and officials and the primary sector wanting it at farm level.
“Ministers saw the rationale for both option and Cabinet agreed to consult on both options for pricing synthetic nitrogen fertiliser emissions.”
The commission still remained opposed to recognising on-farm sequestration.
