Proposal to introduce agriculture to emissions trading scheme by 2025

The Interim Climate Change Committee tasked by the government to investigate how New Zealand can reach net zero emissions by 2050 has proposed introducing the agricultural sector to the emissions trading scheme (ETS) by 2025.

The interim committee released two reports today on agricultural emissions and renewable electricity generation.

Within the Action on Agricultural Emissions report it stated over the past 25 years, farmers have become more efficient and have reduced emissions intensity by about 1 percent each year.

But it went on to say this was not enough.

Among the proposals laid out by the committee was to price livestock emissions at the farm level and price fertiliser emissions at the processor level from 2025.

It also proposed the following interim measures:

  •   •  Farmers must pay for their emissions and can receive credit for reductions by 2025.

  •   •  All farmers must report their emissions by 2024 and voluntarily report their emissions to the government from 2023.

  •   •  Government reports in 2022 on further details of farm-level pricing and regulatory changes needed to implement it.

If subsequent reports show farm-level pricing by 2025 is unfeasible, emissions would be priced at processor level from 2025.

There were two options on how to achieve this, one of which would be pricing livestock and fertiliser emissions at processor level via the New Zealand emissions trading scheme with 95 percent free allocation.

An action plan would then set out steps for implementing farm-level pricing.

Funds raised - estimated to be approximately $47 million per annum - would then be recycled back to incentivise emissions reductions.

Agriculture Minister Damien O'Connor said the cooperation and consensus between the farming sector and the government was an incredibly important shift on the need to tackle climate change compared to nearly 30 years ago.

"We are now agreed on the outcome: Government and farmers want emissions to be calculated at the farm level where farmers have the most control over how they can manage their own emissions on their property," he said.

Climate Minister James Shaw said there had been a huge shift in the agricultural sector in the past few years.

"The sector itself is now saying that farm level emissions pricing is part of the solution to reducing New Zealand's emissions from climate change and I don't think anybody can understate the significance of that."

Prime Minister Jacinda Ardern said controlling agricultural emissions was very difficult - part of the reason it was so contentious - but the reality in New Zealand was it made up a huge part of emissions profile.

"If we're going to take action on climate change ultimately we have to find a way to reduce emissions with agriculture and with technological research and development there are ways we can do that including with farming practice," she said.

Beef + Lamb New Zealand chairman Andrew Morrison said both the primary sector and ICCC agreed that a farm-based pricing mechanism is the best way to get action on biological greenhouse gas emissions.

"Where we differ is that we think we can make faster progress by working with farmers from the get-go to help reduce on-farm emissions and prepare for farm-based pricing from 2025, rather than having an interim processor levy," he said.

Dairy NZ chief executive Dr Tim Mackle had a similar response.

"Bringing agriculture into the ETS at the processor level amounts to little more than a broad-based tax on farmers before we have the knowledge, support and tools to drive the practice change that will reduce emissions," he said.

Dr Mackle said with New Zealand's primary sector contributing one fifth of GDP, the stakes are high.

"We want to avoid shocks like the '80s and make any changes in a stable and considered way," he said.

Public consultation is open until the 13 August, with public information sessions being held around the country from 22 July.

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