Key points in Govt announcement
- Government is committed to implementing a system to measure and price agricultural emissions at the farm level
- A split-gas approach has been confirmed.
- Mandatory reporting of farm-level emissions will start in the fourth quarter of 2024
- Pricing will commence from the fourth quarter of 2025 instead of the first quarter
- A commitment has been made to set the price at the lowest level possible to meet the reduction goals
- Scientifically validated sequestration will be recognised in the NZ Emissions Trading Scheme
- Public feedback is being sought over deferring legislated farm level NZ ETS reporting requirements in the Climate Change Response Act 2002.
The Government has worked with farming leaders to design a final plan to reduce agricultural emissions, Agriculture Minister Damien O’Connor announced today.
“Future export growth for our food and fibre products will depend on demonstrating their sustainability credentials,” Mr O’Connor said.
“The decisions announced today set out a path that gives farmers certainty and addresses the ever-strengthening market signals from overseas on climate.”
Nestle is the single biggest customer of New Zealand’s biggest company, Fonterra, Mr O’Connor said.
It has committed to a 50 per cent reduction of scopes 1, 2 and 3 emissions by 2030. Many more companies have similar targets.
“This is a tectonic shift in our export markets, meaning our farmers will have to reduce their emissions in order to sell to them,” Mr O’Connor said.
“The reality is, government required or not, our agriculture sector will have to adapt over the coming years and reduce emissions. It’s a fact of business in the 21st Century, but with the support of Government we can make that transition in a pragmatic way with the sector.
“The Government has listened and is being flexible in taking a balanced approach. In my meetings with sector leaders, they have reiterated their commitment to taking a collaborative approach on agricultural emissions through the sector partnership He Waka Eke Noa and acknowledge work is needed to meet our climate targets.
“We have shifted farm-level emissions reporting requirements into Quarter 4 of 2024; emissions pricing won’t start until two years from now in Quarter 4 of 2025; and work will also get underway to allow scientifically validated forms of on-farm sequestration into the ETS, which can help reduce the cost to farmers.”
The decisions reached accommodated the key issues raised by the partners on timelines and set a framework for the factors that would determine the farm-level levy price, Mr O’Connor said.
“Our plan is one that supports farmers’ transition, helps secure their future export growth, and works alongside our other climate policies to continue reducing our emissions.”
Sequestration pathway and standardised calculation
The partners believe the best approach to rewarding sequestration on-farm is putting scientifically validated forms into the New Zealand Emissions Trading Scheme (NZ ETS), rather than establishing a parallel system.
“This will provide a pathway for methods such as indigenous vegetation or riparian plantings to be recognised, and research is already happening in this space,” Mr O’Connor said.
“Because it may take time to validate these forms for the NZ ETS, we anticipate the agricultural pricing system commencing in late 2025 will be the interim channel for rewarding sequestration.
“It’s important the system to manage and price agricultural emissions is workable, effective, fiscally responsible and set up to last. That’s why we’re taking a measured approach to its implementation, ensuring farmers are prepared, informed, and well supported.”
It was vital farmers could accurately measure and manage their emissions, before the start of farm-level pricing, Mr O’Connor said.
The Government is proposing deferring the legislated farm level reporting requirements in the Climate Change Response Act (2022) CCRA.
“Currently farmers would be required to register in the NZ ETS and monitor emissions from 1 January 2024, unless the law is changed,” Damien O’Connor said.
“We’re proposing an Order in Council be approved, prior to 1 January 2024, to defer those provisions and public feedback is being sought on the proposal over the next few weeks.”
“We believe it’s crucial that work continues with the sector and Māori on the development and implementation of an alternative pricing system that’s fit for purpose.”
Public consultation begins today and ends on 6 September.
The discussion document can be found on the Ministry for the Environment’s website here.
Work programmes for new tools
The Government is investing more than $300 million over four years through Budget 2022 to get new tools and technology to reduce on-farm emissions to farmers quicker and provide extra on-the-ground support to adapt.
“We’re partnering with the sector to invest $54 million into the first projects through the Centre for Climate Action on Agricultural Emissions to bring down emissions,” Damien O’Connor said.
“That includes developing a methane-inhibiting bolus, increasing the pool of researchers with skills in agricultural greenhouse gas mitigation, and building a new greenhouse gas testing facility for large cattle.”
Budget 2023 allocated $15.4 million in 2023-24 to continue the development of a system to enable farmers and their advisers to calculate and report agricultural emissions. This was crucial to underpinning a farm-level pricing system, Mr O’Connor said.
“Everyone should understand that New Zealand has international Nationally Determined Contribution (NDC) targets that, if not met by 2030, will see us paying billions offshore to offset emissions.
“I believe farmers would prefer to begin paying a levy now that is ring-fenced within the sector to drive the technology we need to contribute to our NDC targets and meet consumer expectations.
“It would be fiscally reckless for any Government to not be taking steps with the sector to future-proof viability. It would cost us more in the long run.”
It had taken five years to get to this stage, Mr O’Connor. The process had been “challenging at times, but it’s also been characterised by collaboration towards a shared goal”.
Source: Minister of Agriculture