Government announces details of farm-gate emissions scheme

The New Zealand Government has today announced its plan to see NZ farmers pay for emissions by 2025.

Under the proposals in the consultation document - Te tātai utu o ngā tukunga ahuwhenua - Pricing Agricultural Emissions – farmers are set to pay a levy on emissions that will be set by Cabinet either once a year or every three years.

The Government has committed to a 10% reduction in methane emissions from agriculture and landfills by 2030, compared to 2017 levels. This will increase to 57% by 2050, and is part of the Government’s broader plan to see net-zero emissions in Aotearoa by 2050.

The proposals include:

  • The Climate Change commission will make the primary recommendation to Cabinet on emissions price, however farmers will be able to participate in this discussion. Government ministers will make the final decision.
  • Farmers will initially be compensated for additional sequestration from riparian planting and managing indigenous vegetation. However eventually this will transition to the ETS.
  • If the sector is not ready to start farmgate pricing by 2025, an interim backstop processor levy will come into play (a change from the Government’s previous position, which was that farmers would be incorporated into the ETS if they were not ready by 2025).
  • Under the processor levy, importers and manufacturers will pay for the emissions based on the amount imported or processed. Government ministers will make recommendations next year on whether this processor levy needs to be brought in.
  • All farmers who meet the livestock and fertiliser threshold will have to pay for their emissions.
  • All proceeds will go to R&D and other climate activities (this is the same as proceeds from the ETS).
  • The Government is still undecided about whether to price synthetic nitrogen fertiliser emissions at farm-level, or pull manufacturers and importers into the ETS.

The consultation document includes modelling which indicates that NZ will hit its methane and CO2 targets under the new system.

The proposals are open to consultation until November 18, with a report due at the end of this year. Legislation will then be introduced to Parliament in 2023, and initial rules and a new IT system for farmers will be developed in 2024.