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Govt eyes 2025 for farm-level emissions pricing

Tuesday 16th July 2019

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The government plans to start policing emissions at the farm level from 2025 but has split with industry on how best to start bringing emissions down in the meantime.

Agriculture Minister Damien O’Connor and Climate Change Minister James Shaw today launched a formal consultation on the proposals which will involve farmers calculating their on-farm emissions annually and being charged – or credited for reductions – from that date. Emissions from nitrogen fertiliser would be paid by importers and manufacturers of fertiliser, also from 2025.

It is also considering a recommendation from the Interim Climate Change Committee that, in the meantime, emissions from livestock and fertiliser would be paid by dairy and meat processors and fertiliser firms from about 2021. Funds raised would be recycled to incentivise emission reduction and build the systems needed to model and account for emissions.

Farming leaders have proposed an alternative transition arrangement, to be funded through their existing levy bodies, like Federated Farmers, DairyNZ and Beef + Lamb New Zealand.

DairyNZ chief executive Tim Mackle said the farming sector is committed to working constructively with government and Maori to make real change to reduce farm-level emissions. While that is the best place to address biological emissions, the sector differs from the ICCC on how to get there.

“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 in a statement.

Andrew Morrison, chairman of Beef + Lamb, told journalists the sector favours anything that will reward good on-farm practices earlier “rather than take $50 million out of the sector” annually through the proposed charge on processors.

The government has spent the past 11 weeks considering the work of the ICCC, which was tasked with advising how best to bring agriculture into the country’s emissions trading scheme, and how to implement the government’s proposal for achieving 100 percent renewable power generation by 2035.

The committee’s reports, released today, advised against the latter in preference for a greater focus on electrification of transport and industrial heat.

For agriculture, it urged early action, given the sector accounts for almost half the country’s total greenhouse gas emissions.

But it also recognised that it could take five years to implement a farm-level scheme of levies and rebates – hence the proposed collection through processors in the interim.

Shaw said resolving how to treat agriculture in the emissions trading scheme was probably the hardest question in New Zealand climate change policy and one that has been “struggled with for the better part of three decades now.”

Getting farming sector support for farm-level pricing from 2025 was “fairly historic” but he also noted the “massive undertaking” that will now be involved providing the necessary infrastructure.

The government is aiming to start voluntary on-farm emission reporting from 2023 and mandatory reporting the following year. That assumes a decision by 2022 that farm-level pricing is actually feasible.

Harry Clark, ICCC member and director of the New Zealand Agricultural Greenhouse Gas Research Centre, said the question was not if it could be done, but how it should be done.

The models needed to estimate on-farm emissions will require a lot of data, he said, and government and industry will need to work together to understand what information is available now, how much it will cost, and whether simpler models might be an option to start with.

“You can go from quite simple models to quite complex models,” he told journalists. “That whole debate just needs further interrogation to see: how feasible is it going to be? How cost-effective is it going to be?”

The government has already allocated $229 million for improving sustainable land use, including $43 million for the upgrade of the Overseer farm management tool.

O’Connor said Overseer is still probably the best modelling tool worldwide to be starting with. He said farmers want a system that is “practical, realistic and enduring” and getting those broader structures right will take time.

The key thing, he said, is that the sector is moving in the right direction.

The ICCC’s levy-rebate proposal, while integrated with the emissions trading scheme, was intended to be less complex and costly as farmers wouldn’t have to trade emissions units.

Based on a carbon price of $25-to-$50 a tonne, the ICCC expected pricing methane and nitrous oxide could raise between $47 million and $95 million annually during the first decade. That money would go into an Agricultural Emissions Fund to pay for programmes to help farmers reduce emissions.

The ICCC wasn't asked to provide targets for the individual gases but has suggested officials need to determine a process for determining their different treatment. 

Farmers would only be at risk for 5 percent of their emissions initially, as the sector would be granted a 95 percent free allocation – like those available to other high-emitters that are also trade-exposed.

At $25 a tonne, the ICCC estimated the emissions charge would cost farmers 1 cent per kilogram of milk solids or 3 cents per kilogram of sheep meat.

Under the alternative scheme proposed by the agricultural sector, the $25 million a year already being gathered by the meat, dairy and horticulture sectors for work on climate change would be mobilised for the new scheme. The group committed to raising additional funds – as a co-investment with government – if required.

Alison Stewart, chief executive of the Foundation for Arable Research, said people shouldn’t underestimate the potential of bringing 11 sector groups to collaborate on ways to reduce their collective emissions.

She wasn’t aware of any other country where their livestock and plant-based sectors – forestry, vegetables, horticulture and arable - had come together.

That provided the potential for some “really innovative mixed farming” solutions to help the livestock sector meet their particular issues.

Shaw said the government recognises the importance of maintaining farm profitability. Farmers and growers will have opportunities to earn money from their emissions reductions, and the government is considering options to help farmers get credit for things like riparian planting to help them offset emissions, he said.

The government is planning a series of public information sessions on the proposals as part of a consultation process that wraps up on Aug. 13.


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