New emissions reduction plan will future-proof NZ’s largest export sector

• Government committed to implementing a system to measure and price agricultural emissions at the farm level
• Confirmation of split-gas approach
• Mandatory reporting of farm-level emissions to start in Quarter 4 of 2024
• Pricing to commence from Quarter 4 of 2025 instead of Quarter 1
• Commitment to set the price at the lowest level possible to meet the reduction goals
• Scientifically validated sequestration to be recognised in the NZ ETS
• Public feedback sought over deferring legislated farm level NZ ETS reporting requirements in the Climate Change Response Act 2002 (CCRA).

The Chris Hipkins Government has worked with farming leaders to design a final plan to reduce agricultural emissions, Agriculture Minister Damien O’Connor has announced today.

“Future export growth for our food and fibre products will depend on demonstrating their sustainability credentials. The decisions announced today set out a path that gives farmers certainty and addresses the ever-strengthening market signals from overseas on climate,” Damien O’Connor said.

“Nestle, the single biggest customer of our biggest company, Fonterra, 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.

“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 21^st 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.

“Our decisions accommodate the key issues raised by the partners on timelines, and also set a framework for the factors that will determine the farm-level levy price.

“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

“We 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.

“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 is vital farmers can accurately measure and manage their emissions, prior to the start of farm-level pricing.

Timelines

The Government is also 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 2023.

The discussion document can be found on the Ministry for the Environment’s website here. 

Work programmes for new tools

The Government is investing over $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. It’s crucial to underpinning a farm-level pricing system.

“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’s been a five-year process to get us here and it’s been challenging at times, but it’s also been characterised by collaboration towards a shared goal. I want to acknowledge all the parties committed to implementing this,” Damien O’Connor said.