The Government has promised to price agricultural emissions at the lowest point possible to ensure its emission targets are met, prompting cautious optimism from the farming sector over its part in New Zealand meeting its climate change goals.

In a report released today, the Government has also re-stated its change in position on what sequestration efforts farmers make to suck up greenhouse gases will be included to offset the cost - something that the sector found lacking in its initial proposal in October.

Under the current proposal, there would be a five-year price pathway from 2025, aimed at giving farmers certainty up until 2030 on what they would pay for their emissions, which would be “relatively low, unique prices could be set initially for both biogenic methane and nitrous oxide for five years based on set criteria”.

“I’ve always said we’re open to changes if they build greater levels of buy-in,” Prime Minister Jacinda Ardern said.

“Today we move forward by moving closer together on a workable system.”

Ardern, alongside other ministers, spoke to media on the report this morning.

Consumers are demanding sustainable products, which indicated the need for an emission reduction system for the agriculture sector, Ardern said.

The Section 215 report on the emission pricing scheme released today preceded final decisions that were expected early next year.

Ardern said the scheme must be practical and reduce emissions in line with existing targets.

She said it would unlock a price premium for sustainable products.

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Representatives of the agricultural sector are cautiously welcoming the news but want to see more details regarding the exact levy price and what sequestration measures will be accepted under the scheme.

“The Government’s report confirms much of the approach put forward by the He Waka Eke Noa partnership and this is promising,” Meat Industry Association chairman Nathan Guy said.

“However, there are still a number of issues that need to be worked through to ensure the system can deliver on its objectives.

“A key area that warrants further work and clarification is how exactly sequestration will be accounted for and rewarded within the emissions pricing system. This is a critical aspect and farmers must be able to count all genuine sequestration on farm.”

Ardern said to the sector that their advocates have been strong.

“We haven’t always agreed but we have found a pathway through.”

The report did say if a price pathway was not set up by 2025, an interim levy would be placed at the processor level - something Guy was concerned about as it could mean farmers’ individual efforts to reduce emissions were cancelled out by those who didn’t.

“This would be ineffective, inequitable and complex,” Guy said.

“It also detracts the focus away from working hard to ensure the farm-level pricing scheme is up and running by the deadline set by Government.”

Ardern said perfect cannot be allowed to be the enemy of the good.

“We must keep making progress and we can improve and refine over time,” she said.

She wanted the scheme to work at the grassroots level that is sustainable long-term.

Ardern shared her personal thanks with farming leaders and producers. She acknowledged she had likely not met with a group with such frequency as she has with sector leaders.

In a consultation document in October, the Government has proposed separate levy prices for long-lived gases and biogenic methane, in line with the “split-gas” approach it’s taken under its Zero Carbon Act.

Introducing these new levies, it says, would be enough to meet its target of bringing biogenic methane emissions down to 10 per cent below 2017 levels by 2030 (later to be scaled up to a 24 to 47 per cent reduction by 2050).

Today’s report, formed following a six-week consultation process that drew almost 23,000 submissions addressed concerns expressed in October that the emissions pricing scheme would drive farmers to reduce stock numbers and increase afforestation.

The report also included a response to criticism that farmers who had made sequestration efforts like planting native bush, would not be rewarded in the emissions plan.

“At the minimum, sequestration from riparian plantings and from increases in carbon from indigenous forest linked to specific management interventions will be included from 2025.”

He Waka Eke Noa, a partnership of sector stakeholders, jointly submitted on emissions pricing and independent chairwoman Sarah Paterson said today’s report showed the Government was moving in the right direction.

“This is a high-level, direction-setting report and does not have all the detail farmers and growers will need, but it is an important milestone,” Paterson said.

“It confirms that He Waka Eke Noa has been successful in putting the case for a farm-level split-gas levy instead of including agriculture in the New Zealand Emissions Trading Scheme (NZ ETS).

“It shows the Government is listening to sector and Māori views and is taking action to address concerns.”

Paterson highlighted the progress made in price setting, particularly the five-year pathway and the need to set the levy price low.

Federation of Māori Authorities Traci Houpapa said Māori accept the need to change land use for the benefit of the environment and the people.

Houpapa said a scheme should effectively reduce emissions and give farmers options to reduce emissions, allow time for markets to respond, give sector enough runway to have technology to reduce emissions or through sequestration, and rewards good farming and growing practices.

She acknowledged many details were yet to be provided but she welcomed the involvement of He Waka Eke Noa, of which the Federation was involved.

Climate Change Minister James Shaw, appearing by livestream, said overall emissions are yet to come down on a sustained basis and the Government had a big part to play in achieving this alongside the sector.

“It is up to our farmers to seize the opportunities [this] will make.”

He said farmers were let down by past Governments which hadn’t given them the tools to reduce emissions and change farming practices.

Jim van der Poel, DairyNZ chairman, said it was important not to lose sight of the fact that farmers were the first to experience a changing environment.

He said the pricing scheme needed to be “practical, pragmatic and fair” to maintain profitable businesses and meeting climate targets.

He believed the Government had listened to the farming community through the consultation process, and noted the changes since October had been prompted through this process. He said it showed what could be achieved when the sector stayed at the table to discuss with the Govt. He also noted today’s report showed the Govt was much more aligned with what the sector wanted when the consultation document was released in October.

“We know it’s not easy but we do have to make it work.”

Agriculture Minister Damien O’Connor said “nothing good comes easy” and acknowledged forming this scheme hadn’t been easy but welcomed what progress had been made before the end of the year. “It is consensus around some of the core issues where there was some debate.”

He referenced instances where there were business opportunities if our exporters were more environmentally friendly.

He confirmed the levy would be set at the “lowest possible price” and that the sector would be involved through an oversight board in setting the levy prices.

“This is a great step forward and I welcome it.”

Now taking questions, Ardern defended the consensus given Federated Farmers, which represented more than 10,000 farmers, which were not as supportive of the proposal. Ardern said the sector representatives who had just spoken showed there was consensus in parts of the agriculture sector.

O’Connor respected Fed Farmers’ right to take an alternative view and believed farmers were well represented by sector groups including HWEN, DairyNZ and FOMA.

Ardern said today’s report showed “broad consensus” but more details were expected around March next year. She was confident collaboration would continue with the sector.

On the issues still to be worked through, Ardern said the fundamentals were largely agreed upon.

Shaw noted how the EU recently finalised a tariff system that concerned emissions pricing, indicating a trend that meant a trade advantage would be given to those countries which made efforts in this domain.

He said New Zealand’s moves in this space would put pressure on other countries to make efforts.

On his position on the scheme in his capacity as Green Party co-leader, Shaw said there were probably more simple processes out there but he said the “political economy” of the current situation meant a lasting solution that the sector agreed with was necessary.

Asked whether he would have preferred a higher price pathway, Shaw said this was a concern of the Climate Change Commission.

Ardern re-stated that the levy price would still require to meet the climate targets.

Van der Poel said it was about changing “behaviour change” on farms.

Van der Poel said the key sticking points were the detail around implementation and the Govt structure, how that would work in reality He said it was also important to make sure a farm-level scheme was in place before 2025 to ensure a processor-level levy wasn’t used in interim.

Ardern said the Govt agreed an interim processor-level levy would not be the best solution and a farm-level levy would be better. The only reason for the backstop was that 2025 timeline was “very ambitious”.

“Our goal remains farm by farm.”

On the 2025 goal, Ardern said the next phase of responding to submissions was March and then work was needed to get underway to make sure the 2025 deadline was met. “They are ambitious timelines but we remain committed to them”.

On the price of the levies, Ardern wouldn’t discuss specifics.

She confirmed it was not a revenue gathering exercise, with collected levies to be returned to the sector to work towards those targets.