Farmers are praising the Government's decision not to saddle them with more taxes and giving them a way to avoid being included in the emissions trading scheme (ETS) altogether.

But the Government has warned the agriculture sector that if it does not do enough to manage and mitigate on-farm emissions, it could be hauled into the scheme as early as 2022.

Last night, the Herald revealed the Government had chosen to work with farmers to develop a plan over the next five years to reduce greenhouse gases.

This plan, called He Waka Eke Noa, means the sector has to improve on-farm emission monitoring tools, increase greenhouse gases reducing technology and develop plans which include a climate module.

Prime Minister Jacinda Ardern says this is a "historic consensus" and her Deputy, Winston Peters, says the decisions show the Government has listened to farmers.

The plan means the Government and industry will also work together to find pricing mechanism for on-farm emissions in 2025, alternative to the ETS.

If industry players stick to the agreed plan, agriculture won't be included in the ETS at all.

Ardern said reaching this agreement with the agricultural sector was an important "world-first".

"For too long, politicians have passed the buck and caused uncertainty for everyone while the need for climate action was clear."

Peters said: "We welcome the co-operation of our primary sector organisations who have been advocating for a smooth transition towards meaningful emission reductions".