With the government setting the agriculture sector a 10% methane reduction target by 2030, our farming sector will be the first in the world to pay for their greenhouse gas emissions from 2025.
The government have mostly followed the primary sector climate action partnership’s proposals of keeping the farming sector out of the emissions trading scheme, using a split gas system and reinvestment of the levy back into the sector. However, key aspects including the pricing system (possibly set by Government), whether emissions from synthetic fertilisers are priced at farm level or in ETS, and how on-farm sequestrations are accounted for are not in HWEN’s suggestions. Additionally, there is discussion on the implementation of a processor-level levy in the interim if the pricing system is not ready by 2025, meaning any emissions mitigation measures taken at a farm level most likely will not be taken account of.
What will this mean for our farming sector? More uncertainty in a time of rising interest rates and inflation as the government have proposed they are looking at setting the levy annually or every three years depending on the response to how the emissions target is reached.
It is important that farmers are given the right incentives to allow their businesses to remain viable so their produce can be competitively priced on a world market. By the government not accepting HWEN’s proposal of how sequestration is accounted for and managed takes away the ability of farms to offset some of their emission footprint.
Modelling shows that the red meat sector will be most affected. Sheep and beef farmers will have to significantly cut production to meet these targets, or we may see a change in use of productive land into forestry. Only time will tell what impact the emissions levy will have. It will certainly have a flow on effect increasing the price of food at the supermarket due to reduced production output.
In November, Beef + Lamb, DairyNZ and Federated Farmers put forward further submissions to the Government’s plan. This included setting the methane price at the minimum level for a fixed five-year period and an independent oversight board appointed by all HWEN partners to be established to help set future methane prices. HWEN needs to continue to advise the government of its policy impact on the farming industry, as the scheme is not a one size fits all scheme.
However, the government has missed the mark by not introducing a carbon tariff to help our export products remain competitive with countries that price, or otherwise regulate, carbon emissions from those that do not. Such a tariff would impose a cost on imports originating from non-regulated countries, incentivising our trading partners to participate in reducing greenhouse gas emissions.
Submissions on the proposals closed on 18 November 2022 and we can only hope that enough voices have been heard to allow the Government to make further amendments before anything is implemented for our primary sector to remain viable and competitive in the world market.
