Article Summary: In early 2022, DairyNZ consulted with farmers to gain feedback on two proposals from He Waka Eke Noa. Farmers preferred an approach on a farm-level basis that rewarded individual farmers for their efforts to reduce emissions on their farms. In May 2022, He Waka Eke Noa provided its ultimate recommendation to the government of this farm-level split gas strategy to price agricultural emissions, with the NZ government due to reveal its agricultural emissions pricing legislation shortly, in March 2023. 


2022 was a busy year for DairyNZ and the NZ Government, who have been actively working on a long-awaited change in agricultural emissions pricing since 2018. 

There is much content online about this issue, and in 2022 alone, there were numerous exchanges of suggestions and rejections of proposal elements due to nervous farmers and governmental bureaucracy. To ensure you are up to speed with this important issue, this article is an easy-to-digest summary outlining the latest in these continuous negotiations. You'll also learn about the problems that have been documented in the NZ press and the detail of the alternative pricing framework, He Waka Eke Noa.

What's the background of pricing agricultural emissions in NZ?

In 2018, the New Zealand Government established that agricultural emissions would be priced by 2025 through the NZ Emissions Trading Scheme (NZETS). This would mean that processors, such as Fonterra, Synlait, and Silver Fern Farms, would be responsible for paying for emissions based on the charges applied to products that farmers or growers acquire or supply (e.g. fertiliser). These costs would be transferred to farmers as a reduced payout. 

The government announced the following measures as part of the proposal:

  • Methane & nitrous oxide prices set at a minimum level 

  • Methane & nitrous oxide prices fixed for 5 years

  • Social, cultural & economic impacts considered when setting prices

  • Recognising as many categories of sequestration as possible

  • Farmers will report as collectives

DairyNZ, on behalf of NZ dairy farmers and other leaders and entities within the agricultural sector, did not accept this. Instead, they proposed an alternate pricing framework that could be established and implemented in 2025 with the potential to more effectively manage and reduce emissions from the sector than the NZETS would.

Throughout 2022, DairyNZ has stayed firm on its proposal, touted as a fairer pricing policy than the government's suggestion, which the organisation believes has the potential to harm the viability of farming businesses and production facilities in rural communities. With input from farmers nationwide, Dairy NZ does not believe the government's proposal is acceptable and has famously reported that 'no deal is better than a bad deal'. They remain steadfast in protecting the future of NZ dairy farmers.

What's the alternative pricing framework for NZ emissions?

The alternative pricing framework proposed by DairyNZ on behalf of NZ dairy farmers is He Waka Eke Noa. Set up in 2019 to provide a substitute system for calculating, managing, and cutting down agricultural greenhouse gas emissions; it is a pioneering partnership comprising primary sector organisations, Māori, and the government. It is NZ agriculture's best chance to generate an alternative method to the NZETS because it is straightforward and practical for farmers. 

He Waka Eke Noa is the foundation for how agriculture will fulfil the government's emissions targets through incentive discounts and pricing without reviewing emission targets. If NZETS priced agricultural emissions, it would reduce farmers' control and result in a wide-ranging tax connected to CO2 and emissions from other industries. 

Furthermore, farmers would not be given any recognition for any on-farm activities that could decrease emissions or alternative forms of sequestration. The farm-level levy recommended by this partnership provides farmers with a practical and reliable emissions pricing framework that keeps them in charge of their business and the capacity to regulate their transition to a lower-emission farm. 

Zero emissions farming next step for NZ

Development is underway to build and establish NZ's first zero emissions farm, aligning with the He Waka Eke Noa proposal. 

Fonterra and Nestle have collaborated with Dairy Trust to build and operate a demonstration farm in Taranaki to reduce Scope 3 carbon and greenhouse gas emissions. This farm will teach New Zealand dairy farmers the best farming techniques and support programs to diminish the carbon footprint generated by agriculture collectively. This project is a key part of the nation's plans to achieve net zero emissions within the next decade.

You can find out more about this zero emissions farming project here.

What happened in 2022 in the ongoing NZ emissions pricing negotiations?

In early 2022, DairyNZ consulted with farmers to gain feedback on two proposals from He Waka Eke Noa. Farmers preferred an approach on a farm-level basis that rewarded individual farmers for their efforts to reduce emissions on their farms. In May 2022, He Waka Eke Noa provided its ultimate recommendation to the government of a farm-level split gas strategy to price agricultural emissions. 

In October and November, the government revealed its favoured options for pricing agricultural emissions for consultation, significantly different from the He Waka Eke Noa recommendations. DairyNZ refused to accept this proposal. During the consultation, the group interacted with farmers and submitted their opinion to the government in November. 

What amendments did DairyNZ suggest for the emissions pricing proposal?

DairyNZ recommended that the government abandon their proposal and entirely adopt the initial He Waka Eke Noa proposal.

In mid-December 2022, DairyNZ stated that the adjustments to the government's emissions pricing scheme are mostly positive, as it now considers some of the sector's apprehensions. However, further modifications are needed to address farmers' worries.

These developments to the government's emissions pricing plan include confirmation that the price will stay static at the bare minimum rate for five years to give farmers a sense of surety and improved acknowledgment of plantation activities on farms. Additionally, farmers will now be able to manage and document their emissions collectively.

The government has since confirmed that the Climate Change Commission must consider the latest scientific developments, such as GWP (Global Warming Potentials), when it reviews and sets emissions reduction targets in 2024. DairyNZ applauds this decision, as it has advocated using the most up-to-date and accurate science when determining methane targets. The current metric overestimates the warming effect of methane emissions by three to four times when emissions are stable, which is the case in New Zealand

Additionally, these suggestions presented to the government that, if implemented, would decrease emissions and recognise and provide incentives for on-farm activities, such as sequestration. Additionally, it would facilitate research and development investments to develop new solutions.

What's in store for pricing emissions in the agricultural sector in 2023?

DairyNZ is determined to continue to speak up for farmers and rural communities to resolve the existing issues and guarantee that the government's broad strategy is in sync with their requests when it introduces agricultural emissions pricing legislation sometime around March 2023. This will provide the specifics of the government's policy. Following this, multiple stages are required before the bill is approved.

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Until we meet again, Happy Farming!

- The Dedicated Team of, 2023-01-12