Responding to valid concerns about emissions pricing

// Climate Change

B+LNZ is aware of some debate about the recommended emissions pricing option sent to the Government in May and we want to let you know we understand your concerns.

trees on farm

It’s right that farmers are asking questions, and debate is healthy. As an organisation accountable to all levy-payers, our job is to answer those questions and we always encourage farmers to speak up.

We’re also very conscious that sheep and beef farmers have had to deal with a worrying amount of flawed environmental policies being released – relating to essential freshwater, intensive winter grazing and biodiversity – and they’re feeling overwhelmed by the amount of change coming at them.

That’s why it’s important we set out our position on emissions pricing and address some misconceptions. 

Why we’re involved in He Waka Eke Noa

Like farmers, we would prefer there was no pricing of agricultural emissions. However, the Government has made it clear it will price emissions in some way (and it already has the legislation in place to bring us into the Emissions Trading Scheme next year) and we’ve been trying to get the best outcome for farmers. 

Agriculture fought to have an opportunity to develop an alternative pricing mechanism to the ETS – getting Government agreement in 2019 to work on an alternative was a major win for the sector. At that time the Government had legislation written to bring us into the ETS in 2020. 

If we don’t convince the Government that the He Waka Eke Noa alternative is credible, the price we’ll likely pay is going into the ETS – which we believe will be far worse for our farmers. 

Going into the ETS would mean losing the split gas methane target, effectively facing a net zero target for methane, and the methane price would be linked to the soaring carbon price. 

While they still need work, the split gas methane targets were another significant win for agriculture in 2019 – around 19,000 consultation submissions had supported all gases going to net zero. 

The ETS is a blunt instrument and farmers have made it clear they don’t want to be included in it. 

Evolution and compromise

The He Waka Eke Noa proposal is by no means perfect. But it is the best alternative, and by being outside the ETS, we have the opportunity to refine it over time as new science, technologies and mitigation tools become available. 

It hasn’t been easy getting to this point. Any process that involves an entire sector, central Government and iwi will inevitably be complex and difficult. All partners have had to make compromises and concessions in order to get a fair and equitable pricing framework that works across the entire sector. 

There were some bottom lines. We pushed for a cautious approach to pricing, for as much sequestration to be recognised as possible and for potential levy relief where no mitigation options are available and sequestration is limited. 

The importance of sequestration

Sequestration is a deal-breaker. If that were to be carved off, this would fundamentally change He Waka Eke Noa and we’d need to reconsider our involvement. 

While we didn’t get everything we wanted, He Waka Eke Noa recognises a wider range of vegetation than the ETS. It also recognises native vegetation that is ineligible under the ETS.  

Our long-term goal is to get the ETS improved to include this vegetation, but the reality is this will take years.  If farmers are to face a price for their emissions, it’s a bottom line they have to be able to get proper recognition for their sequestration from that day, which is why we are pushing for it to be in He Waka Eke Noa for now.   

B+LNZ is also continuing to lobby the Government for more research into how much carbon is being sequestered by native vegetation and soil. Any findings could be incorporated into the He Waka Eke Noa pricing system. 

Getting the methane reduction targets reviewed 

Outside of He Waka Eke Noa, we’re pushing hard to get the Government to review the unfairly high methane reduction targets in legislation, which are currently a 10 percent reduction by 2030 and a reduction of between 24-47 percent by 2050. 

The target for carbon dioxide is to get to net zero (or no additional warming) by 2050. Based on the latest science an equivalent target for methane to contribute no additional warming would be a 10 percent reduction by 2050.   

The price sensitivity of our sector is a key reason the targets need to be adjusted, as the higher the target the higher the price that potentially needs to be applied in order to achieve the target. 

We’re urging the Government to report on warming as well as emissions and to ensure the legislated review of these targets in 2024 uses the latest science – that means using appropriate metrics such as GWP*. 

We’re working across the agriculture sector with dairy, deer and arable on this. 

Emissions pricing will have an impact on our sector, and our awareness of its impact on farmers has informed the positions we’ve taken during the He Waka Eke Noa process.   

B+LNZ’s support in light of our modelling 

Some farmers have asked why B+LNZ supports He Waka Eke Noa when our own modelling shows the significant impact on sheep and beef farmers.

Sheep and beef farmers are more impacted by a price on agricultural emissions because of our profitability per unit of methane emitted. That’s why we published modelling when the He Waka Eke Noa proposal was released to demonstrate the impact and reinforce the need to take a cautious approach to pricing. 

We pushed for a recommended maximum starting rate for methane of 11c per kilo to be held for the first three years and for potential levy relief where no mitigation options are available and sequestration is limited.

New Zealand is the only country in the world currently considering putting a price on biological emissions. It’s critical that a cautious approach is taken to avoid carbon leakage as we are among the most efficient producers in the world.  

Further info

If you have further questions you could also contact your local B+LNZ Director.