Climate Change Minister, James Shaw; Prime Minister Jacinda Ardern and Primary Industries Minister, Damien O'Connor at yesterday's launch of the agriculture emissions mitigation proposals.

The Government shocked New Zealand’s 23,400 sheep and cattle farmers yesterday with proposals to make them pay for their greenhouse gas emissions which could see nearly 18 per cent of them forced to give up farming livestock.

The shockwaves are reverberating through National’s caucus, with some rural MPs questioning the party’s continuing support for a bipartisan climate change policy.

The farmers had been expecting to pay — but not as much as the proposals indicated.

Federated Farmers, who had a preview of the proposals on Monday, held an urgent meeting of its National Council on Monday, and Feds President Andrew Hoggard said the clear view was that the Government changes were unacceptable.

The more radical Groundswell movement said the Government had declared war on rural New Zealand and said the Government’s proposal would destroy NZ food production, “bringing sheep, beef, and deer farmers in particular to their knees.”

The industry bodies funded by farmer levies, Beef and LambNZ and DairyNZ, who are frequently attacked by Groundswell for their willingness to work with the Government on climate change policy, were more measured in their response.

The two bodies were part of the 13-member partnership of agricultural bodies that drew up a set of proposals called he Waka Eke Noa. They form the basis of what the Government announced yesterday.

DairyNZ chair Jim van der Poel says while the proposal had adopted many key recommendations from the He Waka Eke Noa Partnership that were informed by farmer feedback, the Government had made significant changes that would be a focus for the sector during the six-week consultation.

National Party agriculture spokesperson, Barbara Kuriger, said National was concerned that the  Government announcement put bipartisan climate change policy consensus at risk.

“Broad industry support is crucial for any enduring solution to agricultural emissions,” she said.

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“This plan could have significant implications for our rural towns and communities.

“The Government has put at risk the consensus built by He Waka Eke Noa Partnership over three years.”

POLITIK understands that Kuriger is under pressure from some South Island MPs to abandon that consensus which would mean abandoning National’s overall bipartisan approach to climate change.

Prime Minister Jacinda Ardern has been a key figure in the development of that consensus and has encouraged the development of a consensus across Parliament and with the farming sector over payment for greenhouse gas emissions. (The main farm emissions are methane and nitrous oxide).

Standing in gumboots in a farm shed in the Wairarapa yesterday, she enthused about the proposal.

“The proposal, as it stands, means New Zealand farmers are the first in the world to reduce agricultural emissions,” she said.

“Positioning our biggest export market for the competitive advantage that brings in a world increasingly.

“I know once finalised; this will put New Zealand on the best possible footing going forward.”.

But the proposal presented yesterday was not a proposal favoured by Climate Change Minister James Shaw.

Instead, he proposed a “methane market” in which the Government would set a cap on the total number of methane units in the market each year, and farmers would bid for sufficient of them to match their emissions.

In effect, it would be a separate Emissions Trading Scheme for methane.

The Cabinet paper setting out the overall scheme released yesterday said his objections to the Waka Eke Noa price proposal, which has been adopted but modified by the Government, were that it proposed a low marginal price and no overall cap on emissions.

“Prior to our Government’s reforms last term, the history of the NZ ETS shows that a low marginal price and no cap on emissions were ineffective at reducing emissions,” the paper said.

“Further, under a farm-level pricing system, Ministers and Cabinet will need to update the levy rates periodically to ensure the system is effective.

“The Minister of Climate Change is concerned this process will allow meeting emissions reduction commitments to be traded off against other considerations.”

But the big problem with the proposal yesterday is the decision not to allow farmers credit for some types of vegetation.

Thirteen agricultural organisations had drawn up the Waka Eke Noa proposal, which agreed that farmers would pay a levy on their emissions but would be able to get credit for trees and shrubs on their farms because they would be “sequestering” carbon from the atmosphere.

However, the Climate Change Commission, in July’s advice to the Government opposed this because it said it would be too complex to operate and suggested that measuring and reporting vegetation areas across the multiple categories proposed by He Waka Eke Noa would be a challenge for many farmers.

Broadly speaking, He Waka Eke Noa proposed that dairy farmers would be able to count the vegetation they have planted along waterways to comply with the National Policy Standard on Freshwater; sheep and beef farmers, who don’t generally have waterways, would be able to count scattered bush and shelter belts on their farms greater than .25 hectares.

Depending on the price agreed on for the sequestration vegetation, sheep and beef farmers could get credits of several thousand dollars.

Dairy farm credits would be less.

But because the Government accepted the Climate Change Commission recommendation and rejected sequestration, the proposals unveiled yesterday disallowed most of the concessions proposed for sheep and cattle farmers.

The effect of this was graphically illustrated in a series of models prepared by the Ministry of Primary Industries.

They showed that without sequestration and assuming farmers paid the levies at the farm gate and using the price proposed by He Waka Eke Noa of 11c a kilo of methane; by 2030, production of milk solids would be down by up to 5.9%; lamb down 21.4%; beef down 36.7% and wool down by 21.1%.

The same modelling showed that 2.7 per cent of dairyland would go out of dairy production while 17.7 per cent of sheep and cattle country would cease running livestock, presumably to be converted to forestry.

Beef and Lamb NZ chair Andrew Morrison said his organisation needed to clarify the changes with the Government and understand the intent and practical impact.

“New Zealand sheep and beef farmers have more than 1.4 million hectares of native forest on their land which is absorbing carbon and it’s only fair this is appropriately recognised in any framework from day one,” he said.

Beef and LambNZ’s modelling, which has been reinforced by independent modelling released by the Government, also demonstrates that sheep and beef farmers will be most heavily affected by a price on agricultural emissions.

“This would likely be exacerbated by the proposed sequestration changes. 

“The He Waka Eke Noa proposal was designed as a carefully balanced package that was as equitable as possible across all parts of the primary sector.”

Ardern suggested affected farmers might be eligible for some form of transitional support.

“I want to make clear that with dry stock, deer, sheep and beef farmers are more greatly affected by this proposal,” she said.

“The Government remains open to providing support, including transitional support.

“Let’s talk about how we can make the system work.

“There are issues for us to work through to make that happen.”

And it seems sequestration is included in the issues to be worked through over the next six weeks, according to Primary Industries Minister Damien O’Connor.

“Both Waka Eke Noa and the (Climate Change) Commission said that it was going to be hard to get a comprehensive sequestration system in place by 2025,” he said.

“And so they pushed out to 2027.

“We still believe that we can bring sequestration in before 2025, but there are issues around the aggregation of small lots.”

“Those are the things we’ll be looking for feedback on through the consultation process.

“There is some wriggle room.”

Looking at the reaction from the farm sector yesterday, there will need to be a lot of wiggle room.