The Government may have to retreat from an ambitious proposal to have farmers account for their greenhouse gas emissions and pay “at the farm gate” for them.
Instead, it is now likely that farmers will pay a levy on meat and milk after it arrives at a processor.
The move scraps a $37 million initiative announced in the last Budget.
The retreat was signalled at a top-level meeting on Friday involving Ministers Damien O’Connor, and James Shaw and Dairy NZ, Beef and Lamb and Federated Farmers and other producer organisations.
The retreat will be a blow to progressive farmers and producer organisations, while it is likely to be applauded by the protest organisation, Groundswell.
The farm organisations had proposed the farm gate solution under the He Waka Heke Noa proposal because it would reward individual farmers who had made an effort to cut their emissions.
The proposal was the industry’s offer to ensure agriculture did not have to enter the Emissions Trading Scheme.
The He Waka Heke Noa producer groups published figures last November comparing the He Waka Heke Noa proposal with farmers having to buy ETS units.
They estimated the ETS could cost a Waikato dairy farmer $21 452 per year by 2030 and $51,4 72 for an intensive Canterbury dairy farm.
Hill country sheep farmers might pay around $20,000. The farmgate levy would dramatically drop these costs to $6195 for a Waikato dairy farm, $12,966 for a Canterbury dairy farm and about $7000 for a North Island hill country sheep farm.
The processor levy proposal would see similar costs.
Farm-level emissions would be measured through a farm environmental plan which would set out each individual farmer was managing their emissions.
But under the processor levy proposal, farmers will simply pay on their output regardless of how effective they have been in reducing GHG emissions in its production.
The move comes after Dairy NZ has held a series of consultation meetings with farmers.
Jim van der Poel, the chair of Dairy NZ, in an email to farmers last week, said a clear theme had emerged from the meetings of Farmers wanting to work towards farm-level pricing as soon as possible, so they were recognised and rewarded for on-farm actions they took.
Federated Farmers has conducted similar consultations.
Reporting a week ago on a meeting of the Feds’ provincial chairs, the organisation’s president, Andrew Hoggard, said a clear majority of your National Council favoured He Waka Eke Noa’s farm-level option over the processor hybrid.
“However, there’s a lot more work still to be done to get the farm-level model into a final shape the Federation might sign off on, and we’re very clear about sticking to our ‘bottom lines.
“The key one: a pricing mechanism must not incentivise, encourage, or expect to result in reduced New Zealand food and fibre production.”
A Government source told POLITIK the decision to impose the levy at the processor level was because the cost of the farm gate proposal and the feasibility of having it ready before the end of the year made it unlikely to go ahead.
The proposal would have required every farmer to have an environmental plan for their farm showing how greenhouse gas emissions from livestock would be managed.
The last Budget allocated $37 million towards a national integrated farm planning system for farmers and growers.
“To meet our climate change and sustainability goals, we need a single national farm planning framework that is easy for farmers and growers to use and that integrates with their business requirements,” Agriculture Minister Damien O’Connor said last May.
“A national training programme will deliver more skilled farm advisers, and an accelerator fund will invest in targeted initiatives to significantly broaden the uptake of integrated farm planning.
“It will ensure up to 40,000 farmers and growers have the tools they need to improve on-farm performance and meet freshwater and greenhouse gas requirements by 2025,” Damien O’Connor said.
In 2019, the Ministry for the Environment estimated that a farm level scheme could cost between $20 and $120 million to run and $7 -$15 million to set up.
The move will be a big blow to organisations like Dairy NZ, who have promoted the “carrot and stick” approach to pricing farm emissions as a way of avoiding famers going into the “one size fits all ” ETS.
At the same time, it may give more oxygen to the Groundswell campaigners who are currently promoting their own solution to farm GHG emissions and who have specifically opposed the farm level proposal.
In an open letter to farmers published on Friday, the organisation said that the farm level reporting systems were not currently fit for purpose.
“The benefit of farm-level reporting will remain negligible until modelling and data management technology improves significantly,” the letter said.
“There is no point in farmers spending up to 75 hours per year to create an emissions number that is not accurate.”
Instead, they argue, farmers should not pay any extra levies, but producer organisations should divert some of their levy income to research emissions mitigation.
Groundswell claims any farmer levy on emissions is a “farmer tax”.
Van de Poel, in his letter, said his challenge to Groundswell was simple: “If you do have a credible proposal that will keep agriculture out of the ETS, then you need to provide the detail.
“We can’t consider what we haven’t seen.
“We have requested this information on numerous occasions.
“Their failure to provide anything to date raises serious questions about the credibility of their proposal.”
The row has split the centre-right parties.
Van der Poel has in the past had the support of National’s agriculture spokespeople, but ACT’s agriculture spokesperson, Mark Cameron, said earlier this month that he supported Groundswell.
He claimed last Thursday that the Government was really trying to force farmers into the Emissions Trading Scheme.
POLITIK understands the intention now is to have the farm emissions GHG levy scheme sorted out before the end of the year.