Government will rely on export businesses, such as Fonterra, to push farmers to reduce emissions by paying low-methane producers higher prices

The Coalition Government has softened emissions reduction targets for the agricultural sector and promised to exempt it from taxes other parts of the economy have to pay. 

Agriculture Minister Todd McClay announced the Government would reduce the methane emissions reduction targets to between 14% and 24% of 2017 levels by 2050, down from 24% to 47% as is currently in law.

The farming industry will also be exempt from the Emissions Trading Scheme or a similar tax on emissions, which are used elsewhere in the economy to incentive reductions. 

Instead of forcing reductions through a market pricing mechanism, the Government and sector will invest in technologies and incentive payments to try to achieve the target.

Climate Minister Simon Watts said he expected reduction technologies to become available over the next five years. If that happens, and 30% of farmers take them up, total agricultural emissions could fall between 7% and 14% by 2050.

“Our approach is clear: technology and partnership, not taxes, will deliver the reductions that we need. By investing in new tools and giving farmers practical support, we can cut emissions without cutting production or profitability,” he said. 

Other industries and households are not so lucky. Other activities in New Zealand have to pay a carbon tax, except certain trade-exposed businesses which are given free tax credits.

The Government worried that imposing a similar scheme on agriculture, even at a lower tax rate, would result in less food production in New Zealand and more overseas — potentially creating more emissions in the process.

Previously, the Labour Government planned to phase in a soft methane emissions price from 2025, which the National-led Government pushed to 2030 and has now scrapped altogether.

Without a tax on emissions, the Government seems to be relying on buyers such as Fonterra and Silver Fern Farms to penalise high-emission farmers through lower prices. 

Roughly 46% of methane emissions are produced by dairy farms. Cooperative Fonterra controls more than 80% of the market and would be able to penalise high-emission farms. 

The sheep and beef meat market is dominated by four processing and export firms—Silver Fern Farms, Alliance Group, ANZCO Foods, and AFFCO—but is not as concentrated as dairy.

A fact sheet released alongside the announcement said: “It’s important to note, large processors such as Fonterra and Silver Fern Farms, already have emissions reduction targets driven by international export markets. These will play a key role in reducing emissions on-farm.”

This may mean farms still have to meet higher emissions reduction targets to be paid full prices from these buyers, depending on the expectations of export markets.

Paris is next

Act Party agriculture spokesperson Mark Cameron celebrated the softened target, saying in a press release that the Paris Agreement would be next. 

“Labour’s unscientific climate targets could only be met by destocking and shutting down farms. Today’s decision shows that balance and common sense have returned, with targets that can be met through business-as-usual efficiency improvements," Cameron said.

Green Party co-leader Chlöe Swarbrick said the halving of methane targets was done using a “cheap accounting trick that will cost our country dearly”.

This is a reference to the “no additional warming” approach which allows agriculture to lock-in the amount of warming it had already created in 2017. The old target aimed to reduce methane enough to have a cooling effect, as the gas dissipates more quickly than carbon.

“Today Christopher Luxon has downgraded climate ambition, meaning a higher cost of living and ultimately far worse outcomes for the farmers he says he’s doing this for,” she said.

“Methane is a superheating gas — 80 times stronger at frying our atmosphere than carbon in the short-term. To keep a liveable planet, we must cut methane emissions”.

Amanda Larsson, a Greenpeace Aotearoa climate campaigner, said Luxon had gone “full-on Trump” with a decision which could “derail the global fight against climate change”. 

"New Zealand is the world’s biggest dairy exporter. If we back down on cutting emissions from our most polluting industry, you can bet other big livestock-producing countries will jump on the bandwagon. That could be game over for the climate," she said in a press release. 

Labour spokesperson Deborah Russell said New Zealanders deserve to see the advice and analysis this decision was based on — given the Government had rejected independent Climate Change Commission advice.

“Labour stands ready to work on practical, bipartisan climate solutions - backing farmers with certainty and tools to keep New Zealand competitive. But the Government has shut us out. This decision risks our reputation, our exports, and our economy,” she said.