Dairy farmers to pay 1 cent per kilo of milk solids for carbon emissions under proposal to include agriculture in the Emissions Trading Scheme by 2025

Dairy farmers to pay 1 cent per kilo of milk solids for carbon emissions under proposal to include agriculture in the Emissions Trading Scheme by 2025
Image sourced from needpix.com

The Government is proposing to bring agriculture into the Emissions Trading Scheme (ETS) by 2025, giving it a greater discount than other industries currently receive.

The Ministry for the Environment is proposing the agricultural sector be given a 95% discount or “free allocation of emissions units”.

Trade-exposed industrial emitters currently receive discounts of between 60% and 90%. 

While the Labour-New Zealand First Coalition Agreement stipulated agriculture should receive a 95% discount “upon entry” into the scheme, neither the Ministry nor the Interim Climate Change Commission (ICCC), which on Tuesday released a report on agricultural emissions, provided a timeline for when this discount should be wound back.

The ICCC simply said impacts on rural land values, profits, employment, emissions leakages, etc would be need to assessed, and any future changes to the discount should be informed by independent advice from the yet-to-be-created Climate Change Commission.

Based on the current ETS price (which is expected to rise substantially over several years) of $25 per tonne of carbon emitted, the ICCC estimated the average dairy farmer would pay 1 cent per kilo of milk solids. Put in context, Fonterra’s farmgate milk price is above $6 per kilo of milk solids. 

Consensus over how to price emissions come 2025

The Ministry, in its discussion document, also recommended pricing livestock emissions at the farm level and fertiliser emissions at the processor level.

Its rationale, supported by the ICCC, was that farmers could use “more specific calculation methods that recognise a wider range of practices that reduce emissions”.

Meanwhile because the only recognised way of reducing emissions from fertiliser is to use less of it, which farmers can’t necessarily do, it’s best passing the cost of fertiliser emissions on to processors.

Leaving it with farmers would only cost them and wouldn’t necessarily change their behaviour.

The agricultural sector supports the introduction of a pricing mechanism "at the margins", but not necessarily one implemented under the ETS. 

The ICCC acknowledged that a farm-level scheme would be more expensive than a processor-level one.

Needing to cover 20,000 to 30,000 farmers, it would cost between $15 and $39 million a year to operate. Meanwhile a processor-level scheme would cover fewer than 100 participants and cost about $3 million.

Conflict over what to do in the interim

The ICCC therefore suggested that processors (dairy processors, meat processors, and fertiliser manufacturers and importers) be made to start paying for emissions from 2021 ahead of the obligation being put on farmers in 2025.

It suggested recycling the $47 million it expected to collect from processors each year, back to the sector to help farmers get set up for when they have to start measuring and paying for their emissions. 

The agricultural sector isn’t happy with this.  

It has made its own proposal, which the Ministry has included in its discussion document.

It wants to manage its own programme to get the agricultural sector into an emissions pricing system by 2025, funded through its levy organisations like Federated Farmers, Dairy NZ, and NZ Beef and Lamb.

The Ministry explained: “The sector’s proposal includes a commitment from agricultural leaders to work with the Government to design a pricing mechanism at the farm level by 2025 – where any price is part of a broader framework to support on-farm practice change, is set at the margin and only to the extent necessary to incentivise the uptake of economically viable opportunities that bring about lower global emissions.

“The Government notes the emissions price that applies to all of New Zealand’s other emissions is not linked to the availability of economically viable opportunities.”

Neither the ICCC nor the Ministry mentioned treating biological emissions differently to fossil fuel emissions under the ETS, as the Parliamentary Commissioner for the Environment suggested in a comprehensive report released in March.

The public has until August 13 to make submissions on the Ministry for the Environment's discussion document.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Comment Filter

Highlight new comments in the last hr(s).

A “cushy” tax that will have ZERO impact on the climate, even if they taxed farmer revenue 100%. What a pathetic joke...

Pathetic joke because the tax payer pays the 95%, farmers subsided yet again. Think cumulative effect and if the world doesn't buy in, we are stuffed. Whinging won't help.

Stuff have a good summary for you this morning -

No this is how you introduce a TAX, make it low and then RAMP IT UP!.
Next sector to be destroyed by fraudulent science.

The science describing how greenhouse gases warm the atmosphere has been well understood since 1890.
There is no fraud, just loopy conspiracy theories.

Two totally pathetic conclusions..
“Its rationale, supported by the ICCC, was that farmers could use “more specific calculation methods that recognise a wider range of practices that reduce emissions”.
Meanwhile because the only recognised way of reducing emissions from fertiliser is to use less of it, which farmers can’t necessarily do, it’s best passing the cost of fertiliser emissions on to processors”

The process for emissions contributions calculations should be modelled on the IRD tax system of contributions and deductions, standardised across New Zealand.
And please convince me the fertiliser companies will not pass the tax on with the usual profit margins.


Yet biological emissions are treated differently to fossil fuels, in that fossil fuels can be offset by the governments tree planting programs, while biological emissions are unable to be offset by carbon credits. All this despite the fact that grass absorbs carbon from the air so that net emissions are exactly zero.

... yeah . . Why fail utterly in their idiotic target to plant 1 billion radiata pine trees .. when grass does the exact same thing , at less cost ..

Can someone alert the Greens . .. green grass absorbs bucket loads of CO2 .. far out , man !

I’m having a grumpy night after this lot, this government talks big but delivers...little.

.. the problem is that they didn't expect to be in government . . They had resigned themselves to 3 more years in opposition ... so they went into the 2017 election promising ludicrous things to all and sundry .. never thinking they'd have to deliver on those extravagant promises ..

Sorry GBH but this has already been well debated (and lost). Pasture has been around for as long as the livestock and in balance with a short shelf life. You'd have to find a new block of bare land to plant in pasture to get any gains (and it would sequester a lot more carbon if in trees) see page 24 on ICCC report on Ag.


It's not sequestered in the live plant, that just
like the pine trees is consumed and returned to the atmosphere. It's the build up of humus that's important, which is why cropping for vegan foods is not nessacarly as good for the planet as its used up that stored humus.

Guy - it is not about the grass. The Government conveniently chooses to ignore soil carbon when calculating their tax take. "Long-term data on whether New Zealand soils are gaining or losing carbon is limited." The ICCC needs to get it's ducks in a row and get some data before they start taxing individuals on trace gases. A government report on the ag sector leaving out soil carbon is laughable or duplicitous?
"-Adaptive multi-paddock grazing can sequester large amounts of soil C.
-Emissions from the grazing system were offset completely by soil C sequestration.
We demonstrated this based on measurements of soil C and cattle productivity at the Lake City AgBioResearch Center from 2012 to 2016, which indicates a sink during the finishing phase of −6.65 kg CO2-e kg CW−1 which is similar to the results of Beauchemin et al. (2011). Yet, our results differ from many of those in the current literature, reflecting the importance of considering emissions and sinks from the entire system in a geographically localized area, including the soil ecosystem, when modeling beef production systems."

No valid comments thus far. Sad indictment on something. Selfishness, one suspects.

Nobody - including the comment-makers above - is paying their way, vis-a-vis future generations. From their POV, they cold reasonably demand no more CO2 in their atmosphere than we have (regardless of avoidance-type bleating). They could also demand as many litres of fossil energy per head, as we have.

Bur we choose to burn 100 million barrels a day, and equivocate about the exhaust impacts of that burning. Immature, is what it is. And unsustainable. Which means it will end anyway. Meantime short-term self-seekers have the vote, and tend to hog ever-more of the vote-buying influnce. So we'll go until we crash, which is how the climate will get some respite.

I don't believe those figures, looks like bs to me. Even at 100% rate that will mean we can carry on farming for less than the yearly shift in the milk price, $0.20. Wow that's a deal. Take it and get some of the animal haters of the sent.
Of course I still see it all as bollocks, the idea that methane within the "natural" cycle is the same as digging it from the ground is just preposterous, let alone that pasture is a proven system of sequestering.

It will be interesting to see what changes happen in herd owning sharemilking agreements and other various contract type agreements in dairy to allow for this. Some under contract type agreements are getting hit hard under the minimum wage increases - especially those that have paid above minimum wage and want to keep pay difference parity. 20c/kgms might not sound a lot redcows but the cumulative effect on cost creep in SMEs such as sharemilking/contract milking etc, coupled with tighter bank requirements, m bovis etc will potentially put serious question marks around dairy pathways, and viability for those on those pathways.

End user should pay for the dirty work that is done on behalf, producing what is consumed, has to be.

The uncomfortable truth. The air travel that enables New Zealands vast tourist economy.
At least cattle sheep and deer munch on CO2 consuming pasture. The soil under that pasture also sequesters carbon. Much better than under trees.
What do tourists do to mitigate the vast emissions from these planes? They then get in a car and zoom from one end of enzed to the other.
In a warming world if we keep planting pinus radiata all that carbon is one match or lightening strike from being back in the atmosphere.

Good point about the pine, but still there is much land that does need to revert to forest, even if it is just to provide the topsoil of the future that is diminishing around the world. NZ is possibly only in the lucky place it is as it is still relatively a only or short while ago that we deforested. It will catch up with us. We ARE overusing the planet. We DO need to stop.

Isnt topsoil best accumulated from grazing animals? Rotational grazing with good fencing does wonders. Pine forest with its needles does nothing but acidify. Our natives are very long winded. I have young totara and rimu around the farm. Been here 26 years. They have grown a bit. Emphasis on bit. Put it this way their contribution to grabbing CO2 would not be large.
I have pine on the boundary. Planted in 96, ready to harvest soon. Will go to china i suppose and at some point be burnt. As you do with pellets or the rubbish they turn it into.

I'm not talking about pines I think they are awful trees, topsoil was formed over thousands and thousands of years by the litter on the forest floor. Grazing only looks like the best way now, as it is all we have left.

Belle - from what i understand topsoil thats in grass (longterm) that has high levels of N applied to it over time show significant drops in its carbon levels due to extra N pushing the organic cycle past a point where it cant self replenish. In Aussie there are a huge number of farms that have been overcropped and as a result lost most of their organic matter (top soil).

Agreed. The use of N is a big big problem. Read below. Sheep and deer farming paying way more than N using cattle farmers.

Yes but the N user will be taxed via our co-ops (eg Balance) by the looks of it.

Terry Copeland of fed farmers this morning on TV1 Breakfast just essentially told us that doing business is more important than climate change as the only thing left to them is to de-populate to meet emissions targets and that is no way to do business.
So there you have it, the economy is more important than the planet. Far *insert expletive*ing out.

PocketAces - hes said that because he is representing a large number of farmers that are under the pump at the moment. That means they are probably insolvent or have a truckload of bank pressure on them due to poor seasons, m Bovis, poocackered Fonttera, poor/inaccurate media reporting about the industry and yesterdays annoucement is simply is another nail in their (our) coffin..........

My point in the past is that change needs to be managed properly, clearly this isnt the case with the current government shooting their mouths of about when they simply dont understand the consequences of their actions. The same can be said about the dairy industry regarding plans to double production by 2025 & PKE and N use as well as the Plant a Pine Tree fanatic's.

If NZ is going to save the world then we need to firstly understand what systems need changing and then workout how to change them with minimal disruption (i suspect tax incentives are the best option so that the financial cost doesnt cripple those that have got into a law a binding business and then have the rules changed on them dont get smashed). e.g. clearly dairy farmers need to get cows of grass through the winter therefore barns need to be built therefore increase depreciation rates on barns to help ease the transformation.

Same goes for the EV policy reduce the tax paid on EV's to attract new users and dont increase the tax on normal cars as this simply doesnt work when there are no other options in EV's at the moment. That way you dont smack the average Joe Blow that needs a 4x4 to get out the back of the farm on a wet day with more tax........

There being so much argument about climate change and our part in it, and how we can't afford to do anything about it (which seems to me to be what it comes down to) that I am more convinced than ever, and I have been convinced for a long time, that the only palatable answer is us reducing our numbers. I can only hope we can do this without war, but even that hope is diminishing every time I read articles like this.

What is the basis behind charging sheep and deer farmers 3 and 4 times as much? I would have thought that sheep and deer are smaller....less methane? They are generally farmed less intensively as well. Can anyone explain this anomaly?
One lamb .75 stock unitequivalents 20 kilo carcase .03 per kilo. .60c
One steer 15 stock unit equiv 330 kilo cacase .01 per kilo $3.30
20 lambs per 1 steer
.60 x 20 equals $12
$12 farming sheep
$3.3 farming cattle
Either my maths is up the bung or sheep farmers (and deer but I dont have time for that maths...I really must go and move some heifers) are being totally rorted.

Its blardy cold n windy out here. But I got to thinking. That steer required around 26 months of farming. (A lot of variables here) but the lamb is more than likely at the works within 4 to 5 months.
The mother of that steer produced .95% calving, the ewe that breathed out all that methane produced probably 130%. Infinately more productive for less methane.
In short cow less productive, 2 years of burping before offspring dead.
Ewe many more offspring in her lifetime, so you need less of them, lamb burping and farting for less than 1 quarter of that time. Taxed 363% more. Hmmm. Brilliant work industry heads. Just goddam brilliant

I wouldve thought it would be based on stockunits unless of course sheep and deer produce more methane than cattle on a sockunit basis???? Wheres Keith Woodford when you need him?

Yes we need some context to this. The method to their madness. You cant just tell sheep and deer farmers they have to pay 3 or 4 times as much and stay stum.

Belle am no expert but think it’s probably based on per hectare kgs of Beef or Milk or Lamb or Venison