The Tax Working Group (TWG) is recommending the Government adds the agriculture sector to the Emissions Trading Scheme (ETS).
"[The TWG] recommends that all emissions face a price, including from agriculture, either through the ETS or a complementary system," the TWG's final report says.
The TWG is also recommending that "some or all" environmental tax revenue should be used to help fund a transition to "a more sustainable, circular economy."
Below are the recommendations covering the environment, including agriculture, water, waste and transport from the TWG's final report.
Environmental and ecological outcomes
5. The Group recommends the Government adopts the framework in Chapter 4 of this report for taxing negative environmental externalities.
6. supports a reformed Emissions Trading Scheme (ETS) remaining the centrepiece of New Zealand's emissions reduction efforts but recommends it be made more ‘tax-like' - specifically, by providing greater guidance on price and auctioning emissions units to raise revenue (as recommended by the Productivity Commission).
7. recommends periodic review of the ETS to ensure it is fit for purpose and is the best mechanism for pricing greenhouse gas emissions.
8. recommends that all emissions face a price, including from agriculture, either through the ETS or a complementary system.
Water abstraction and water pollution
9. recommends greater use of tax instruments to address water pollution and water abstraction challenges if Māori rights and interests can be addressed.
10. recommends further development of tools and capabilities to estimate diffuse water pollution to enable more accurate and effective water pollution tax instruments.
11. recommends introducing input-based tax instruments, including on fertiliser, if significant progress is not made in the near term on implementing output-based pricing measures or other regulatory measures.
12. supports the Ministry for the Environment's review of the rate and coverage of the Waste Disposal Levy.
13. supports expanding the coverage of the Waste Disposal Levy.
14. recommends a reassessment of the negative externalities associated with landfill disposal in New Zealand to ascertain if a higher levy rate is appropriate.
15. recommends a review of hypothecation arrangements of the Waste Disposal Levy to ensure funds are being used in the most effective way to move towards a more circular economy.
16. The Group supports current reviews by the Government and Auckland Council into introducing congestion pricing.
17. recommends costs associated with the care of land subject to a QEII covenant or Ngā Whenua Rāhui be tax deductible.
18. recommends that the Government consider allowing employers to subsidise public transport use by employees without incurring fringe benefit tax.
19. recommends that the Government review various tax provisions specific to farming, forestry and petroleum mining with a view to removing concessions harmful to natural capital, while also considering new concessions that could enhance natural capital.
Other matters relating to environmental taxation
20. recommends some or all of environmental tax revenue should be used to help fund a transition to a more sustainable, circular economy.
21. recommends consideration over the longer term of new tools, like an environmental footprint tax, or a natural capital enhancement tax.
22. recommends the Government strengthen its environment tax capabilities, including with the Parliamentary Commissioner for the Environment.
23. recommends that the Government commission incidence studies to better understand who will incur the costs of new environmental taxes and to design appropriate mitigation measures.
24. recommends further work to rigorously assess how taxes can complement other environmental policy measures and to work through the design principles identified in the Group's framework for taxing negative environmental externalities.