For farm businesses there is a knowledge the government is “talking softly but is carrying a big stick” as the sector mulls over its options for greenhouse gas measurement and allocation.

This is because in the deal making after the Zero Carbon Act was passed in 2019, the government agreed to let the primary sector determine its own system of emissions management and accountability, subject to governmental approval.

But the trade-off for a level of self-determination was that if the primary sector did not decide on a mechanism, or arrived at a less than ideal solution, it would face being captured in the Emissions Trading Scheme (ETS), forthwith.

The clock is now ticking into late April when industry must present to government an alternative framework that accommodates primary sector gas emissions, compiled through the joint industry partnership known as He Waka Eke Noa.

“While there has been plenty of noise regarding environmental issues faced by the agri sector recently, I think the agriculture emissions pricing proposal will be the single most important decision for rural landowners to make in 2022.

“It is going to impact all rural landowners in some way, so it's important landowners engage and consider what is being proposed,” says Nick Hawken, Bayleys’ national rural director.

The challenge, specifically for the pan-pastoral industry group, is to try and devise a means of measuring and pricing emissions that recognise the myriad of different farming systems within the description “pastoral sector”.

Put simply, no two farms are the same, and few will share the same greenhouse gas emissions profile within what are essentially complex biological systems.

A key need for whatever system the sector arrives at is to have a mechanism that recognises the differences between biogenic methane gas emissions (from livestock) and carbon emissions, given there are quite separate targets for both in the Act.

Methane reduction targets have been set at 10-percent reduction below 2017 levels by 2030, and a significant 24-47 percent below those by 2050.

Generally, industry analysts agree that with tuned up management, including more careful attention to nitrogen fertiliser use, reduced bought in feeds and relatively subtle shifts in dietary mixes, the 10-percent target is attainable.

However, significant technological leaps will be required to achieve the subsequent methane reductions heading into 2050.

Being folded into the ETS along with all other industrial, commercial, and private emitters would mean the primary sector loses its “split gas” view on emissions.

Methane, despite its short-lived nature in the atmosphere would be rolled into the carbon price, which is likely to continue to surge upwards globally as countries work to move away from hydrocarbons.

Farmers would lose any ability to pare back methane, their business’s largest gas emission type, and with that any capacity to be recognised for their mitigation efforts.

There are also other reasons being placed into the ETS would bring downsides.

To be recognised for capturing carbon through tree planting certain ETS eligibility rules have to be met, including minimal planting areas.

The ETS does not currently recognise specific on-farm plantings like riparian strips and shelter belts that play a part in helping offset a farm’s emissions.

Also, any payments made into ETS by the sector would only be invested into the national reduction plan, whereas a separate scheme allows re-investment of the funds back into agriculture and research to further reduce gas emissions.

The options to be considered by pastoral farmers in the coming weeks include a farm level levy, or a processor hybrid levy.

The farm level option puts the choices on mitigation and reduction firmly in farmers’ hands, with those who make significant reductions recognised by having lower emissions charges.

The processor levy model would be based on the processor passing on a charge, or reduced payment to supplying farmers, with that charge based on the average emissions per supplier.

Farmers or groups of farmers would have the option to enter into an agreement to manage their emissions lower than the group average, in a legally binding contract and receive a better payment for efforts that put them above the average.

“These are very important considerations for our landowners. Arguably if two landowners produce similar levels of production but one has less emissions then it’s reasonable to expect this will influence buyer considerations and their land value assessment when transacting in the future,” says Hawken.

Industry leaders have highlighted the pluses and minuses to farmers, with complexity and administration key areas of concern.

However, these may be eclipsed by the upsides of choice, control, and value in retaining a split gas approach, all areas the ETS would fail.

In the coming weeks, farmers have the opportunity to engage and share their views on the approaches offered as roadshows roll across the country from industry bodies such as Beef and Lamb and DairyNZ.

The best action rural landowners can take is to “know their numbers” in terms of greenhouse gas emissions, ensuring a good understanding of where their particular farms’ strengths and weaknesses lie when it comes to emissions.

“Farmers everywhere are being given a choice and an opportunity not to waste, to help shape how they manage their industry’s future in a decarbonising world.

“We would encourage all farmers and rural landowners to get along to the roadshows - they could be the most significant changes yet that affect their farms’ future value, and viability.”

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