He Waka Eke Noa was set up when the sector organisations pitched that Government, Māori and the sector bodies, on behalf of farmers and growers, work together to develop a plan to manage and reduce on-farm greenhouse gas (GHG) emissions.

Collaboration is the right way to design policy, especially with our rural communities. Representatives from the primary industry bodies, government policy, scientists, and farmers and growers, have been deep in discussion and undertaking analysis on some very complex issues around sequestration, farm definitions, reporting and, of course, pricing.

Each industry partner has put forward farmer representatives, who form farmer reference groups. Our farmer reference groups sense-check the direction of travel and point out real-world implications and outcomes of policy approaches.

One size doesn’t fit all, and we are also cognisant of all the noise, regulatory change, and public pressures that some of our farmers and growers are under.

World leading approach

He Waka Eke Noa is partnership between Government, Māori and the primary industry bodies of Aotearoa. It’s a world-first approach to developing a framework for farmers and growers to measure, manage, and collectively reduce their agricultural GHG emissions.

The partnership is committed to achieving a solution that is practical for the primary sector, rewards efforts to reduce emissions and increase sequestration, and supports the sector’s future success.

This includes collaboration on the design of a pricing scheme as an alternative to agriculture facing liabilities for biological emissions under the New Zealand Emissions trading Scheme (NZ ETS). An alternative pricing system can:

• Recognise and reward on-farm changes that reduce emissions
• Recognise the difference in climate impact between different gases
• Delink the price of biogenic methane from the carbon price in the NZ ETS
• Recognise on-farm sequestration that the NZ ETS does not
• Recycle revenue generated to help reduce emissions in the agricultural sector.

Farmer feedback call

In February 2022, farmers and growers will get to see what the recommended pricing options are and let the He Waka Eke Noa partners know what they think.

DairyNZ and B+LNZ, supported by Federated Farmers, are planning detailed engagement to discuss options with their farmers. For the latest information, and details on sector work shops in your region, go to the He Waka Eke Noa website1 or check with your industry representative.

The two options on the table at this stage are a farm-level split-gas levy and a processor-hybrid split-gas model. The third, a default option is the ‘backstop’ of agriculture being included within the ETS.

Two split-gas levy options

These two options involve setting different levies for short-lived (methane) and long-lived (nitrous oxide and carbon dioxide (CO²)) gases, with levy rates being set by an independent advisory body.

Methane would be calculated by weight of gas and have a unique levy rate. Long-lived gases (nitrous oxide from livestock and fertiliser and CO² from urea) would be calculated in weight of CO²e. There is an option to link the rate for nitrous oxide and CO² to the NZ ETS carbon price or have a unique rate.

Both options seek to recognise on-farm sequestration not currently in the ETS, including riparian planting, shelter belts, perennial cropland and woodlots.

Farms could work as individuals or collectives, and revenue raised would be invested in research and development to support emission reductions.

Option 1: Farm-level split-gas option - A (methane) + B (nitrous oxide & CO²) – C (sequestration) = $

The farm-level split gas option would apply to farm businesses with one or more of: 550 stock units (sheep, deer, cattle, goats); 50 dairy cattle; 700 swine; 50,000 poultry; apply over 40t of nitrogen through synthetic fertiliser per farm per year.

Farms would calculate their emissions using a single calculator, with actual on-farm emissions being used to determine pricing.

Option 2: Processor-level hybrid - A (methane) + B (nitrous oxide & CO²) = $

Processors would pay for emissions based on a charge applied to products supplied (meat, milk) or bought (fertiliser), and likely pass on these costs to farmers. There would be separate emissions charges for short-and long-lived gases, set by an independent advisory body. To receive payment for sequestration, farms would develop and sign up to an emissions management contract (EMC). The framework for this is still under development.

ETS backstop

If the partnership is not successful in delivering recommendations on an appropriate pricing system, the default is pricing emissions at the processor level via the NZ ETS.

Under the backstop ETS approach, emissions would be calculated using national average emissions factors for milk, meat and synthetic fertiliser, and then charges would be applied per kilogram of meat or milk or tonne of fertiliser. Methane and nitrous oxide emissions would be priced at the same rate ($/tonne of CO² equivalent) and initially, farmers would get a 95% free allocation. This allocation would reduce gradually over time.

More detail in February meetings

As long as Covid-19 restrictions permit, DairyNZ, B+LNZ and Federated Farmers are working together to take face-to-face meetings to the regions. There will also be online webinars. Attendees will have the options explained to them, and will have the opportunity for questions and feedback that will go to the partners working on the policy.

He Waka Eke Noa will make recommendations to Ministers at the end of April 2022.