New Zealand to tax agricultural emissions from 2025

The New Zealand government plans for farmers to pay a tax on agricultural greenhouse gas (GHG) emissions from 2025, as part of its plan to reduce emissions in an economy where the sector accounts for around half of the country's emissions.

The government has started a consultation process to seek industry feedback about its emissions levy price proposal for its highest export revenue sector.

Modelling suggests that pricing agricultural emissions at the farm level using a split-gas levy with a low methane price could achieve sufficient reductions to meet or exceed New Zealand's biogenic methane target by 2030, said the country's climate change minister James Shaw.

New Zealand plans to cut biogenic methane emissions, which come from plant and animal sources, by 10pc on 2017 levels by 2030. Emissions reductions are expected to come from land use changes to low-emissions land use with sheep and beef farmers the most affected, Shaw said.

The government proposes that prices for methane will be set each year or three-yearly by the government, based on progress against targets and advice from its Climate Change Commission. The price will be determined by New Zealand's progress towards meeting its biogenic methane emissions reduction target by the end of the decade and the long-term target of net zero emissions by 2050.

This price will be paid for by farmers that meet the government threshold for herd size and fertilizer use, the consultation papers said. Long-lived GHGs like carbon dioxide (CO2) and nitrous oxide will be set annually and linked to emissions trading scheme (ETS) unit prices but with discounts that falls by 1pc.

Revenue from the agriculture emissions levy will go towards new technology, research and incentive payments to farmers that adopt climate-friendly practices.

"This is an important step forward in New Zealand's transition to a low emissions future and delivers on our promise to price agriculture emissions from 2025," said New Zealand prime minister Jacinda Ardern. "No other country in the world has yet developed a system for pricing and reducing agricultural emissions, so our farmers are set to benefit from being first movers."

If an alternative pricing system, such as the levy proposed, is not implemented by 1 January 2025, legislation states that agricultural emissions will be priced under the ETS, the consultation paper said.

New Zealand's GHG emissions budget for 2022-25 sets average emissions at 72.4mn t/yr of CO2 equivalent (CO2e), or 8pc below 2020 levels. New Zealand's carbon budget covers 2026-30 when the average emissions level is targeted to be 61mn t/yr of CO2e and 22.5pc below the 2020 level. Its budget for 2031-35 sets an GHG emissions target at 48mn t/yr of CO2e, or 39pc below 2020 levels.

By Kevin Morrison