Edmonds Judd

HWEN

He Waka Eke Noa

Rural
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Recommendations with the government

In the Autumn 2022 issue of Rural eSpeaking we wrote that, following a period of public consultation, the He Waka Eke Noa (HWEN) Partnership was about to provide its recommendations to the government on how best to equip farmers to measure, manage and reduce on-farm agricultural greenhouse emissions.

Recommendations

In its report to the government, HWEN has recommended a farm-level split-gas levy pricing system. The key features are:

  • Farms calculate their short and long-lived gas emissions using a single centralised calculator (or farmers can use existing tools and software that are linked to a centralised calculator)
  • The system will be calculated by on-farm emissions determining levy costs, rather than the use of national averages
  • A recognition of reduced emissions from on-farm efficiencies and mitigations as they become available
  • Incentives are provided for the uptake of actions to reduce emissions
  • A split-gas approach applies different levy rates to short and long-lived gas emissions
  • On-farm sequestration is recognised that could offset the cost of the emissions levy
  • Levy revenue is invested in research, development and extension (providing technical advice and information) including a dedicated fund for Māori landowners, and
  • A System Oversight Board is established with expertise and representation from the primary sector. The board will work closely with an independent Māori board to provide recommendations on levy rates and prices, and set a strategy for the use of levy revenue.

Levy rates yet to be set

At this stage, levy rates have yet to be set. The modelling has, however, estimated that if a farm-level split-gas levy was applied to agricultural emissions, along with incentives for actions to reduce emissions, then an additional 4% to 5.5% reduction in gross methane emissions and 2.9% to 3.2% in gross nitrous oxide emissions between now and 2030 is achievable (over and above the baseline achieved by other environmental policies).

These reductions would come from a combination of within farmland use change, change in farming practices and the uptake of new technologies.

If this model is adopted, HWEN would be placing responsibility squarely on the heads of individual farmers, making them (to a certain extent) in control of their own destiny, by making decisions and adopting practices based on their emissions from their farm. This will almost certainly lead to changed farming practices and, in some cases, the current farming set up may well become economically unviable.

Government has not yet agreed to proposal

It is important to note that the HWEN recommendations are just that; the government will consider those recommendations (with advice from the Climate Change Commission) and make its final decision in December 2022.

If the government accepts the HWEN recommendations, the relevant legislation is likely to be drafted in 2023.

The intention is that by 1 January 2025, all farms should have a written plan to measure and manage their greenhouse gas emissions. The recommendations noted that 61% of farmers and growers already know their numbers (ie: they are calculating their emissions at farm level) with 21% already having a written plan. HWEN hopes to have 100% of farmers knowing their numbers by the end of 2022 to enable the written plans to be ready by 1 January 2025.

Adding to on-farm costs

Obviously, any levy system will add to on-farm costs which are already under pressure. During the consultation period, farmers raised concerns for the future of the primary sector and they expressed the importance of remaining internationally competitive.

HWEN noted that deer, sheep and beef operations will probably face a greater impact on their bottom line than dairy operations. Modelling showed that, in general, the impact on average farm profit varied from zero up to 7.2% (with a significant variation across farm systems with some farms being impacted more significantly than others).

There is a challenge ahead for the primary sector. Nothing is certain, however, until the government makes its final decision with more critical decisions to follow, most noticeably in the pricing area.

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

He Waka Eke Noa

News, Rural, Your Own Business
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Options out of the ETS for the primary sector

He Waka Eke Noa (HWEN) is a partnership established to reduce the emissions generated by the primary sector. It works to equip farmers to measure, manage and reduce on-farm agriculture greenhouse emissions and to provide sustainable farming practices for future generations.

More importantly, HWEN is developing a suitable emissions pricing scheme as the entire primary sector is not currently covered by the Emissions Trading Scheme (ETS). The government’s approval to this industry-led approach, however, comes with a large caveat – the ETS is the backstop for pricing agricultural emissions if HWEN does not deliver an effective and workable alternative.

HWEN has put forward two options to the ETS:

  1. A farm-level levy: this will calculate emissions using farm-specific data and the farm will pay a price for its net emissions, or
  2. A processer-hybrid levy: this will calculate emissions at the meat, milk, and fertiliser processor level, based on the quantity of produce received from farms or, the amount of product sold to farms. It will be paid at a processor level. This levy is likely be charged through to the farmer based on the quantity of product processed or supplied.

These options went out for public consultation earlier this year; HWEN will provide its recommendations to the government in late May.

These options aim to provide farmers with a practical and credible emissions pricing framework enabling them to control how their farm is operated. Crucially, the alternative mechanisms delink the methane price from the carbon price and give greater recognition of the sequestration on a farm, that is, a split gas approach.

Both the farm level levy and the processer-hybrid level acknowledge on-farm sequestration. For example, it would recognise native regeneration, riparian planting, shelter belts and other non-ETS eligible tree lots. This would be a significant win for many farmers who have invested heavily in improving the ecology and wellbeing of their land over the last few years.

What if either option is rejected?

If these two options are rejected, the sector will be subject to the ETS and the split gas approach will not be available; this means that the methane price will be linked to a rapidly increasing carbon price.

While agricultural emissions would be calculated at a processor level initially to create a ‘financial incentive’ for farmers to reduce emissions, it is likely that this would be passed on to farms based on the quantity of produce processed or product purchased. There is no doubt that costs for farmers would continue to increase annually, together with the ever-growing carbon price, despite continued work to reduce emissions.

‘Know your number’

Another milestone for HWEN is to ensure that all farmers and growers in New Zealand will know the annual methane and nitrous oxide emissions for their farms by December 2022. This has been dubbed ‘know your number’ by many in the primary sector. By 2025, each farm must have a written plan in place to measure and manage these emissions.

HWEN has defined a ‘farm’ as any farm over 80 hectares, or a dairy farm with a milk supply number or a cattle feedlot as defined in the National Environmental Standard for Freshwater. HWEN is supporting and assisting farmers in this process of knowing their numbers. While this space is still evolving and subject to change, the sooner farmers determine their numbers, the sooner they can understand where the emissions are being generated, and what actions may be taken to manage, mitigate or reduce them on farm.

Looking ahead

Regardless of the outcome that HWEN generates, the ETS and New Zealand’s international obligations create a need for better integration between forestry, emissions and the farming landscape. Farmers need to know their numbers so they can begin leveraging opportunities, and ensure they are in a good position for meeting legislative requirements.

To know more about HWEN and how it is working with the primary sector, click here. For advice relating directly to your farm or forestry situation, please don’t hesitate to contact us.

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650