Labour is continuing to insist that putting agriculture into the Emissions Trading Scheme (ETS) in 2013 won't raise the price of dairy products, and says Prime Minister John Key is being misleading by saying it will.

Party leader Phil Goff announced on Sunday a Labour government would bring farmers under the ETS two years earlier than the Government's entry date of 2015 so it could fund research and development tax credits for businesses.

He said the tax credits would cost $800 million over five years, the same amount that farmers would pay during that time for their greenhouse gas emissions.

The Government, and Federated Farmers, say the policy would be disastrous because New Zealand would be the only country in the world with its agricultural sector under an ETS and international competitiveness would be compromised.

Mr Key said yesterday added farm costs would mean the price of meat, milk, butter and cheese would go up -- and noted Labour had been complaining for months that they were already too expensive.

Mr Goff said today Fonterra chief executive Andrew Ferrier had previously told him it was nonsense to suggest the price would go up because it was set internationally.

"The prime minister was being quite misleading, it's dishonest," he said.

"Fonterra today announced the biggest ever payout, over $8 a kilo for milk fat solids. It's not right that the taxpayer is subsidising the cost of the ETS when agriculture, like every other sector, should be carrying its share."

Mr Goff said Mr Ferrier had made it clear to him that the international milk price was not set by domestic input costs.

To back that up, Labour today posted on its website a clip of an interview TV3's John Campbell had with Mr Ferrier during the network's recent investigation into the price of dairy products.

Campbell asked Mr Ferrier whether Fonterra set the price of milk in New Zealand and Mr Ferrier replied: "Absolutely not. The world market sets the price. All we do is run a milk price that converts the world market price to the New Zealand equivalent."

Labour's agriculture spokesman, Damien O'Connor, said bringing agriculture into the ETS in 2013 would present a challenge for the industry but offered opportunities at the same time.

"The challenge will be to identify systems and production methods to reduce emissions two years earlier than planned," he said.

"The innovation and vision of farmers will inevitably drive the changes needed to remain profitable."

Mr O'Connor said if agriculture wasn't brought into the ETS, farmers and exporters would face increasing trade barriers and New Zealand's reputation for high standards of environmental protection and sustainability would be undermined.

"The additional funding for research and development will enable agricultural scientists and research organisations to access more money for the ideas that need further investigation and commercialisation," he said.

- NZPA