The Government has bowed to agriculture sector pressure and has chosen to adopt a scheme which means farmers won't be taxed on agricultural emissions until 2025, if at all.
Instead, the Government will work collaboratively with the agricultural sector to get farmers ready for the pricing of emissions at the farm level by 2025.
This is a huge carrot for farmers, but it also comes with a big stick.
If an agreed programme of work is not completed to allow the pricing of emissions at the farm level by 2025, then agriculture will enter the Emissions Trading Scheme (ETS), the Herald understands.
But if the programme, which includes the roll-out of farm environmental plans, is completed by farmers then agriculture won't go into the scheme.
Climate Change Minister James Shaw, with Prime Minister Jacinda Ardern, will make the announcement tomorrow morning.
Several major players from the sector will also be present at the announcement.
The Interim Climate Change Commission (ICCC) proposed a plan in July for a farm-level levy/rebate scheme – but the Government still had decisions to make about how to get the infrastructure in place to enable this to happen by 2025.
The Government had two options - one recommended by the ICCC and one by the agricultural sector.
The Herald understands the Government will tomorrow morning announce it has adopted a plan put together by farmers called He Waka Eke Noa.
Landmark climate breakthrough: Farmers back emissions pricing
The proposal was put forward by the heads of Beef and Lamb, Dairy NZ, Horticulture NZ and other major agricultural bodies.
The plan envisages all farmers in the country know their emissions footprint, where those emissions are coming from, and what they can do to manage and reduce them.
It would involve a lot more investment by the Government into things like research and development to improve emission management on a farm level.
The commission, which released its report on agricultural emissions in July, recommended the Government start taxing farmers through the ETS from 2020 until 2025.
This would cost dairy farmers 1c on every kg of milk solids and between 1c - 4c per kg of meat.
The commission estimated that would raise $47 million, which would be used to develop the framework and infrastructure for a farm-level system from 2025 onward.
This option, according to the ICCC, would have provided "a gradual transition for the sector to become part of New Zealand's domestic response to climate change".
This approach was criticised by the agriculture sector, which argued there were better ways to get the agricultural sector ready for 2025.