Emissions prices suggested by the Productivity Commission would unfairly penalise New Zealand farmers, says DairyNZ.
The Commission's final report Low Emissions Economy, released today, suggests that over the next 30 years New Zealand's emissions price should rise to at least $75 per tonne of carbon dioxide equivalent, and possibly to over $200 a tonne.
DairyNZ chief executive Tim Mackle said the emissions prices suggested by the commission would see a significant impact on the New Zealand agricultural sector if the sector faced a full emissions price under the Emissions Trading Scheme without a technological solution to reduce methane emissions.
DairyNZ believed that sustainable dairy farming has a critical role to play in New Zealand's future prosperity and wellbeing, he said.
"We are committed to successfully farming within environmental limits, including climate change commitments."
"We can't expect the average dairy farmer in 2050 to face a yearly emissions cost in the vicinity of $231,800," Mackle said.
"Emissions prices need to incentivise best environmental practices. But at these prices, without a split gas approach or the availability of methane reducing technology, we would be unfairly penalising New Zealand farmers."
Although no decision has been made on agriculture moving into the Emissions Trading Scheme, Mackle says a transition period for the sector is essential for any low emissions pathway the Government decides to take.
"There needs to be a fair and stable transition for the sector while a methane vaccine or inhibitor is developed," says Mackle. "We know there needs to be continued and significant Government-Industry funding for this to occur within the next thirty years."
The Commission also recommended the Government increase its yearly funding for research into methane mitigation technologies to a level that better reflects the potential value of successful outcomes.
"Measures like planting trees and riparian margins will help," says Mackle. "But even with a significant focus on forestry planting we wouldn't see the required decrease in agricultural emissions without methane reducing technologies, or significant land use changes".
"As a dairy sector, we are absolutely up to play our part in this challenge, and that is why we've been investing in research and development, as well as farmer awareness, for many years. Having said that, it needs to be workable and the settings need to be right. The devil is in the detail, and we need to take the time to understand this 600-page report, says Mackle.
Many of the key changes the Commission states must occur is substantial afforestation of up to 2.8 million hectares, with a particular focus to increased planting on land currently used for sheep and beef farming. The report also says some shift from agriculture to lower-emissions land uses such as horticulture is required.
"Many farmers are already foresters, and many more are looking for opportunities to increase planting on their farms," says Mackle. "Looking to the future, there may also be increasing numbers of farmers looking to diversify into other food production opportunities by introducing cropping into their land.
"We know New Zealand is well placed to focus our food production at the premium end of the market, and this will lead to changes to the current system over time.
"We must keep in mind that many farmers have already been making significant changes and financial investments to their farm systems to improve their environmental sustainability.
"We all want a fair and stable transition for the agricultural sector and we are committed to work alongside Kiwi farmers as we make this transition to a low emissions economy."