New Zealand towns and cities are in for an economic "hiding" if dairy farmers are forced into the Emissions Trading Scheme and have to pay yet another crippling levy, says Federated Farmers.

Dairy chairman Chris Lewis was reacting to indications the Government is leaning towards a proposal from the Government's Interim Climate Change Commission (ICCC) for agriculture to come into the ETS, albeit at a reduced emissions charge, as opposed to allowing the rural sector to operate its own emissions payment system as proposed.

Primary sector leaders have unveiled a five-year work plan for agriculture to manage its own way into the ETS, whereby farmers would be responsible for collecting and reporting emissions data and paying directly for emissions.

Their unprecedented cooperation in the work plan, called the Primary Sector Climate Change Commitment, was announced as the Government released the ICCC's interim report.

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While the Government hasn't ruled the pan-sector plan out and is putting both proposals out for public consultation, Climate Minister James Shaw suggested the Government was leaning towards the ICCC proposal.

This would see agriculture pay just 5 per cent of its total emissions cost from 2025.

Agriculture produces nearly half New Zealand's total greenhouse gas and has been excluded from the ETS so far. Dairying is New Zealand's biggest export sector, accounting for 10 per cent of GDP. Export returns last year were $16.6 billion.

The ICCC's proposal was quickly branded a sweetheart deal for farmers. Federated Farmers' Lewis said farmer reaction would crush this idea quickly.
To achieve the Government's emissions reduction target, dairy farmers would have to reduce feed inputs to a level where production and New Zealand's dairy productivity advantage will be lost, Lewis said.

"It will affect farmers' livelihoods but I tell you what, it's going to give our towns and cities a hiding. If we reduce our productivity, we reduce exports and we reduce the ability of this country to pay its way."

Lewis said farmers were "well-aware" of climate change issues.

"But putting another levy on an industry that is struggling at the moment with all the levies and taxes and other things coming at us, you're not going to get a happy reaction."

Lewis said the reasons farmers' were opposed to coming under the ETS were simple - there would be unintended consequences, scientist opinion was still deeply divided on the extent of agriculture's part in climate change, and comparing New Zealand agriculture's emissions with other countries was like comparing apples with oranges.

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"Of course farmers expect to do their bit - we all have to - but when our country has a high amount of renewable energy compared to other countries, of course our agriculture emissions are going to take up a large share.

"Those other countries also have other ways of earning their dollars - they're not reliant on agriculture to feed the population. Exports are one of our leading ways of earning currency."

Lewis said agriculture's submissions to policy-making on climate change were "heavily science based". But given the policy-making arguments were pitting non-agricultural experts against agriculture scientists "at the moment we've got scientists fighting scientists".

"This is a difficult spot our Government finds itself in. It has aspirations, it wants to spend money, but to do that we need profitable businesses."

Federated Farmers climate change spokesman Andrew Hoggard said farmers agreed a priority was to find a workable and affordable way for them to measure emissions and sinks at farm level, and adopt practices and technologies to help drive down methane and nitrous oxide emissions.

"Where we differ is that the Government keeps emphasising pricing as the predominant tool. Federated Farmers does not agree with universal pricing of methane.

"The ETS has failed to reduce carbon dioxide emissions from transport - transport emissions have near doubled since 1990. Universal pricing of methane will be similarly unsuccessful."