Farm emissions scheme: Expect higher food prices for consumers - economists

Consumers can expect higher meat and dairy prices as farmers pass on emission pricing charges. Photo / Sylvie Whinray

Government proposals to impose charges on agricultural emissions will ultimately cost consumers, economists say.

A consultation document for the scheme which will see farmers paying for agricultural emissions in some form, says it will be introduced in just three years and is expected to be signed off by Cabinet in 2023.

The system of farmgate pricing has been worked on since 2019 after calls from the sector to have a farmgate emissions pricing system that would reward climate-friendly farmers.

Westpac senior agri-economist Nathan Penny said imposing charges on agriculture emissions - particularly for sheep and beef farmers - would end up costing consumers.

"This will mean higher food prices," Penny said.

"There is no free lunch for this policy - it will mean higher meat and dairy prices.

"Invariably, those costs will end up with household consumers," he said.

ANZ's agri-economist Susan Kilsby said the proposals, when enacted, would affect how much food is produced locally.

"It's definitely going to impact how much food we produced in New Zealand," she said.

"Dairy and meat production will decrease, but this will provide some opportunity to increase the average value of these goods," Kilsby said.

"Production of horticultural goods and arable goods is expected to increase, but this will require significant additional investment."

The Government has said it is committed to a 10 per cent reduction in methane emissions from agriculture and landfills by 2030, going up to a 24-47 per cent reduction by 2050, compared to 2017 levels. It comes alongside a net-zero emissions target for 2050.

The consultation document, Te tātai utu o ngā tukunga ahuwhenua - Pricing Agricultural Emissions, has drawn criticism from farming groups.

Federated Farmers national president Andrew Hoggard has strongly opposed the plan, saying it will "rip the guts out of small-town New Zealand" by facilitating the conversion of sheep and beef farms in particular into trees.

Beef and Lamb New Zealand was similarly worried the Government had proposed to reduce the categories of sequestration recognised.

"New Zealand sheep and beef farmers have more than 1.4 million hectares of native forest on their land which is absorbing carbon and it's only fair this is appropriately recognised in any framework from day one," its chairman Andrew Morrison said.

Prime Minister Jacinda Ardern noted the disproportionate impact on sheep and beef farmers and said the Government was committed to working through the proposals with them to find solutions.

She described it as a "pragmatic proposal" that would reduce agricultural emissions while making products more sustainable and enhancing the "export brand".