NZ Scraps Farm Methane Tax: Relying on Fonterra to Force Cuts

Agriculture Minister Todd McClay announced that the national methane emissions reduction target for 2050 has been reduced from the previous target of 24% to 47% of 2017 levels, down to a range of 14% to 24%.

This new policy exempts the farming industry from the Emissions Trading Scheme (ETS), reversing plans initiated by the former Labour Government. Instead, the government seeks to partner with the agricultural sector to develop reduction technologies and provide incentive payments aimed at lowering emissions without impacting production and profitability. Climate Minister Simon Watts has expressed confidence in emerging technologies that are expected within the next five years which, if adopted by 30% of farmers, could reduce total agricultural emissions by 7% to 14% by 2050.

Export buyers like Fonterra and Silver Fern Farms, who already face international pressure to cut emissions, will be a driving force in enforcing emission reductions. Fonterra, which accounts for over 80% of New Zealand’s dairy market and about 46% of the nation’s methane emissions, can potentially influence farms by reducing milk payments for high-emission producers. Meanwhile, the political reaction to these changes varies widely—from the Act Party's acclaim to the criticism from the Green Party, which considers the changes misleading and potentially detrimental to climate goals.

While some see this approach as balanced, others, including Greenpeace Aotearoa, warn that backing down on agriculture emissions could undermine New Zealand’s climate reputation, especially as a major global dairy exporter.