On-Farm Pricing Mechanism
The recommendation is for farms to do an annual “Greenhouse Gas (GHG) return” based on the following formula:
A + B - I – C
A = methane
B = nitrous oxide + CO2 from nitrogen fertiliser
I = reduction due to mitigations (e.g. inhibitors)
C = offset from forestry (both ETS (Emissions Trading Scheme) and He Waka Eke Noa (HWEN) forests)
This will be denominated in dollars; each component will be costed, and a net figure derived. The costing around use of mitigations is yet to be determined.
There will be a different price for methane and nitrous oxide:
- Methane will be priced on a per kg methane (CH4) basis. The indicative HWEN price is 11c/kg from 2025 to 2027, then rising to 17-35c/kg by 2030.
- Nitrous oxide and CO2 from nitrogen fertiliser will be priced on a per tonne of CO2 equivalent. Indicative price for 2025 is $4.25/T, rising to $13.80/T by 2030.
- HWEN have suggested that the prices are not related to the ETS price but are set by the System Oversight Board and are reviewed every 3 years.
The proposal to government is to broaden out the definition of a “forest” compared to the ETS definition: