It's here: the Government has unveiled its plan for pricing fertiliser and cow burps, which together form around half New Zealand's official climate tally.

Farming gases have never been priced in New Zealand before, and to devise a new system, political leaders have blended the farming industry's proposals with selected counter-proposals from the independent Climate Change Commission, topped off with a few tweaks of their own.

The resulting proposal will be unveiled today, and puts prices on both emissions of methane (mainly from cow and sheep burps) and emissions of nitrous oxide (mainly from fertiliser-enriched livestock urine), while allowing farmers payments for doing good for the climate by planting and caring for carbon dioxide-sucking trees.

To determine their bill, farmers will plug a list of inputs into a calculator: farm area, livestock numbers, how much meat or milk they produce, and how much fertiliser they use on their paddocks.

The proposed pricing system – seen by Stuff – applies to farmers who are GST-registered and who meet thresholds for fertiliser use and herd size.

Climate Change Minister James Shaw says parts of the scheme will evolve after 2025, reflecting the 'imperfect” nature of some features.

On the positive side, farmers will also get financial rewards for using burp-fighting technology, such as low-methane sheep breeds or cattle feed supplements.

At least some of these options are expected to be ready and available to buy in time for the scheme's 2025 kick-off.

Money from burp and fertiliser levies will be used to run the scheme as well as recycled into payments for tree-planting and forest protection, and introducing climate-friendly technologies on farms (therefore reducing the total bill for farmers who adopt them).

The plan isn't quite what farming bodies wanted, and nor does it meet all the climate commission's concerns – let alone the concerns of environmental lobby groups. But it marks a milestone in a plan to price agricultural emissions that has been on the table in some form for 20 years.

The proposal shows the backstop of rolling farming into the Emissions Trading Scheme (which prices carbon dioxide emissions from vehicles and heavy industry) is firmly on the back burner.

Instead, the Government is suggesting bringing in a processor-level levy on farm emissions if a farm-level system isn't ready by 2025.

Here's what's proposed:

Methane price (livestock burps)

A proposal to have farm bodies nominate their own representatives to a powerful price-setting board did not make the cut with Cabinet.

Instead, Government Ministers will set the price for methane, after getting advice from the Climate Change Commission and also consulting farmers.

Consulting emitters about the price of climate-heating gas makes this scheme different from the Emissions Trading Scheme – under the ETS, emissions are capped, and the price of carbon dioxide is set by the market without consultation with polluters.

The methane price will change either every year or every three years (Cabinet has not decided which, and is asking for feedback).

The price will be based on how New Zealand is tracking towards meeting its international promise to cut methane by 10 per cent by 2030, down from 2017 levels, the consultation material indicates.

Government discussion documents seen by Stuff say a cap-and-trade system would have been more responsive, and would have given more certainty of meeting New Zealand's targets, but the Government deemed it too complex to bring in by 2025.

Speaking ahead of the announcement, Shaw says he would have preferred a trading system, rather than having politicians set the price – since the price could be vulnerable to lobbying. However, work is not far-enough advanced for trading methane to be in place by 2025, he says.

The cap-and-trade option remains an option for the future.

'It wasn't one of the options that He Waka (Eke Noa, the industry partnership that came up with the first proposal) put a lot of work behind,” says Shaw, adding that it's politically and technically hard to divvy up emissions for trading between farms.

Asked about calls to regulate methane using an alternative metric to the commonly-used GWP100 (a system which averages methane's heating impact over 100 years, thereby both under-counting its short term impact and over-stating its long-term heating), Shaw said the short-lived nature of methane was already built into New Zealand's target of reducing methane by 24-47 per cent by 2050 (as compared with long-lived carbon dioxide, which has a target of net-zero).

Nitrous oxide price (fertiliser and animal urine)

Like carbon dioxide, nitrous oxide is a long-lived gas.

The Climate Change Commission recommended the Government should price this gas as soon as possible, by slotting synthetic nitrogen fertilisers into the ETS.

Ministers are weighing this advice up against the industry's proposal that nitrogen fertilisers belong with the on-farm price from 2025.

Nitrous oxide will be based on what carbon dioxide emitters pay under the ETS, but with a hefty 95 per cent discount (the rate negotiated by now-ousted New Zealand First when the party was in coalition with Labour).

The agriculture industry, which came up with the first sketch of a farm gas pricing scheme under the He Waka Eke Noa partnership, assumed that discount would still apply.

The Government has also continued to run with it, and built the discount into its plan.

The discount will be phased out at one percentage point a year, slowly pushing up the price of nitrous oxide.

Shaw says modelling suggests that even with the discount, the price will be enough to prompt farmers to shrink emissions sufficiently to meet New Zealand's emissions targets.

The Government is seeking feedback on two pricing methods: pricing fertiliser at the farm or grower level, or rolling a fertiliser levy into the ETS and getting manufacturers and importers to pay the levy.

Rina Walker and Terry Isson at Ngāti Pukenga's food garden, just out of Tauranga. The iwi and scientist are working together on a trial to absorb carbon dioxide by sprinkling crushed rock on farmland. Photo: Dominico Zapata/Stuff.

Credit for trees

Long-term, the Government wants all planting and bush on farms to sit inside the ETS, and earn credits inside that system, provided farmers can prove they're sucking in added carbon dioxide from the atmosphere.

That would put all landowners – farmers or not – on the same footing when it comes to their planting.

However, the proof isn't yet there for some plots of vegetation to meet international standards for counting carbon, Shaw says.

The proposed plan is for landowners and landowner-supported groups to be able to obtain the research and proof needed to get wider classes of planting into the carbon accounting system, so the sole burden doesn't rest with the Government, says Shaw.

In the meantime, the plan includes an interim system where the Government pays farmers grants directly to encourage carbon to be sucked in by planting along waterways, shelter belts and looking after native bush on farmland.

Money for these grants will come from the burp- and fertiliser- levies.

What's next?

Feedback on the plan is open until November 18, and a final report due in December. The Government plans to introduce a draft law implementing a pricing plan in 2023, before pricing kicks in on January 1, 2025.

-Eloise Gibson/Stuff.