Sticks replaced by carrots for farmers who pursue lower carbon footprints

Tuesday, 18 February 2025

Extra payments for farmers who achieve “emissions excellence” and have farms with among the lowest carbon footprints in the sector will be available from June, Fonterra says.

And farmers striving for sustainability will receive an even bigger reward from Fonterra’s largest customers. The dairy co-op said it had struck a deal with Mars and Nestlé, which have agreed to help fund on-farm tools or services designed to further improve emissions efficiency, and pay even more in incentive payments at payout time, if farms reach certain sustainability goals.

The current government has been less inclined to use stick on the agricultural sector to force it to adhere to new emissions standards, but now this new carrot is being dangled by Fonterra and its enormous global customers to entice the country’s dairy farmers to do just that.

Fonterra is Mars’ largest global dairy provider, while Nestlé, which has been supplied by New Zealand farmers for over 100 years, already has some incentive programmes in train with farmers in this country.

The new agreements are more formal. Based on last season’s data, more than 5000 farms will be eligible for Fonterra’s extra payments, and between 300-350 farms will be eligible for the Mars/Nestlé payments.

Almost 90% would be eligible for the emissions-busting on-farm tools and services.

Changes

From June 1 this year, as well as qualifying for the 10 cents per kilogram of milk solids for meeting environmental and other targets, the new “Emissions Excellence” offers a further 1-5 cents per kgMS for farms that show their emissions from farming activities (like feed, fertiliser and herd) minus any carbon removals (i.e. emissions reductions resulting from the carbon dioxide that is removed from trees and vegetation that is grown on-farm) are lower than the co-op’s 2017/18 baseline year.

Some 5000 farms qualify for this, according to last season’s data, Fonterra said.

As far as the Mars and Nestlé incentives go, farms will be able to access an extra 10-25cps per kgMS payment if they have one of the lowest emissions footprints in the Co-op, or around 30% lower than the average farm.

“This will take into account not only emissions from farming activities, but also those associated with land use change (e.g. the historical conversion of forests to pasture) and those released from peat soils, before subtracting any carbon removals,” the company said.

At a lower level, some 87% of farms will qualify for on-farm tools or services designed to further improve emissions efficiency, for example herd efficiency services from the likes of Livestock Improvement Corporation and CRV New Zealand, subsidised by Mars and Nestlé.

The latter two companies have strict plans to reduce their value chain emissions - plans that those with knowledge of export markets have long warned will force New Zealand farmers to adopt emission-lowering activities, whether they want to or not.

Mars is aiming to halve emissions by 2030 (against a 2015 baseline) across its entire value chain and become Net Zero by 2050, and Nestlé is also seeking Net Zero by 2050. By the end of 2025, Nestlé aims to reduce emissions by 20% and by the end of 2030, by 50%.

Back story

The coalition government agreed in mid-2024 that a 2025 deadline for the agricultural sector’s entry into New Zealand’s carbon market would be pushed back, and it would potentially not face a price for carbon emissions until 2030.

Agricultural greenhouse gases comprise the bulk of this country’s contribution from humans to global warming.

Fonterra says New Zealand’s carbon footprint is lower than that of other major milk producing countries. It nevertheless introduced a programme called The Co-operative Difference in 2021, under which up to 10 cents of each farm’s milk payment would be determined by the farm’s sustainability credentials and milk quality. To pass the environment standard to get the payment, the farm needed a farm environment plan in place, and be achieving three out of the four key practices - low purchases of nitrogen, participation in product stewardship schemes for plastics and agrichemicals, no effluent discharge and 80% farm grown feed.

The scheme has been adopted by many farmers, but late last year Fonterra came under fire from the likes of fresh water advocate and academic Dr Mike Joy for using the phrase “Regenerative Agriculture” in a presentation about what it was encouraging amongst its farmer community.

After the criticism blew up, Fonterra said it was not “regenerative farming” but farmers using “regenerative practices”