Agricultural processors are being invited to make submissions on how they can reduce their greenhouse gas emissions or help suppliers reduce theirs.
Processors such as dairy factories, meat processors and fertiliser works are the point of obligation under the Government's emissions trading scheme for agriculture, but there has been criticism that this was too far removed to influence farmer behaviour.
Ministry of Agriculture and Forestry Policy climate-change manager Julie Collins said that unless that behaviour could be tracked and monitored, it could not be verified, at least with present technology.
There has therefore been a tradeoff, with the decision made to make the point of obligation with 250 agricultural processors instead of between 30,000 and 40,000 individual farmers.
Those processors will be able to apply for what is being called a unique emissions factor, a tool or system they claim reduced their emissions, or those of their suppliers, to a level lower than the average for that sector.
If a processor applies for and gets a unique emissions factor, they will end up paying less for their emissions per unit of product than the average.
So the unique emissions factor is the reward in itself because of the reduced cost it offers.
Ms Collins said the Ministry of Agriculture and Forestry would start consultation on this with processors and the wider community next year.
In July this year, the Otago Daily Times reported that the first wave of the ETS, which includes an emissions charge for transport fuel, electricity generation, stationary energy and industrial processes, will cost the primary sector an estimated $65 million a year.
The emissions trading scheme legislation allows the Government in the future to shift the point of obligation to farms, but Ms Collins said before doing so, the Government would need to be satisfied it could calculate emissions, that farmers have the tools to reduce farm emissions and the cost of the scheme outweighed by the benefits.
Animal production levels, feed quality and quantity influenced emissions, which made it difficult to calculate them at farm level, but there was not the technology to track all these factors to reward farmers for reducing emission.
Ms Collins said Maf had a proxy calculation that used scientifically-developed formula which assigned a charge.
This was levied, based on per kg of milksolids for dairy, per kg of carcass weight for slaughtered animals, per animal for live animals exported, per egg for egg producers and per tonne of nitrogen for synthetic nitrogenous fertiliser.
Agricultural processors can start reporting their emissions from January 1, 2011, but it will be mandatory from January 1, 2012.
The sector will start paying for their emissions from January 1, 2015.
The Government has also promised a review of the ETS in 2012 and has consistently said agriculture will be exempt if competitors do not include agriculture in an ETS scheme, or if there is insufficient technology to allow farmers to reduce emissions.