Agriculture is unlikely to be included in the emissions trading scheme in the next five years, Prime Minister John Key told a farmers group on Friday.
The scheme comes into effect on 1 July, when the energy and manufacturing sectors have to start paying for their greenhouse gas emissions. The agriculture sector is due to be fully included in 2015.
Mr Key told the Federated Farmers national conference in Invercargill on Friday that unless the country's agricultural trading partners made a similar move, farmers in New Zealand would not be expected to pay for their livestock emissions.
But he warns that although New Zealand might contribute only 0.2% of the world's emissions, it must be seen to be doing something.
Mr Key say farmers' continuing objection to the scheme may result in people in towns and cities taking a negative view of the rural sector.
Earlier, Federated Farmers gave notice it would not give up its fight to get the scheme scrapped, with the launch of a nationwide campaign next month called "Switch Off".
The organisation believes the scheme will cost the economy $500 million in its first year.
President Don Nicolson says it may be a waste of money because its success cannot be measured, which is why farmers are calling for it to be switched off. He says the scheme is not the answer to reducing the country's greenhouse gas emissions.
Agriculture Minister David Carter has agreed to supply details of Ministry of Agriculture and Fisheries calculations on how much the scheme will cost farmers.
The ministry's latest figures suggest it will cost the average dairy farmer $3300 from July, and sheep and beef farmers $1200.
Monetary policy defended
Mr Key also used the gathering to defend the country's monetary policy as among the best in the world.
Mr Key said Labour Party leader Phil Goff was wrong to claim there needs to be a change to the policy to rebalance the economy.
He said the policy was world best practice and widening the objectives of the Reserve Bank would not make any difference to interest rates.
He says the only way interest rates can be lowered is if the Government spends less.
