Farmers will be paid for improving biodiversity and absorbing carbon as part of a $34 million scheme rewarding producers who help the environment.
The Morrison government will invest $30 million in the Agriculture Biodiversity Stewardship Program, with a further $4 million to create a national and internationally recognised biodiversity certification scheme.
The scheme aims to help biodiversity-friendly farmers get an extra premium for their products at the checkout and when they trade with other countries.
Agriculture Minister David Littleproud said the government was offering a carrot to farmers who look after biodiversity rather than a stick.
"Farmers should be rewarded for having plants and animals on their farm, not penalised by stopping them using that land without any compensation," he said.
"I've always thought farmers should be paid for managing the biodiversity on their properties - this can become a passive and drought-proof income stream for them."
The payment program will be trialled across different regions and commodities before being expanded as national policy.
Mr Littleproud said it could eventually become a more sophisticated scheme of the Carbon Solutions Fund, the centrepiece of the coaliton's "direct action" climate change plan.
The National Farmers' Federation will help develop the certification scheme to motivate producers to look after nature on their properties.
"If shoppers are prepared to pay more for produce which comes from farms that look after biodiversity then let's create a brand and reward farmers who do that," Mr Littleproud said.
Australian Associated Press