Edging closer to agriculture's inclusion in emissions scheme

Rural NZ holds its breath as more details of the ETS changes trickle in.
Fonterra group environment manager Francesca Eggleton said "If we reduce production here, we could shift it offshore to less efficient producers and global emissions could go up"

Labour may have eased back on its campaign promise to swiftly bring agriculture into the emissions trading scheme but the rural sector remains nervous about where things are heading.

Labour had planned to introduce biological emissions into the ETS by 2020, having previously set a goal of reducing emissions by 40% from 1990 levels by 2030.

But since being elected to power this has been replaced by a plan to allow a yet-to-be-formed Climate Commission to examine what reductions can practically be achieved and recommend targets.

There is a lot at stake for farmers. For example, such a tax affects family farms as well as corporate farmers and the Coalition has no intention to offset this by cuts to income tax

Prime Minister Jacinda Ardern has said that, as a result of the Coalition agreement with New Zealand First, the government will shoulder a bit more of the burden.

New Zealand First favours ditching the ETS, replacing it with a UK-style Climate Change Act, and introducing a Parliamentary Commissioner for Climate Change.

Labour’s latest plan would mean farmers pay tax on 5% of their total on-farm emissions with the revenue raised from this being used to encourage agricultural innovation.

That’s down from the 10% Labour took to the election.

Climate Change Minister James Shaw says officials are “developing a plan” at the moment but says it’s likely the Climate Commission will be set up “within the first six months of next year.”

Beyond that, he doesn’t know when the ETS issue will be looked at.

Rural jitters
It is this uncertainty that is making some in the industry nervous.

Federated Farmers president Katie Milne says an extra tax on Kiwi farmers would make them less competitive in the global marketplace.

She says other farming-intensive economies around the world are already being propped up by various government subsidies.

An extra tax would further tip the scales in favour of New Zealand’s competitors, giving them greater market share.

“It’s the process of living that will actually be taxed,” Ms Milne says. Plus, it’s a process that is out of most farmers’ control.

This is one of the main reasons no countries in the world have included agriculture in the ETS, as the process is just too hard to measure and effectively tax.

“With fossil fuel emissions, you can – in the cycle of energy – change to renewable resources, take coal out of the equation and you have an option,” Ms Milne says.

But this is simply not an option when it comes to belching livestock.

Climate Change Minister James Shaw says it is likely the Climate Commission will be set up "within the first six months of next year"

Fonterra group environment manager Francesca Eggleton says New Zealand is internationally recognised as one of the most “emission-efficient” producers of dairy in the world.

Over the past 25 years, the total biological emission from agriculture in New Zealand has increased by 15%, according to The Climate Change and Agriculture: Understanding the biological greenhouse gases report. In contrast, over the same period the carbon dioxide emissions from road transport increased by 71%, industrial processing increased by 45%, and electricity and heat by 21%.

Although total biological emissions have risen 15% over that period, the emissions intensity of pastoral agriculture has declined 20% due to large improvements in productivity (see graph.)

“We have always been very conscious that, if we reduce production here, we could shift it offshore to less efficient producers and global emissions could go up,” Ms Eggleton says.

Is there an upside?
But the new government argues the tax won’t have this impact and Agriculture Minister  Damien O’Connor says if agricultural emissions are brought into the ETS, New Zealand will “probably be in a better position.”

He says the revenue recycled back into agriculture to encourage agricultural innovation will help drive this.

“An increasing number of consumers look for environmental credentials when they’re buying their food,” Mr O’Connor says, adding that, although there will be a cost to farmers, in the long term they will reap higher returns.

According to data from Unilever released in May, a third of consumers are now choosing to buy food from brands they believe are doing social or environmental good.

Lincoln University senior agribusiness management lecturer Nic Lees says that, in reality, the tax won’t be a major cost to those in the sector.

“There are other external factors, such as the price of milk solids, which will have a far greater impact on their profitability.”

Mr Lees says bringing agriculture into the ETS will start to bring the costs of those emissions inside the farmgate.

“What we have at the moment with greenhouse gas emissions is farmers aren’t bearing the full cost of their production system.”

Technology no silver bullet

Belching and farting animals are responsible for most of the methane emissions in New Zealand, according to the Climate Change and Agriculture: Understanding the biological greenhouse gases report, the last report written by then environment commissioner Jan Wright in October last year.

Both Mr O’Connor and Mr Shaw are optimistic about the role biological technology can play in New Zealand.

But Dr Wright says there is still a lot of work to be done in developing a lot of the technology which could be used.

National’s agriculture spokesman, Nathan Guy, says there was a “huge amount of research” that went into reducing agricultural emissions when National was in power and produced good results.

“But it hasn’t produced the silver bullet and that’s likely to come from either pasture genetics or inhibitors or vaccines.”

Mr Guy says cracking that technology is still years away.

“The most recent update I had three or four months ago, indicated that they were probably five or 10 years away from taking a [vaccination] product to commercialisation.”

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