Thin Ice

Post Written by C. Will

Thin Ice is a New Zealand created movie that follows Simon Lamb (Victoria University of Wellington) as he travels around the world meeting the scientists behind climate change. The film is intended to help people develop a better understanding of climate change. The film also gives an introduction to the most recent Intergovernmental Panel on Climate Change (IPCC) Assessment Report.

Livestock: The answer, not the problem?

Post written by C. Will

Seth Itzkan of Planet-TECH discusses how holistic management can restore grass lands and reverse the effects of climate change in his TEDx talk; “How global warming can be mitigated through holistic management”.

In the video, Seth discusses his experiences in Zimbabwe and how the village herders have changed the way they manage their livestock. Using holistic management, they have replenished grasslands and during the dry season surface water is occurring further upstream than before. Increased availability of surface water has made farming easier and removed the need for water pumps, saving money. Regenerating grasslands also increases soil sequestration, reducing the amount of carbon in the atmosphere.

Holistic management uses livestock in a way that mimics wild herds which were a key component in the ecosystem when grasslands thrived. The wild herds would graze, naturally process the grass, fertilise the ground and then move onto a new area. The villagers are now replicating this process by running livestock in dense packs and moving them regularly just as a wild herd would. They also stick to grazing plans to prevent over grazing.         

Although his focus is on environments that have suffered desertification (the transformation of habitable land to desert), parallels can be made between the framework of holistic management and the way farmers in New Zealand manage their stock. Relative to farmers in Africa though, New Zealand farmers have lower emissions per unit of production and are more efficient. However, even in New Zealand many farmers can apply management strategies other farmers are already using to reduce their environmental impact. A recent Motu working paper, looks at such mitigation possibilities.

Holistic management was a way of managing resources originally developed by Allan Savory. Here Allan offers further discussion on holistic management and “how to fight desertification and reverse climate change”.

A Negotiator’s Perspective: the Future of Agriculture in the UNFCCC Negotiations

Post written by H. Griffin.

With this year’s annual international climate change (UNFCCC) negotiations kicking off in Warsaw on Monday, now is a good time to look at agriculture’s place in the negotiations and where things might be headed in the future. 

Due in part to socio-economic and food security issues, progress in agricultural negotiations within the UNFCCC has been very slow. This is because of the role agriculture plays as a source of employment for many of the world’s poor, and the fact that many developing countries have had recent experiences of drought induced famine.

A new agreement is currently being negotiated and is expected to come into force in 2020 at the end of the Kyoto Protocol’s second commitment period. Whilst the Kyoto Protocol placed mitigation obligations on industrialised nations, the post-2020 agreement will be applicable to all nations. The negotiations are currently in a phase of design and preparation for the post-2020 agreement. It is particularly important that progress on mitigation and adaptation in the agricultural sector is made in preparation for the next agreement.

To give us a better idea about what is going on in the negotiations, Paul Melville from the Ministry for Primary Industries has kindly agreed to be interviewed for this blog. Paul is in Warsaw with the New Zealand government delegation as a negotiator in the area of agriculture.

Q. What is New Zealand hoping to achieve in relation to agriculture at the negotiations in Warsaw?

A. The discussions on Agriculture had a breakthrough at the inter-sessional meeting in Bonn this year. After many years of inconclusive negotiations, Parties agreed to a submission and workshop process as a first step of SBSTA (Subsidiary Body for Scientific and Technological Advice) work on Agriculture. This will be a useful opportunity for Parties to share experiences and lessons learned on agricultural adaptation and adaptation co-benefits. This workshop should facilitate more focussed negotiations on agriculture at Warsaw and future SBSTA sessions.

A successful work programme would aim to provide the UNFCCC with detailed scientific advice on issues relating to agriculture. One workshop will however unlikely deliver this. Though, it is often said that the hardest part of any process is taking the first step. The challenge for COP19/Warsaw is to ensure that Bonn was the first step in a wider process by continuing and building upon this work. If Warsaw was to fail to continue the progress made in Bonn we risk falling back into the previous pattern.

Q. What role can New Zealand play, both within and outside of the negotiations?

A. New Zealand likes to be a flexible thought leader wherever possible, piloting new ideas and working with a broad range of countries. We have expertise and a particular interest in issues related to agriculture, forestry and carbon markets.

Q. How is domestic policy in New Zealand relating to agricultural GHG emissions influenced by the international context?

A. There is a two-way relationship between domestic and international policy: domestic policy in New Zealand influences New Zealand’s international position; and international policy has an influence on New Zealand’s domestic policy.

While there is an influence in both directions, the two remain different. We promote international rules and commitments that are suitable for New Zealand’s domestic circumstances; and once agreed we implement commitments and rules using policies and measures that best suit our domestic policy environment.

Q. In your opinion, what would be the best outcome for agriculture in the post-2020 agreement?

A. The agricultural sector faces unique challenges. Agriculture is responsible for approximately 10–12 percent of global greenhouse gas emissions and is also an extremely vulnerable sector to the impacts of climate change. In addition to the challenge of having to simultaneously manage greenhouse gas emissions while adapting to climate change, it is forecast by the FAO that global agriculture will be required to increase production by 70 percent by 2050 to meet rising demand.

Outlining a best outcome for agriculture is difficult at this early stage of the negotiations as we are still working collectively in the UNFCCC on the design of the post-2020 agreement. However, by focusing on what we do know we can begin to understand what a good outcome for agriculture could look like.

We know the post-2020 agreement will include measures that will be ‘applicable to all’ Parties. We assume it will include, amongst other things, mitigation, adaptation and finance. We know that agricultural systems, including considerations of capacity, scale, culture, environment, efficiency and productivity are extremely varied, and it will probably not be possible to design a one size fits all rule set.

Therefore, in order to remain applicable to all, a key feature of any treatment of agriculture will be a need to adopt an approach with sufficient flexibility to cater for this broad range of national circumstances. In this sense, although agriculture has its own unique features, the broad principle of ensuring Parties are able to take commitments consistent with their specific national circumstances remains relevant here, too. New Zealand has outlined a concept of ‘Bounded Flexibility’ in a number of fora including the below submission which builds on this idea of a flexible framework.

http://unfccc.int/files/documentation/submissions_from_parties/adp/application/pdf/adp_new_zealand_workstream_1_20131015.pdf

Beyond outlining that any treatment will need to be sufficiently flexible to cater for national circumstances, it is very hard to predict or prescribe outcomes for a post-2020 agreement at this early stage.



About Paul:
I am a Senior Policy Analyst in the Ministry for Primary Industries International Policy Team. Our team covers environmental policy related to forestry or agriculture. In addition to agriculture in the UNFCCC, I also have responsibilities related to common metrics in the UNFCCC (global warming potentials), environmental footprinting policy and carbon footprinting policy. Prior to working for MPI I was a member of Fonterra’s Sustainability team. While at university and high school I paid my bills by milking cows and operating a successful calf rearing business on my parent’s dairy farm near Te Awamutu.

New Motu Working Paper Shows Significant Potential for Better Farm Management Practices to Improve Environmental Outcomes

Post written by H. Griffin.

This new working paper looks at differences in management practices of New Zealand dairy farms and the mitigation of nitrogen leaching and greenhouse gas emissions. Research on this topic in New Zealand to date has relied on simulation modelling and has been limited by the fact that different farms have generally been treated as homogenous. In reality, farms vary greatly – looking at this heterogeneity gives a better idea of the potential for better environmental outcomes through more efficient farm management practices.

Using data on 264 New Zealand dairy farms, the paper estimates the extent to which farm management and farmer skill could potentially reduce farms’ greenhouse gas emissions and nitrogen leaching per unit of production. It suggests that significant feasible, relatively low-cost mitigation could be effected by less efficient farmers moving towards existing best practice, potentially reducing nitrogen leaching by more than 30 percent and greenhouse gas emissions by more than 15 percent. The potential for such mitigation varies considerably across farms.

Check out the new paper here.

Food Security and Climate Change

A recent article in the Guardian highlights the increasing importance of food trade globally. Of the countries investigated in the study, 66 currently do not produce enough food to feed their people - roughly 16% of the global population. By 2050 the study predicts that over half of the world’s population will rely on imported food – making global food security more reliant on international trade. The predictions do not take into account the impact of climate change on food supply which could exacerbate the situation.

It is now thought that climate change is going to significantly impact our global food system by shifting where food is grown, in what seasons and in what quantities. Including these possibilities into the predictions of global food security is a necessity if we are to think ahead.

A new study in New Zealand is aiming to look into these issues for our own country. The CCII or Climate Change Impacts and Implications for New Zealand study led by NIWA and Landcare Research will explore the consequences of different climate trends for New Zealand so we can better prepare for these coming issues. The study will generate improved climate projections for New Zealand based on the latest global modelling and evaluate key pressures on and responses of five important environments (alpine, hill-country, lowlands, coastal and marine). The study will also explore feedbacks, cumulative impacts and limits at the national level from the interaction of climate, population, land-use change, economic development, and increase the relevance of climate change in decision making processes. The aim of this project focuses on extending New Zealand's foresight into the issues of climate change and how primary industries such as agriculture can respond to these challenges.

Another part of the equation of global food security is that New Zealand is currently a global food producer. If these predictions come to play and the world is significantly dependent on imported food - New Zealand may be a source of those food supplies for other countries. The increase in demand may offset the economic losses resulting from lowered agricultural production from extreme weather events. The potential negative and positive impacts of these shifts in agricultural production show how complex these issues are.

For more information, check out these condensed and interesting resources on what we know in New Zealand about the interactions between climate change and agriculture.

The New Zealand Farming Story: Tackling Agricultural Emissions

Today we are very excited to release our new short film on New Zealand’s agricultural emissions. Although the topic may sound dry (though hopefully not too dry if you visit this blog!) our filmmaker Jess Feast has done an excellent job of making an engaging film on an extremely important topic for the future of our country, our planet, our people and our stomachs. (She also made our films about improving the water quality in Lake Rotorua).

The film covers a wide range of topics, and many of the ideas in it come directly from what we learnt through the AgDialogue process. Importantly, we cover how we might be able to achieve some real reductions in New Zealand’s agricultural GHGs (greenhouse gases). You will get to meet some of the participants and experts from AgDialogue, including two of our star farmers, Mike and Megan.

The film speaks for itself, so you are better off watching it than reading about it. But before you do that, I’d just like to acknowledge all the hard work that went into making the film. To all those in the AgDialogue who gave their time and those who have done related research in the past few years, this film is dedicated to you and the hard work you have done.  Also thank you to our filmmaker Jess and the Ministry for Primary Industries for its support. The work will pay off in creating a more sustainable and prosperous future for us and future generations.

Oh, and if you like the film, please share it far and wide. New Zealand is uniquely placed to be able to make a big difference to levels of agricultural GHGs (greenhouse gases) around the world. And everyone in this country can make a difference.

UPDATE: Teaching materials to accompany the film have now also been released. These can be found here.

Looking forward: what NZ rural land might look like in the coming decades under a carbon price

This blog post is by Motu Research Analyst Zack Dorner.

A couple of years ago, my sister brought her partner to visit New Zealand for the first time. We picked them up in Auckland, and drove down the North Island back to Wellington. He asked “Why are there so many golf courses here?”

Of course, they weren’t golf courses, but the lush, green grassy farmland that New Zealand is so well known for, and that he was not used to.

Motu has just released a new working paper, modelling what our rural land might look like in the coming decades, including with a price on agricultural GHGs (greenhouse gases). Luckily, for our “golf courses”, even with the agricultural sector facing a price on its GHGs, New Zealand probably won’t look much different to the way it does now.

The really cool thing about the model used is that it is based on real world observations of how rural land use in New Zealand has changed in recent decades in response to commodity prices. It is slow to adjust – farmers don’t want to switch immediately to the new best thing for their land (see final graph below), which is understandable. Changing your whole farm can’t be easy or cheap to do, and who’s to say market conditions won’t change again.

Of course, the results in the working paper are just from a model. They do not predict the future, but give us an idea about the types of changes to land use and their magnitude under certain scenarios. There are on-farm mitigation options that farmers may be able to do to reduce their GHGs before changing land use, but to keep things simple, the model does not include these.

The working paper models three scenarios out to 2030: no carbon price, a carbon price ($25) just for forestry, and a greenhouse gas price for forestry and agricultural emissions.

The model shows several interesting things.

First, as I have said, land use change is quite slow. Even with a $25 carbon price on forestry and agriculture, there is actually relatively minimal changes in land use. This provides evidence that our agricultural sector may be able to respond efficiently to a price on carbon without huge disruption to rural life in New Zealand.

However, although changes to land use are gradual and small, they actually make a big difference to our emissions. The extra trees are especially helpful in this regard. From the paper directly:

Under our ETS [emissions trading scheme] scenarios there is substantial reforestation. The extra removals associated with this new planting mean that the additional sequestration in 2024 is from 17.6 to 20 percent of national inventory agricultural emissions in 2008.

That’s a huge amount of emissions, and would help New Zealand immensely in our quest to lower our emissions.

In terms of cows and sheep, we actually see more dairy cows, and fewer sheep and beef farms. This is because dairy farms are so much more profitable, and the balance is tipped even more in their favour once a price is applied to farming emissions. This is already happening to a much larger extent, and only the already marginal sheep and beef farms are converted to dairy or forestry under an efficient response to a carbon price. The overall change is only minor in the scheme of things, and even when you exclude agricultural emissions from a carbon price, this still happens (see the first graph below).

So these results suggest that there are large benefits to having a $25 carbon price in New Zealand for forestry and our country’s emissions profile. As for agricultural emissions, if dairy and sheep and beef farmers face a price on their emissions, the sky won’t fall in, but the adjustments that are already taking place will just continue to a greater extent. By creating an efficient, economy-wide price signal which includes agriculture, we should achieve more mitigation overall (see the second graph below). If on farm mitigation is encouraged optimally, and technologies continue to improve, we might well see less of the minor reduction in farming in the model and instead end up with more efficient farms on our rural land.

Bringing agricultural emissions into the ETS or some other pricing mechanism must occur once farmers are ready and on board. Through research like this, and having a dialogue with all interested parties, we can hopefully move forward together, and work towards future-proofing our golf courses, and our farms.

And now, for those of you who get a kick out of graphs (like me), here are some relevant ones:

This graph above shows the projected change in land use share for each type of land use. The solid lines give baseline projections. Short-dash-dot lines give a $25 carbon price, but not on agriculture. Dashed lines show a carbon price with agriculture. Note the y axis is the same scale for each graph so direct comparisons can be made (page 9).

This graph shows the amount of emissions that are reduced or sequestered. The red line is with just forestry, the blue line shows including agricultural emissions as well increases the emission reductions (page 16).

  

This final graph below shows why sheep and beef farms have been declining over the years, and how land use change is gradual (page 4 of Kerr and Olssen 2012).

Motu's agricultural GHG emissions research in the news

"We can't design systems assuming we're going to fail. Let's assume we're going to succeed and what the world will look like in 30-50 years given that we have succeeded."

There was an interesting article in the Timaru Herald’s Central South Island Farmer feature last week, which discussed a speech Dr Suzi Kerr gave to the New Zealand Institute of Agricultural and Horticultural science. The article is a good summary of many of Motu’s conclusions from the AgDialogue group, stressing rewarding farmers who make changes towards best practice guidelines for reducing emissions and making long-term, carefully considered policy decisions instead of rushing into dramatic changes.

The article can be found here.

Recently announced changes to the New Zealand ETS

This blog post is by Motu Research Analyst Zack Dorner.

A couple of weeks ago, the New Zealand government announced changes to the Emissions Trading Scheme (ETS) based on a review last year of how it was operating, and recent consultation on proposed changes. This blog post summarises and comments on some of the key points in relation to agriculture.

In terms of agriculture, while processors (such as Fonterra) must report on their emissions as of this year, they do not have to face any costs of their biological emissions until after at least 2015.

In 2015 there will be a review of whether or not they should have to face any of these costs. The next election is scheduled for 2014, and this decision could be highly dependent on who leads the next government. Labour’s policy at the last election was for agriculture to start facing the cost for some of their biological emissions in 2013.

It is worth noting that the government is keeping its price cap on CO2 emissions at $25 per tonne, which means a reduction in this cap over time as it is not being adjusted for inflation. Furthermore, the government is keeping our ETS strongly linked with international markets, which are currently highly dependent on the EU carbon price. The EU carbon price is highly dependent on their regulatory decisions, meaning the price, when below $25, is highly uncertain. A tonne of carbon is worth less than $7 in New Zealand at the time of writing. The agricultural sector is due to get 90% of their credits for free from the Government once they enter the ETS, with this amount being slowly phased out.

The true cost to farmers and processors also depends on the price they receive for their output, which is set in the international market. Other countries, including those in the EU, are moving towards regulation to deal with their agricultural GHGs (greenhouse gases). Policies like regulation, and also to reduce deforestation can raise agricultural commodity prices. Biofuels are an example of a climate policy which has been argued to have raised agricultural commodity prices in recent years due to increased competition for agricultural land.

Our farmers cannot pass on the exact costs of the ETS on to consumers as they face international prices for their produce. However, even if farmers overseas are not facing similar carbon charges, they may be facing other policies which cause international commodity prices to rise, which can help compensate New Zealand farmers for costs under the ETS. The food security issue from higher prices for goods like meat and milk is something for another post.

Uncertainties around commodity prices, carbon prices and entry date into the ETS mean the New Zealand agricultural sector faces large uncertainties as to the future costs they will face under the ETS.

As recommended by the ETS Review Panel last year, the Government would like to move to a farm level for reporting on emissions, which would ultimately mean farmers would have to pay directly for their emissions.

The ETS deliberately sets the point of obligation for participants as high up the supply chain as possible. This is so that, for example, petrol and energy companies do the trading of emission permits, and pass price signal on to consumers, rather than having over 4 million New Zealanders all accounting for their own emissions.

Agricultural emissions are a bit different. Under the current processor-level system, processors are charged on the basis of the national average emissions for every unit of output they produce. This means there are not tens of thousands of farmers in the ETS. Emissions are lowered through processors and farmers (who ultimately may bear the costs) convincing other farmers to mitigate, to lower the national average level of agricultural emissions per unit of output.

Using a farm level ETS, farmers could be directly rewarded for action they take themselves on their own unique farm. By measuring each farm’s emissions, mitigation actions don’t get lost in the surveys done to create national average emission data and the incentives are much stronger for individual farmers to take action to lower GHGs on their farm.

A farm level ETS would require farmers to run a computer programme like OVERSEER, which takes a detailed snapshot of their farm, and models their GHG emissions. OVERSEER is not perfectly accurate, but it is impossible to measure each animal’s emissions directly so it’s a good second best option and is constantly being updated and improved.

There are a number of administrative issues to be worked out before a farm level scheme is viable. It looks to be worthwhile though given it allows farmers much more scope for reducing their emissions and directly rewards them for good behaviour.

Finally, the government notes that it is currently investing over $18 million per annum into research to reduce New Zealand’s agricultural GHGs.

It is true that we are relatively one of the most efficient producers of meat and milk products in the world. New Zealand’s emissions per unit of agricultural output have been reducing at a rate of about 1.3% per year over the last couple of decades. This means a reduction in the amount of emissions per litre of milk, not necessarily an overall reduction, as our overall production has also increased. These reductions in emissions per unit of output have been due to productivity gains – getting more milk per cow for example – and not due to specifically trying to reduce our GHGs (see 2011 ETS review).

So would putting a price on agricultural emissions encourage and facilitate New Zealand farmers to continue to be the best in the world? Is this important for our clean, green brand and to help other countries lower their agricultural emissions? Will putting farmers into the ETS drive their production down, forcing production overseas to places where they are less efficient and do not have to pay for their emissions (so called “leakage”. This issue is briefly addressed in this blog post and this Motu article)? Are there other ways of encouraging our farmers to be greener?

These questions are at the heart of the debate on if/when New Zealand should bring its farmers into the ETS, and no doubt the debate will continue in the years ahead.

Watch this blog for future posts on some solid suggestions from Motu’s Agricultural Emissions Dialogue group as to how we can start dealing with our agricultural emissions. They look outside the ETS as to how we can bring about behaviour change amongst farmers. It is important to remember that reducing our emissions is what we really want, and a lot needs to happen alongside an ETS to achieve this. We don’t want to get bogged down in a heated debate about the current ETS, and lose sight of the big picture.

Further listening/viewing:

Click this link for a good debate between Cath Wallace and William Rolleston on National Radio

There is a good discussion here of mitigation options for agriculture, by Harry Clark

Here is Tim Groser, Climate Change Minister, on The Nation

Thoughts on land use from a young Māori woman

The following post is by AgDialogue participant Ana Ngamoki.

Climate change. Global warming. Greenhouse gas emissions. Fossil fuels.

These terms, and others, have now been ingrained into everyday conversation. As a young Māori woman, what do they mean exactly? It suggests damage to our tribal lands. Or even a loss of food resources and biodiversity. This leads to loss of land, culture and identity. A familiar pattern is emerging; a new form of ‘colonisation’ maybe? This time however, Māori have an opportunity to shape and partake in discussions to control, to an extent, the climate change situation.

Sustainable development. Renewable energy. Emissions trading scheme. Carbon Credits. AgDialogue.

These terms are perhaps a step in the direction towards recognising our role in managing the effects of climate change. The AgDialogue discussions have been an interesting experience. I am not a farmer, a policy analyst, a scientist or even consider myself an expert in this field. However, I have a vested interest and understanding in Māori, and more specifically Te Whānau a Apanui use of land. Our role as kaitiaki (guardians/ steward) over our lands and foreshore is a part of our culture and identity. It is our responsibility to put in place systems now to ensure future generations have continued access to the resources which our ancestors have left us.

Entering the AgDialogue discussions partway through was a daunting experience. I was suddenly thrust into a room of individuals whose years of experience in their respective fields almost equalled my age (and I am quite old!!). Following my first meeting in November 2011 and an exchange trip to Japan, I was able to reflect on my role within AgDialogue. Sometimes it is not until you travel abroad and participate in other processes that you realise how privileged a position you have been put in. This is what I discovered while I was in Japan. As a member of Kaitikiatanga – Caring for our lands and foreshore; a whānau and hapu not-for-profit organisation and, as tangata whenua, we have been allocated a voice in a process which some people and organisations can only dream of. We have been placed in a position where the voices of tangata whenua can be shared within a National Working group and climate change policy can now reflect these voices, aspirations and values.

The most interesting experience for me has been learning and absorbing information and stories from experienced individuals. Nitrification inhibitors were a foreign language to me prior to joining this group, so too were some of the scientific terms associated with climate change. This process has been a window by which I have been able to view how they can be simplified and turned into appealing prototypes such as a cooking show, an educational farming game, and so forth. So as a young Māori woman, witnessing this process has made it a lot easier to understand and work through a complex issue and turn it into a more manageable situation for tangata whenua.

Some Comments on William Rolleston's recent column

This blog post is by Motu Research Analyst Zack Dorner.

In case you missed it, here is an opinion piece published in the Sunday Star Times on 15 April by William Rolleston, vice-president of Federated Farmers. It covers his views on bringing agriculture into the New Zealand Emissions Trading Scheme (ETS). It comes as the Government is consulting the public on a new series of changes to the ETS.

In the opinion piece, Rolleston states:

Farmers here are encouraged to see agriculture's enrolment [in the ETS] on hold until mitigation technologies are available and other countries "make progress". Such pragmatic preconditions don't go far enough. 

Although that may be Federated Farmers’ understanding of the Government’s current position, the first of what are to be regular reviews of the ETS recommended that agriculture come into the ETS in 2015, the date currently in the legislation (see page 47 of this document). The panel recommended this on the basis that there are some Greenhouse Gas (GHG) mitigation options available to farmers, and all other sectors are facing the costs from their emissions.

 It is also important to note though that there is an important difference between the current processor-based ETS (where agricultural emissions are charged at the processor level, eg Fonterra) and a farm-scale ETS.

Farmers have almost no ability as individuals to influence their liability under the current processor-based system in the legislation; therefore inclusion of agriculture may have very little effect on on-farm mitigation. Including agriculture in this situation would mostly send a signal of government’s longer term intentions and shift some of the cost of meeting our domestic reduction targets onto farmers. 

A farm scale ETS would incentivise farmers to take mitigation actions on their farm as this would reduce their liability. The ETS review panel did show a strong preference for a farm scale ETS, though it noted significant administrative barriers to doing this must be worked through (page 49).

Rolleston goes on:

Federated Farmers considers it a necessity that our competitors bring agricultural biological emissions into their schemes before we do likewise. Otherwise, all that will happen is carbon leakage to less efficient carbon production systems.

Unless New Zealand farmers can get a premium for our products overseas on the basis of being a part of an ETS, our farmers face the world price for their product, and therefore cannot pass the costs of their emissions on to their consumers unless other countries put a price on their agricultural emissions. You can argue about whether or not it is fair for our farmers to face these costs while not being able to pass them on to the consumer. 

What’s the evidence for leakage being a problem in our agriculture sector? 

It is important to note here that leakage will likely result in higher global GHG emissions, even if similarly efficient producers take over production. This is because New Zealand operates under an ETS cap, under which reductions in emissions in one sector will be replaced by an increase in emissions in another sector. A reduction in agricultural emissions which are replaced by production overseas would likely be replaced in a country outside of a cap, and lead to an overall increase in emissions.

We have a large amount of prime agricultural land which profitably and efficiently produces agricultural goods, and not much of it is likely to change out of farming due to the ETS. Empirical evidence suggests the ETS is unlikely to induce much land use change.  There may be some risk at high carbon prices; more of these issues and potential remedies covered in this Motu Working Paper (especially pages 7 and 8).

Our agricultural sector is very efficient in terms of emissions at producing milk and meat compared with the rest of the world. This is around Rolleston’s final point.

So where to now? Some positive recognition of agriculture's impressive carbon leadership would be welcome. New Zealand agriculture has, during the past 20 years, reduced emissions in every single unit of agricultural product by about 1.3 per cent each year. As a biotechnologist and farmer, I advocate giving science a chance, through the agricultural greenhouse gas research centre.

The more GHG emissions from our agricultural sector we can reduce, the better. The trick is to figure out how to best incentivise farmers to continue to lower their GHGs per unit of output into the future. Yes, we need more research into mitigation. But we also may need some way of getting farmers to take into account the GHGs of their production, and to keep pushing them to lower their emissions.  

And given New Zealand farmers are so efficient at what we do, we can play an important role as a world leader on agricultural mitigation and policy to encourage it. Through leading the way, we really can punch above our weight to lower global agricultural GHG emissions.

The Taupō Beef Story

AgDialogue member Mike Barton farms sheep and beef on the shores of Lake Taupō. In July this year legislation was passed that caps total nitrogen discharges into Lake Taupō, limiting farmers’ ability to intensify production. In response to this, and in an attempt to increase the returns for meat production, Mike decided to set up Taupō Beef to sell premium, sustainably-produced beef. Mike’s experience offers an insight into the potential for New Zealand farmers to receive a premium price by appealing to sustainability-conscious consumers. Below, we outline the Taupō Beef project, and discuss the challenges and opportunities for farmers looking to increase the value of their output through “green” production.

Taupō Beef

As a result of increasing nutrient runoff from farms (and other sources), in 2011 the Waikato Regional Council (WRC) introduced new regulation to cap and decrease agricultural runoff in the Lake Taupō catchment. Under the new regulation, farmers’ nutrient runoff is capped, and can only increase if farmers purchase allowances from others who decrease their runoff. Consequently, Taupō farmers cannot increase profits by boosting production, as this would require farmers to purchase nutrient discharge allowances. Facing these limits, Mike established Taupō Beef in an attempt to increase profits by improving the prices he receives for his output.

Taupō Beef sells sustainably produced meat to consumers at a premium price.  For the recently completed initial trail period, two Taupō farms supplied the beef to four local restaurants and a retail butcher. Both farms were verified by WRC as sustainable producers meeting the conditions of the new regulation. The restaurants involved included the Huka Lodge and the Bistro Lago Restaurant at the Hilton Taupō. Taupō Beef provided the restaurants with training, and brochures and table cards to communicate the Taupō Beef story to consumers. In return, the restaurants and butcher were asked to charge a premium for Taupō Beef meat. For example, Bistro Lago charged up to $46 for a Taupō Beef eye fillet dish, $7.50 more than a similar, conventionally-sourced dish. This premium was charged to test how willing consumers were to pay extra for sustainably produced meat.

The feedback from the restaurants, butcher, and consumers involved in the trial period was overwhelmingly positive. All restaurants reported that the sustainable local production story resonated with customers. Indeed, three out of the four restaurants reported significant increases in beef meal sales, despite the premium price charged. All restaurants and the butcher wanted to continue with Taupō Beef beyond the trial period. The regional council, the local tourism board, and Lake Water Quality Action Group (a local environmental trust) also vigorously supported the initiative.

While the feedback has been uniformly positive for the Taupō Beef trial, challenges exist. A key issue is Taupō Beef’s small scale.  Mike outlines this in a recent report that assesses the Taupō trial period:

"We will struggle to develop a viable business model until we have achieved greater scale and volume. In order to achieve greater scale and volume, we need to prove to farmers and the (meat) processor that we have a viable business model."

The Taupō Beef trial has been extended for a further 12 months. The hope is to increase the scale of the project, to improve the long-term viability of the business model. Taupō Beef is seeking a single large customer or distributor to assist with this.

Lessons for greenhouse gas emissions

The key conclusion from the Taupō Beef trial was that consumers are willing to spend more on meat that is produced in a way that protects Lake Taupo.  It is difficult to tease out whether this is due to the water quality story or the quality of the beef, and whether the same result would apply outside of the local area. However, the fact that consumers are willing to spend extra to support the sustainable production of food is a promising result. The project also highlighted a number of other lessons for New Zealand farmers looking to increase the value of their output through sustainable production: 

•          Purchasers all along the supply chain were willing to pay extra for ‘green’ production: restaurants and consumers.
•          Consumers who are able to pay a premium for sustainable production often have a good understanding of the environmental issues.
•         Close relationships between farmers, processors, and purchasers are critical to success.
•          Having trustworthy verification of environmental claims is important to consumers.

The trial also demonstrated a number of issues that Mike argues are illustrative of wider problems plaguing the red meat industry. There is a widespread lack of trust between farmers and meat processors: farmers are doubtful that sustained increases in returns can be attained by processors, and in turn, processors are deeply suspicious of farmers, believing that they will change contracts as soon as another player offers them an increased premium. As a result, Mike observes that “the red meat industry is not currently providing returns to beef farmers that can compete with dairying and forestry because of this prevailing short-term ‘cannibalistic’ business model”. This was illustrated during the trial, when a major meat company attempted to sell meat cuts back into the trial restaurants at a substantial discount to the prices Taupō Beef was charging, rather than wait and see if the TaupōBeef approach had the potential to build value for all. Mike concludes that it is this lack of will to work collaboratively, from all players in the meat industry, that is limiting farmer returns. 

The Taupō Beef project shows that at a local scale consumers are willing to pay for sustainably produced food. Whether the same result would apply to an emissions story is not certain, but Taupō Beef certainly demonstrates the potential. The challenges Taupō Beef faced are also illustrative of the challenges that might be faced by farmers looking to sell low-emissions beef. It seems clear that to succeed at growing returns for New Zealand farmers, the whole industry will need to get past its current state of mutual distrust and work together to take advantage of the opportunities.