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).
