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.
