The Government has proposed a plan of action for farmers to reduce their greenhouse emissions that’s now open for consultation.
The proposal has largely adopted the farming sector’s recommendations to price emissions at the farm level, and has proposed modifications in the consultation document based on advice from the Climate Change Commission. Consultation is open from now until 18 November.
The SMC asked experts to comment on the announcement.
Honorary Professor Troy Baisden, Te Pūnaha Matatini Principal Investigator, Motu Affiliate, and University of Auckland School of Environment, comments*:
“New Zealand is taking on the challenge of becoming one of the first nations in the world to price agricultural greenhouse gas emissions. We’re seeing difficult choices emerge as the Government considers competing proposals that can be implemented by 2025, with meaningful reductions by 2030.
“In many cases, the Government is consulting on options that hide the possibility that reducing emissions can be an opportunity rather than a cost. Prices exceeding $100 per tonne CO2-e (carbon dioxide equivalent) mean that farmers can get paid to become more efficient; or, we can continue to see reducing emissions as a cost. If we take the latter, the profitability of some sectors – sheep and beef in particular – will decline. Māori-owned farms may also be disadvantaged unless they have more capacity to innovate.
“So what are the opportunities? Getting farmers credit for trees and other vegetation on their land could be very important for making the overall policy mix work, but could also be hard to calculate and verify. Yet credit for sequestration could be very worthwhile if it reduces the expensive purchase of emissions reductions that New Zealand must buy offshore, or achieve by planting carbon forests that lock up land.
“While some technologies may come online for reducing animal methane emissions, the Cabinet Paper and Consultation Report uncover important opportunities for nitrous oxide reduction. While many argue simply for reducing fertiliser, nitrogen fertiliser directly contributes only a small proportion of total nitrous oxide emissions from pastures. Even I was surprised to see the number reported as 6% of total agricultural emissions.
“Direct emissions from fertiliser have dominated discussion, but are about a fifth of total agricultural nitrous oxide emissions. In between the lines of the report, we can see a real need to develop on-farm calculators able to capture the large remainder of nitrous oxide emissions.
“For every tonne of direct emissions, nearly three tonnes can be attributed to urine and dung. Fertiliser and other nitrogen inputs, including feed and fixation from legumes such as clover, contribute to more pasture growth and commonly provide animals with more nitrogen than they can utilise. The excretion of excess nitrogen in urine is the main cause of nitrous oxide emissions. Farmers have management tools available to them now to reduce emissions through improved efficiency.
“Some options in the consultation will enable a rush to develop calculation tools by 2025 that will enable farmers to reduce nitrous oxide and emissions overall while optimising productivity. These tools will need to innovate and compete for the opportunity to earn their keep in the value of reducing emissions. The cost borne by farmers of maintaining emissions will be discounted initially, but the value of reducing gross emissions will matter at its face value estimated to be over $100 per tonne CO2-e in our national accounts, on either side of the split-gas ledger. It will pay to get this suite of policy decisions right.”
Conflict of interest statement: “I have some work scoping the development of on-farm calculators for greenhouse emissions.”
NOTE: Honorary Professor Baisden’s comments were updated with corrections on Wednesday, 12 October 2022.
Dr Robyn Dynes, Senior Scientist, AgResearch, comments:
“It is pleasing from a science perspective to see that, on the whole, the Government has proposed adopting a pricing system put forward by He Waka Eke Noa that is evidence-based – one that recognises the differences in greenhouse gases through a split-gas approach, is at farm-level and which will reward farmers for adopting new technologies that reduce their on-farm emissions. This approach will provide clear incentives to reduce emissions, with some of the revenue generated from the pricing system directed back into research to identify and develop greenhouse gas mitigations, which will be critical as we move forward.
“We know from our research that greenhouse gas mitigations through efficiency or genetic gains generally have the dual benefit of improving water quality in an agricultural systems context, so as farmers make gains on reducing greenhouse gas emissions we know that it should also help us address another of the biggest challenges for New Zealand.
“The consultation document that has been released by the Government acknowledges the challenges of equity across different sectors, and this will undoubtedly be a topic that is debated in the consultation process. For example, a risk has been identified that a sector such as sheep and beef farmers could be disproportionately impacted by costs relative to their net revenue, and it will be important to the fabric and wellbeing of our farming communities that this issue of equity is carefully considered in the implementation of any pricing system. The consultation provides an opportunity to close the gaps between what the Government has proposed and the preferred approach of the industries, including the equity issue.
“The pricing system as proposed reflects the reality that agriculture, like all parts of our society, needs to do its part to reduce our greenhouse gas emissions.”
Conflict of interest statement: “Colleagues and I at AgResearch have provided science advice to He Waka Eke Noa as part of its considerations and development of its recommendations to the Government.”
Dr Bill Kaye-Blake, Principal Economist, New Zealand Institute of Economic Research, comments:
“The Government is working on deciding how to regulate greenhouse gases produced by agriculture. The decision is based in part on consideration of acceptability and durability of the programme. However, its economic value comes down to three numbers: the decline in agricultural production, the value of avoided damages, and the cost of administering the programme.
“A decline in animal numbers is inevitable: animals produce methane; methane is a key consideration for New Zealand; therefore, the number of animals needs to decline. The impact on agricultural production is not one-for-one, however: more production per animal, higher value from the volume of production, and shifting to other land uses will all happen. These all add uncertainty to forecasts of future losses for the sector.
“The value of avoided damages depends on how much emissions are reduced, but also on what we assume about future carbon prices and discount rates. Predicted future carbon prices have a wide range, which adds to the uncertainty. As well, the adoption of a split-gas approach implies lower discount rates. That approach raises the value of taking action now to avoid future damages.
“The final number is the cost of administering the programme. He Waka Eke Noa provided estimates of the cost of different approaches. There is a trade-off between accuracy or fairness – how well the programme recognises farmers for their actions – and cost. An efficient programme needs to balance those considerations. Fairness isn’t free: a key question is whether more fairness is worth the additional cost.”
Conflict of interest statement: “I have been advising MPI and MfE on the economic impacts of these proposals.”