The Government has proposed that, in 2025, farmers start paying for 5% of their climate emissions. It estimates that this will cost about 1c per kilo of milk solids, or 3c per kilo of sheep meat.
While some farming groups are bleating in protest, the majority seem to be grudgingly on board. Of course, the fact that farmers are acquiescing has sparked claims from environmental groups that, while this deal is a step forward, it still amounts to a backdown. National is playing a true opposition role – including to itself – by claiming that it is both a ‘tax grab’ and a ‘backdown’.
Is it possible to do better for the environment without stuffing the economy? This is an incredibly complex issue with many moving parts which this blog sets out. Yesterday’s announcement gives rise to as many questions as answers. The main question is: what are we really trying to achieve with our land-based industries?
The Interim Climate Change Committee Report
In general, the Government looks to have accepted the core of the proposal from the Interim Climate Change Committee (ICCC) report. It estimates that it will take five years to develop the necessary infrastructure to bring farms into the Emissions Trading Scheme (ETS), through a simplified levy and rebate scheme. That is why the Government has set the date for 2025.
The ICCC also recommended bringing agriculture into the ETS sooner, at a processor level. This would get the industry to start paying, but wouldn’t enable farmers to reduce emissions at farm level to the same extent. For that reason, farmers have labelled this interim measure a “tax” and the Government seems to have put it in the too-hard basket.
Should Farmers Pay for More of their Emissions?
Absolutely. 5% is a total cop out. And the Government’s proposal gives no indication as to when this favourable treatment would end. The cost of other free allocation to heavy emitters is already a massive challenge for reducing our emissions. Effectively, this puts all the burden of reducing emissions on everyday Kiwis.
Of course, farmers will pay more as the carbon price rises, but large price rises are unlikely in the near future. There is currently a price cap in place and when it is removed, New Zealand has lots of marginal land available for planting trees.
On the other hand, current carbon accounting methods are also wrong for farming and need sorting out. If this was done, it would reduce the burden on farmers. Let’s look at these issues in more detail.
What Should Count?
The ICCC report signalled that there are still big questions to be answered about what to include in the ETS and how. Here are a few examples:
- Treating methane fairly - given it is a short-lived gas - is a massive issue. Methane emissions need to be reduced, but not to zero. The current approach overestimates methane’s impact on warming.
- The Parliamentary Commissioner for the Environment has suggested using trees only to offset agricultural emissions (not fossil fuel emissions). This would keep the cost of mitigation lower for farmers and focus on getting fossil fuel use to zero as soon as possible.
- Farmers are currently not rewarded for looking after pre-1990 forests. As a result, they have no incentive to keep stock out.
- Nor are farmers currently rewarded for riparian planting, which is too small to count under the ETS.
- Wetlands are great carbon sinks and improve water quality, but aren’t currently included in the ETS either.
Is It Worth It?
So, is it worth setting up a very expensive and complex scheme to get farmers to pay for 5% of their emissions? Especially when the pricing may not cover all the aspects of emissions we’re worried about?
The Government was going to ask farmers to take action on water quality and biodiversity soon – will they still be doing that as well? Hopefully announcements on fresh water changes due to come out soon will tell us. It would be a shame if this timid climate announcement comes at the expense of progress on water quality.
After reading the ICCC report, it struck me that it would be a lot simpler to just include synthetic fertiliser companies in the ETS with no free allocation. This could start right now and would have a similar impact to including the whole of agriculture and giving them 95% free allocation. Of course, you could argue that the planned changes create a system we can use later – but with no plans to reduce the 95% free allocation, it just looks like more paperwork.
Overall, it seems that everyone has gotten bogged down in the details of how to implement the ETS and can’t see the wood for the trees.
The question is: what do we want farmers to actually do? How do we want them to use the land differently? That is the conversation that seems to be missing completely – and will be the topic of a future blog.