One of the biggest frustrations with partisan politics is that very rarely do we see good ideas acknowledged as good ideas. Every now and then we get a policy announcement that simply makes sense. Environment Minister David Parker’s recent comments regarding changes to the RMA, specifically relating to the amount of nutrient that can be lost from a farm is one such policy.
The announcement was followed with the oh-so-predictable huffing and puffing from Simon Bridges and the National Party, who described it as “ yet another example of their unchecked assault on the regions”. But, if we take off our red, blue, green, or black hat for a second and consider the ramifications of such a policy, we really have little to be upset about; in fact, the outcomes will even be good for farmers.
As Mr Parker explained, It’s not about the number of cows, but about nutrient limits in our waterways. Plain and simple, nutrient leaching from farms is one of the leading causes of fresh water degradation we face. The reality is that in most cases, farmers are allowed to pollute as they see fit, since they are responsible for none of the environmental damage they cause. That responsibility is borne instead by the taxpayer. How on earth can such a lax environmental regime exist? And further, why has this only reached crisis levels now – what is it that has seen the size of the dairy herd double?
The institutional structure of dairying remains one that incentivises farmers to maximise the volume of milk. The profits of the industry are still in effect predominantly returned to the owner/supplier via the raw milk price rather than by dividend. A dairy farmer cannot supply milk long term, without owning shares in Fonterra. Until share ownership is freed totally from kgs of milksolids supplied, then rational on-farm behaviour will be to maximise volume rather than underlying on-farm profitability. This bundling of dividend with raw material price is the legacy of dairy co-ops. Sure, Fonterra sees itself as setting a “fair” price for raw milk but that is nothing more than a construct, the price at the margin for the last kg of milksolids should be no higher than the marginal cost of production – and of course that cost should include compensation for environmental destruction. Fonterra’s fair price regime is a million miles from that. Correspondingly the volume of milk production is way higher than the economics of farming alone would dictate.
To understand then why we now have so many cows, and so much nutrient leaching isn’t that hard. As the profitability of the industry rises, it is reflected in the price paid for milk and the supplier/shareholder responds by producing more milk.
We may therefore sheet home the “blame” for the nutrient pollution, to the decades-long lack of political will to force reform on the dairy industry. To deal with this consequence without removing such regulatory protection as is present in the Dairy Industry Act , can only be done by directly charging farmers for the pollution they cause. This is the principle behind what Mr Parker proposes and is outlined fully in TOP’s fresh water policy.
Of course there are farmers who are just as keen as anyone else to ensure safe drinking water and healthy ecosystems are compatible with them having a “sustainable” (in the environmental sense) income. However so long as share ownership and supply contracts are bundled, these farmers are just as conflicted as others. For sure there are some – a few – who have opted not to intensify for environmental reasons and have found alternative ways to maintain profits. But we are talking here of of a few ‘goody two shoes’ operators pursuing their personal enviro ideals. They are free to do that of course, but it is not the profit-maximising norm.
How to align the on-farm dairying profit maxmisation with national well being is the role of the policymaker. And Mr Parker has taken up the concept of a corrective tax to achieve that end. Ensuring that farm pollution is not a free ride will shift the incentives back to more sustainable levels of farming. TOP’s freshwater policy is stronger and more business-friendly because it ensures that revenue doesn’t leave the industry by returning all revenue collected from farms that over-pollute their waterways, to those farms in the catchment that don’t. This rewarding of best practice will lift the overall environmental performance of farming.
It appears Simon Bridges has simply looked past the benefits of this intervnetion, instead alleging the government is out to blindside the industry, his reaction is pretty lowbrow. The predictable partisan politics that is the stock and trade of Establishment parties, demonstrate a disregard for the magnitude of the environmental damage – that’s a disappointing contribution from National.
Andrew Courtney - [email protected]
Gareth Morgan - [email protected]