Prime Minister Jacinda Ardern with Dairy NZ's Tim Mackle (right) and Minister for Climate Change James Shaw at Parliament in Wellington. Photo / Marty Melville
The biggest collaboration in New Zealand's agriculture history will this week deliver a world-first plan for a system to price agricultural emissions.
The product of two years work by food producer organisations, Māori and government ministries in a climate action partnership called He Waka Eke Noa, the plan will land first on the desks of the ministers for climate change and agriculture, and be published for public scrutiny after June 6.
New Zealand will be the first country in the world to price agricultural emissions, says Cameron Henderson, Federated Farmers representative in the partnership.
"It's a massive step forward in tackling climate change by the agriculture community, he says.
While the plan is unlikely to silence the "free ride" carping of those inflamed that agriculture isn't in the Emissions Trading Scheme (ETS) and won't be fully captured by a regime until 2025, it should give them plenty to chew on.
Kelly Forster, programme director for the partnership (He Waka Eke Noa translates as "we are all in this canoe together") says what we'll get are recommendations for an alternative system to the ETS for pricing agricultural greenhouse gas emissions.
The ETS, introduced in 2008 through the Climate Change Response Act 2002, is the Government's main vehicle for reducing our greenhouse gas emissions. A market-based instrument providing for trading of carbon credit units between participants, it charges some sectors a flat tax on the gases they produce.
But before exploring the proposal, let's look at how agriculture – New Zealand's biggest economy, set to earn $51 billion this year - defends giving critics so much time to conclude it's dragging its feet on climate action. (The complaints volume shot up this month when the Government's first Emissions Reduction Plan allocated $340m for a new research centre for agriculture emissions. Yet, brayed the critics, farmers wouldn't be paying a cent into the $2.9b bucket of money for climate action.)
For starters, it's not accurate to say farmers aren't paying for emissions.
Every time they fill up the tractor or the ute, turn on the irrigator or the cowshed or the shearing shed, a portion of their bills goes to the ETS. Farmers use a lot of fuel and energy.
Industrial emissions from their processors are also covered by the ETS. And since 2003, farmers have paid more than $100m to the Pastoral Greenhouse Gas Research Consortium through their dairy and meat industry levies.
What they're not paying for yet is methane and nitrous oxide emissions.
So why isn't agriculture fully in the ETS?
Because it isn't a factory of widgets, says Forster.
"It is a whole of small businesses with very complex farming systems with not just a single widget (to change), but a whole lot of things to do to change emissions.
"There was a genuine and well-understood difference between agriculture and other sectors in the ETS. Agriculture wanted to come up with a more effective emissions pricing system than the ETS, one better suited to the agriculture sector which is not a factory of widgets with technology they can use to reduce their emissions."
Or as agriculture leaders put it: "Farmers can't go out and buy an electric cow." (Yes, but they could reduce cow numbers, says Greenpeace, which claims He Waka Eke Noa is simply a lineup of some of the country's worst greenhouse gas offenders.)
Forster: "This system is designed to be more effective. Farmers want a system that will support farmers who do the right thing."
She notes the Interim Climate Change Committee, the precursor to the Climate Change Commission, "emphasised" the ETS was not fit for purpose for agriculture.
The proposal going to the Beehive will include recommendations on how a pricing system should work and how prices are calculated, whether pricing should be imposed at farm or processor level, where any revenue raised should be invested, and what system oversight is needed.
Will it quieten claims agriculture is a climate action truant?
Yes, says Forster, whose background is climate change and agricultural policy. She came to the five-year project from the Ministry for the Environment.
"It is a clear commitment of what the agriculture sector have done, are doing and will do from 2025."
"Do nothing was never an option for the sector. An emissions pricing system is most effective when there are mitigations available that people can do in response to price. At the moment that set of mitigations is very limited. There's no point having a price on emissions if all it means is farmers pay the price and can't do anything different.
"A price on emissions isn't just there to whack people over the head. A price is about driving change."
Total funding in the project from all sources, including Government and partners, was $932,764 in the 2020-2021 financial year. There's also been contributions of partners' time and resources; Beef+Lamb has provided office space and DairyNZ and B+L have funded consultation meetings around the country. AgResearch has provided science expertise at no charge. The programme has three staff including Forster.
The pricing system will seek to raise funds to run the system and pay farmers for sequestration – farmers' tree planting efforts are not currently recognised for carbon credits.
The Government is required by legislation to report by the end of this year on how pricing will happen.
The Climate Change Commission, a Crown entity, must advise the Government by May 31 what financial assistance, if any, should be provided to participants in a pricing scheme. By June 30 it has to assess progress on the sector's commitments and farmer readiness for a farm-level system for pricing.
Nearly half New Zealand's greenhouse gas emissions, which cause atmosphere warming potential, come from agriculture. Methane, from livestock digestion, is 80 per cent of the sector's emissions. It's a short-lived gas compared to carbon but around 30 times more effective at trapping heat. Nitrous oxide is released from dung and urine patches, and nitrogen fertilisers.
The Government wants methane emissions reduced by 10 per cent below 2017 levels by 2030, and nitrous oxide and carbon emissions to zero by 2050.
Not all the He Waka Eke Noa partners agree with those targets so they'll engage with the Government on targets separately.
The partnership's modelling showed by 2020, methane emissions would reduce by 4.4 per cent and nitrous oxide by 2.9 per cent under existing policies such as the national freshwater policy statement, and forestry in the ETS, and market drivers.
Modelling showed if He Waka Eke Noa or the ETS were to apply a simple price to agriculture emissions and nothing more, less than 1 per cent further reductions would be achieved.
"However if the revenue generated by the pricing were to be recycled to support on-farm behavior change, more reductions could be attained," the partnership says.
He Waka Eke Noa isn't just about pricing emissions. Sometimes overlooked, it says, is its job to get more farmers thinking about reductions at a practical level.
Much has been achieved. Today 61 per cent of all farmers know their emission numbers and 21 per cent had a written plan for dealing with them at the end of last year. Statistics NZ says there are 49,530 farms in New Zealand, down 28.7 per cent from 2002. Farms include horticulture.
Federated Farmers' Henderson says He Waka Eke Noa is agriculture's biggest-ever collaboration.
He says methane and nitrous oxide emissions will be priced independently from carbon and are unlikely to be market-determined because they are different to carbon. Kiwi dairy and meat farmers have already been recognised as the world's most carbon-efficient.
A reason methane hasn't been priced yet is because the way it's accounted for nationally is not very accurate in terms of climate warming, he says.
"But the reality is, agriculture everywhere in the world is not priced." (That said, our food customers are demanding emissions accountability.)
Agriculture hadn't fitted into the ETS because if our farmers were charged the flat tax when international food producers weren't, it would make our product uneconomic.
The sector has been working hard on mitigation options. It's been challenging, he says.
"There aren't many. We don't have battery cows. (But) get the mitigations, pricing starts and farmers are incentivised to take them up in a standard and equitable transition."
DairyNZ chief executive Tim Mackle says other countries are paying their farmers to reduce emissions. The proposed pricing model will be "a much smarter" system than the ETS, and given the size of agriculture's contribution to the economy, there's "a public good element" to Government (and significant sector) investment in R&D, he says.
He Waka Eke Noa partners: Apiculture NZ, Beef+Lamb, DairyNZ, Dairy Companies Association, Deer Industry NZ, Federation of Maori Authorities, Federated Farmers, Foundation for Arable Research, Horticulture NZ, Irrigation NZ, Meat Industry Association, the environment and primary industries ministries.
Walls has been ZB political editor since January 2023.