KEY POINTS:
The Government's flagship climate change legislation passed into law last week, setting agriculture on the path to accounting for its emissions.
It's a long path, however, with the farm sector included from 2013, albeit with a free allocation equivalent to 90 per cent of emissions in 2005, reducing
to zero between 2018 and 2030.
So in 22 years agriculture will be fully exposed to the Government's emission trading scheme.
Not necessarily. There are some twists and turns along the way.
New Zealand has signed up to the Kyoto Protocol, under which it must reduce net emissions to 1990 levels or purchase emission units internationally to cover any shortfall.
The aim of the trading scheme is to encourage emitters here to make reductions by applying a cost.
Greenhouse gas emissions in New Zealand increased nearly 25 per cent between 1990 and 2005, according to the United Nations.
Under the scheme people will have to count emissions and purchase and surrender an emissions unit for each tonne of greenhouse gas for which they are responsible, while people who remove emissions can earn and sell units.
Most countries have excluded agriculture from their national systems, while the US, India and China have not signed up to Kyoto.
Federated Farmers president Don Nicolson says the scheme is honourable if it means New Zealanders alter their behaviour in efficient use of resources.
"There should be no special deals for anybody but the problem is New Zealand agriculture is unique in the world and it is such a large chunk of our emissions profile," Nicolson says.
According to the Net Position Report 2008 agriculture accounts for 48 per cent of total emissions.
It was illogical that New Zealand would want to include agriculture ahead of overseas competitors, Nicolson says.
"Dr Cullen has said if it wasn't for the dairy receipts we would be in major recession."
Horticulture New Zealand says it fears with the emissions trading scheme New Zealand's days as an internationally competitive food producer are numbered.
President Andrew Fenton says consumers will end up eating imported product from countries with a higher carbon output as local growers slowly go out of business under the weight of the scheme's costs.
"Those low-cost producing countries New Zealand competes with, like Chile, South Africa and China, are years and years away from legislating controls on emissions," Fenton says.
The value of carbon is a big unknown.
At $25 dollars a tonne a 4000-head sheep and beef farm producing 1443 tonnes of carbon dioxide equivalent could have an annual liability of $36,085, while a 350-cow dairy farm with 1632 tonnes could be liable for $40,804.
Fears are running high in some quarters and we should all be interested in the debate because agricultural exports help put food on our plates, roofs over our heads and hospitals in our towns.
The Government says the phase-out of free allocation will be done only after a review and if the tools to reduce emissions from livestock do not exist then farmers will not be penalised.
Political messages can sometimes need a bit of interpretation but this one is pretty clear - if it can't be done we won't make you do it.
It's a huge get-out clause but the message is struggling to be heard above the melee.
This could be because the future call on whether the tools exist and are effective and affordable could end up in a bun fight.
But the get-out clause is not the only twist yet to come - Kyoto's first commitment period ends in 2012.
Lincoln University professor of farm management and agribusiness Keith Woodford says nothing is set in concrete post-2012.
The current calculation of agriculture's 48 per cent emission responsibility is based on a 100-year timeframe, Woodford says.
During 100 years a molecule of methane - which makes up two thirds of agricultural emissions - is deemed to be about 25 times as damaging as carbon dioxide, but on a 500-year basis this drops to about 6.5 to 7 times, Woodford says.
Methane leaves the atmosphere very quickly, with three-quarters gone within 24 years.
"As soon as you do that agriculture shifts in New Zealand from being 48 per cent [of total emissions] to well under 30 per cent and the real demons are things like transport," he says. "Totally different picture."
New Zealand could promote the 500-year calculation to international agencies, Woodford says.
There is almost no prospect of science coming up with anything to help with methane by 2013, while inhibitors for nitrous oxide emissions - the rest of the agricultural total - could help in some situations, Woodford says.
Most of the nitrogen comes from clovers, which is eaten by animals and then excreted in urine and dung.
"There's no easy answer there because the problem is that both methane and nitrous oxide, they're natural products of farming livestock," Woodford says.
Sustainability Council executive director Simon Terry says the exemption of agriculture until the end of 2012 could come at a net cost of $1.3 billion, assuming a carbon price of $30 a tonne.
"We actually think there's a great deal of economic abatement farmers can undertake," Terry says.
"It's conceivable they could bring it back to where we're not providing a huge subsidy after all but our argument is that without a financial incentive that's not going to happen."
Tools to tackle emissions include inhibitors, high sugar grasses to reduce nitrogen passing through animals, stand-off pads for collecting effluent and supplement grass with the likes of maize. Meanwhile, a price placed on emissions would track back to reduced land values rather than production, he says.
"They'll keep producing but if they take up these other measures they can reduce their emission while still having the same amount of production."
The dairy sector had seen an 83 per cent rise in land value since 2002, which would reduce to 71 per cent if agriculture were fully exposed at 2030.
"In a business case the underlying asset has been rising hugely in price, if you increase the cost structure it just shaves a bit off the gains that have been had," Terry says..
We do not want to damage our biggest earner but the lead-in time to 2030 is generous with opportunities for review and adjustment.
It's hard to see how the Government could have struck a much fairer deal short of largely absolving farmers - and even that door still waits further down the track.
Shoulders now need to be placed to the scientific wheel in the development of mitigation tools - a task sure to be oiled by the Government's $700 million New Zealand Fast Forward fund.
The long-term alternative to agriculture reducing or paying for its own emissions is the unpalatable prospect of asking taxpayers to pick up the bill - not much of a vote winner.
LET'S GET IT ON
After months of failed merger proposals and sector initiatives in the meat industry someone has sealed a deal. Dunedin-based meat processor co-operative Silver Fern Farms has sold half the company to rural services business PGG Wrightson. It was tight with 75.6 per cent of farmers approving the $220 million deal - only 0.6 per cent clear of the threshold.
PGG Wrightson chairman Craig Norgate may have nearly 50 mergers and acquisitions under his belt but going into this vote he was nervous.
But this won't be the end of the story, with the deal promoted as a platform for industry rationalisation.
Silver Fern Farms chairman Eoin Garden says other industry players have been waiting to see the outcome of the PGG Wrightson vote and discussions will already be taking place around board tables.
"We've said quite openly, quite publicly and also privately to individuals, when you want to, come and talk to us." How fast the talking starts is hard to call in an industry that's had its fair share of recrimination.
Southland-based co-operative rival Alliance Group last year turned down an opportunity to merge with Silver Fern Farms and later proposed a bigger industry mega-merger which collapsed in April, while a Meat & Wool New Zealand taskforce set up to develop a sector strategy was shut down in June, lacking consent.
Hackles have been raised.
Alliance recently said it had concerns with the business case for a merger with the Silver Fern Farms PGG Wrightson partnership it could not see being satisfied, but intriguingly chairman Owen Poole has also said there is now an opportunity in the industry for constructive dialogue towards a common view.
Other major players include Anzco Foods and NZX-listed Affco but it's hard to imagine a common view side-stepping Silver Fern Farms, which accounts for about 33 per cent of sheep meat exports and 35 per cent of beef.
Emotions may be raw but it is the unemotional reality of economics that may dictate the pace of change.
Meat & Wool New Zealand says more than 300 new dairy farms started this season and sheep numbers were down 11 per cent in the year ended June 30 at 34.2 million. The export slaughter for the season starting on October 1 was expected to be down 9.3 million animals.
Garden says Silver Fern Farms will not enter a procurement war and process animals for the sake of it, but will focus on what the market wants.
But if a war starts it's hard to imagine any processor will sit back and accept empty plants.
Sitting back and waiting doesn't sound like Norgate, especially now he has a mandate from Silver Ferns' farmers to get stuck into the industry.
