KEY POINTS:
It may well be years before the largest emitting sector, agriculture, is included in the emissions trading scheme the Government is to unveil today.
In the interests of efficiency and fairness all sectors and all greenhouse gas should be included and they will be, the Prime Minister assures
us. But "over time".
On Sunday's Agenda TV show Helen Clark ran the line that agriculture faced a bigger challenge than other sectors in reducing its emissions, especially of methane, which makes up about a third of the emissions New Zealand is accountable for under the Kyoto rules.
The argument is that you can't redesign a cow the way you can redesign a car, so agriculture deserves special treatment.
Farmers ran that argument five years ago when the policy was to introduce a carbon tax.
The only way they could respond to such a price signal and reduce their liability to the tax, they said, was to reduce stock numbers.
For an economy founded on pastoral farming that would be a spectacular own goal. And it would not do the global environment any good either, if lower production here meant more production elsewhere, since most of New Zealand agriculture's competitors use much more energy- and emissions-intensive methods of production.
If the object of the exercise is to alter behaviour, there has to be some alternative.
So far research into reducing the amount of methane cattle and sheep belch has not yielded anything more than promising lines of inquiry.
This line of argument carries less weight when we are talking about emissions trading rather than a carbon tax, however. After all, under a trading regime it is not necessary for emitters to reduce their emissions but only to take financial responsibility for them.
The entire point of trading is to ensure money flows from those who are responsible for emissions to those who can reduce (or offset) them more cheaply.
It makes no difference to the atmosphere or the climate where emission reductions occur, or how, or who pays for them, only that they occur.
The rest of the case for the prosecution, so to speak, would go like this:
If farmers don't pay for their emissions, taxpayers will have to.
And they can afford it.
Choose the right baseline year and a measure which targets growth in emissions from that year will effectively target the dairy sector, rather than sheep and beef farmers, who have been having a much harder time.
Dairy prices, even in New Zealand dollar terms, are nearly twice where they were a year ago and at record highs in the 21-year life of ANZ's commodity price index.
Dairy Farmers of New Zealand chairman Frank Brenmuhl will have none of this. It is not the farmers' fault New Zealand has undertaken this liability, he says, but given that it has, farmers will be paying like everyone else for the consequent rise in fuel and power prices.
As for the charge of getting a free ride at the taxpayer's expense, well, farmers are taxpayers too and the tax take from increased dairy incomes next season would cover the Kyoto bill for the whole country, he says.
Brenmuhl argues there is an anomaly built into Kyoto's rules: in the case of fossil fuels it is not the countries which produce the coal, oil or gas which are are answerable for the emissions they give rise to but, rather, the countries in which they are consumed.
But in the case of agricultural emissions it is the producer not the consumer who is liable. The treaty's defenders would say there is no anomaly. In both cases what matters is where the emissions occur, whether it is from a chimney, an exhaust pipe or a cow's mouth.
The argument that farmers need to have an incentive, in the form of a carbon price, to keep funding research into reducing on-farm emissions and to adopt the technologies that flow from that research, does not cut much ice either.
There are only so many scientists with the relevant expertise and it takes time to train more. In the meantime all the resources that could be applied to the problem are being applied to it, Brenmuhl says.
As for incentives to adopt emissions-reducing technology, it already exists inasmuch as the methane represents a waste of feed.
Food prices are rising globally.
Partly that is demand, as incomes rise, but it also reflects climatic effects like drought, which the scientists tell us to expect more of, and the unconscionable folly of policies like the US tax credit for ethanol from corn.
In the face of rising populations and increasing environmental stress on a finite amount of farm land, International policymakers will need to be very careful they don't produce a system which discourages food production and encourages biofuels instead.
Suzi Kerr, director of the think-tank Motu, says there are practical reason why you might want to bring agriculture into a trading system later rather than sooner.
Monitoring emissions is much harder in agriculture than in other sectors, which is one of the reasons the Europeans have not included it in their emissions trading scheme and the Australians don't plan to either. But software called Overseer may address that problem.
It essentially allows the farmer to put in how many animals he has, how much fertiliser he uses and the like, and get out figures for how much nitrous oxide and methane the farm is producing.
Fonterra already requires its use, but it was designed for water quality rather than greenhouse gas purposes and may require refinement. Kerr gives weight to the "leakage" argument, that there is no point in reducing milk production here if it is just replaced by more emission-intensive production overseas.
But issues of international competitiveness might be best addressed through border adjustments - rebates for exporters whose competitors face no carbon price and some kind of protection for firms competing with imports from outside the carbon-pricing world. Another reason not to exempt agriculture altogether, Kerr says, is that it would miss not only methane but nitrous oxide emissions.
The latter make up about a third of agricultural emissions and, therefore, a sixth of total emissions - roughly twice those from the electricity sector. "And there is quite a lot you can do about nitrous oxide."
