Despite some opposition, the government is presently not planning to account for agricultural emissions within a trading scheme -- but one industry spokesman believes it's only a matter of time before it is included, reports James Penn

Question marks were raised earlier this year over agriculture's sacred status as the only industry excluded from the Emissions Trading Scheme (ETS) in a Treasury briefing document.

A policy change, however, remains remote under the current government. Climate Change Minister Paula Bennett confirmed that the government is not currently looking at accounting for agricultural emissions within the scheme.

The briefing document, released under the Official Information Act, was prepared for Finance Minister Bill English in advance of a meeting to consider the proposals arising from the first phase of the government's ETS Review.

"We have consistently said it's very difficult to price agricultural emissions because there aren't yet simple or cost-effective solutions to drive down those emissions," says Bennett.


This is a marked contrast to the stance of Megan Woods, Labour's Spokesperson on Climate Change. She says the "same principles" of Labour's 2014 election policy remain. That policy involved a "managed entry" system, which would have resulted in agricultural producers paying 10 per cent of their 2005 emission levels, as well as any growth in emissions since then.

"It's an absurdity, this far out, that we have one industry that sits outside (the ETS)," says Woods.

"It's just not fair for the rest of the economy."

Woods does have an "open mind" on the prospect of pricing different gases at different levels -- since short-run (such as methane) and long-run (carbon and nitrous oxide) gases may have varying impacts on the environment.

International climate standards don't currently take these potential differences into account, but New Zealand's Parliamentary Commissioner for the Environment is undertaking research which may provide answers.

"The reality for New Zealand is that we do have such a huge proportion of our emissions coming from agriculture," says Woods. "So it wouldn't be surprising that a country such as New Zealand would be one of the first to look at this."

Both political parties seem eager to present a science-led approach, with Bennett highlighting the Government's $400 million per year investment in primary sector research, including $65 million for the Global Research Alliance.

"New Zealand farmers are some of the most efficient in the world, which is why we want to see those good practices being shared by all farmers," said Bennett.

Despite these efficiencies, agriculture continues to account for 48 per cent of New Zealand's emissions. Paris Climate Agreement targets require that overall emissions must fall to 30 per cent below 2005 levels, which New Zealand will fall short of under current projections.

Historically, farmers have been slow to respond in terms of land use to changes in the relative price of dairy, lamb, and beef. The response to priced emissions is likely to be lower still.


However, Suzi Kerr, a climate change policy expert at research institute Motu, points out that while New Zealand does need to reduce its own agricultural sector emissions, it doesn't have to do it rapidly.

Paying other nations to reduce their emissions beyond target levels could ease the transition.

While there is no mechanism for international credits currently in place, it may be possible for New Zealand to pay for mitigation abroad at some point in the future, which could then be claimed as credit against its target.

This would give New Zealand more time to reduce emissions in all sectors including agriculture but contribute just as much to the international climate effort.

Federated Farmers Spokesperson on Climate Change Anders Crofoot acknowledged there was a longer term likelihood of agriculture being brought within the ETS, but he emphasised that inclusion would increase farmers' costs and make products less competitive internationally.

"New Zealand farmers have increased their efficiency of production by almost 30 per cent since 1990," says Crofoot.

Kerr says "for the most part New Zealand does not affect the international prices of our products.

New Zealand farmers have increased their efficiency of production by almost 30 per cent since 1990.


"The result is that whether production shifts overseas will depend on whether farmers would still make a profit with the added cost of ETS credits.

"If they don't, they will produce and sell less."

According to research by Levente Timar in a Motu Working Paper this year, the average impact of introducing a cost of $25 per tonne CO2-equivalent for farmers (from a 2012 land use base) would be a reduction of $223 in profits per hectare for dairy farmers, and $33 per hectare for sheep-beef farmers, if they do nothing to respond.

Concerns of reduced production (and exports) in the short term may also be overstated when the likelihood of land use change is considered.

Historically, farmers have been slow to respond in terms of land use to changes in the relative price of dairy, lamb, and beef.

The response to priced emissions is likely to be lower still, due to the fact that it is even more difficult for a farmer to switch to non- or lower-emitting production (for example, oats, nuts, land-based aquaculture) than it is to switch between dairy and lamb/beef when prices shift.

With Crofoot admitting that "it is more a matter of when, not if the agriculture sector will be brought within the ETS", the sticking point seems to be what conditions might be acceptable -- and achievable -- before that takes place.

Those conditions not only include a level playing field with farmers from overseas nations, but also time for investment in science to translate into the development of more cost-effective technologies that farmers can adopt in order to reduce emissions.

Once that has occurred, says Crofoot, recognition and rewarding of adoption needs to occur -- this will require "putting in place a farm level point of obligation with emissions reporting tools that farmers can cost-effectively report their achievements [through]."