COMMENT:

Nobody enjoys having to pay for something that has always been free.

But often, it is the only way to avoid a tragedy of the commons.

So we have a quota management system intended to avert the collapse of fisheries, and more recently carbon pricing — albeit still at a gentle level — mitigating the right to emit greenhouse gases from the combustion of fossil fuels.

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The same treatment is now in prospect for the methane belched by cattle and sheep, which represents around 44 per cent of national emissions.

But the good news for pastoral farmers is that the domestic regime that emerges is likely to recognise — as international carbon accounting rules do not — the difference between long-lived gases like carbon dioxide or nitrous oxide and a relatively short-lived gas like methane.

Three possible ways of defining the statutory objective of net zero emissions by 2050 are offered in the Government's consultation document for its proposed Zero Carbon Bill. The one that looks to have the best chance of garnering crucial cross-party support is "Net zero emissions of long-lived gases (mainly CO2 and nitrous oxide) by 2050 and stabilised flows of the short-lived gas, methane." It does not indicate at what level the flow of methane would be stabilised.

But policymakers might be guided on that rather essential point by a note put out last week by the Parliamentary Commissioner for the Environment, Simon Upton, which outlines the scientific case for treating methane differently.

Does that mean it is good enough just to stabilise the flow [of methane] at current levels? Sorry, no.

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The long-lived gases accumulate, so if you want to stabilise the atmospheric concentration, you have to reduce the net flow of those gases into the atmosphere to zero.

But for methane, Mother Nature cleans up after us, breaking it down to CO2 and water at the rate of two-thirds every 12 years.

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Does that mean it is good enough just to stabilise the flow at current levels? Sorry, no.

"First, if New Zealand's emissions of livestock methane were held steady at 2016 levels, then within about 10 years the amount of methane in the atmosphere from that source would level off," says Upton. "However, the warming effect of that methane would continue to increase, at a gradually declining rate, for more than a century.

"Secondly, if New Zealand wished to ensure that methane from livestock caused no additional contribution to warming beyond the current level, emissions would need to be reduced by at least 10 to 22 per cent below 2016 levels by 2050."

The 22 per cent cut by 2050 reflects a scenario in which other countries take strong action and meet the Paris Agreement goals. The 10 per cent level reflects a scenario in which other countries take some action but not enough to achieve the Paris goals.

Throttling back methane emissions to that sort of range looks like the sort of reduction that could be achieved through land use change: more forests on marginal erosion-prone land, more horticulture and cropping in better country.

The Productivity Commission, in its final report on the transition to a low-emission economy, released this week, is clear that it will require land use to change substantially.
Modelling it commissioned suggests that land planted in forests will need to increase by between 1.3 million and 2.8 million hectares over the next three decades, mostly converted from marginally profitable beef and sheep farms.

"Overall, the needed rate of land-use change is comparable to the rate at which, over the last 30 years, beef and sheep farms have converted to forestry, dairying and other uses. However, the nature of change needed is quite different. In particular, the average rate of forest planting New Zealand needs to sustain over the next 30 years is comparable to its highest ever planting rate in a single year."

Then there is the question of how to transmit the necessary price signal to landowners.

The commission counsels against including methane in the existing emissions trading scheme (ETS). That would involve a fixed exchange rate between methane and CO2, so that for every tonne of liable methane emissions, 25 New Zealand units would have to be bought and surrendered. It does, however, favour treating nitrous oxide that way.

Instead, it suggests either a separate parallel ETS for methane with its own cap and its own units (which could not be traded for normal NZUs) and therefore its own prices.

An alternative would be a methane quota system modelled on fishing quota. Under that model, an emitter would have to own individual transferable quota to emit "biogenic" methane up to a specified limit per period, not defined as an absolute tonnage, but as a proportion of the total allowable methane (TAM) for the year. The TAM level is set to achieve the relevant emissions budget for short-lived gases.

The commission recommends that the Interim Climate Change Committee should assess both a dual-cap ETS and a methane quota system in its report to the Government on recommended policy for agricultural greenhouse gas mitigation. That report is due by the end of April next year.

Both options — a dual ETS or methane quota — are variants on the cap-and-trade model, with medium-term emission budgets or caps set by the Government on the advice of the proposed independent and expert Climate Change Commission.

The Productivity Commission says the legislation must be clear about what consideration should guide the setting of medium-term emission budgets for methane.

They should include considering the relative cost of reducing methane versus CO2, what social and economic consequences are acceptable, and an assessment of what New Zealand's fair share of global methane emissions is.

So some tricky value judgments lurk there. It implies that the idea of "depoliticising" climate policy in the future would be difficult if not impossible.