Dr Jacqueline Rowarth: He Waka Eke Noa - this generation’s subsidy-free moment?

In the 1980s the removal of subsidies resulted in widespread concern. File photo / Duncan Brown

Opinion: How farmers move forward and negotiate with the government’s response to He Waka Eke Noa proposals could be this generation’s “subsidy-free moment,” reminiscent of the 1980s, writes Dr Jacqueline Rowarth.

The release of the Government’s response to the proposals from He Waka Eke Noa has resulted in misunderstanding, muddle and misery. New suggestions have appeared, questions have been asked, and the misery remains.

How can farm businesses survive what has been suggested? Economic viability is threatened.

The Prime Minister has recognised the concerns and has used the phrase “Just Transition” – the same words used in Taranaki when changes in the energy sector were made.

Assurances have also been given that nobody wants farming operations to fail – which was also the case in the Just Transition partnership in Taranaki.

But “Just Transition” doesn’t eliminate the costs, on-farm, in rural communities and ultimately on the national economy.

The government’s calculations have shown the considerable impact of the proposals in both dollars and in production.

Perversely, this can be regarded as good news.

When the agricultural sector calculated the costs in 2018 for going into the ETS, there were suggestions that they were exaggerated. Despite this, the government gave the agricultural sector the opportunity to come up with an alternative approach to the ETS that would bring emissions down and be equitable across subsectors.

The He Waka Eke Noa (HWEN) partnership was born, and the result of two years of hard work and consultation was submitted to the government in May.

The HWEN approach was a compromise. None of the parties achieved everything they would have liked, but the result seemed equitable across the subsectors and it did result in methane decreasing by 10 per cent by 2030 without jeopardising economic viability. It was deemed fit for purpose.

The government’s response to HWEN, released in October, involves significant changes, and the sector is reeling.

Predictions include an 18 per cent reduction in net revenue for sheep and beef farms and a 6 per cent reduction for dairy, The significant difference has resulted in people asking why dairy has different targets.

It doesn’t.

The overall target of bringing biogenic methane down by 10 per cent by 2030 applies to the agricultural sector as a whole.

Further, within the government’s modelling, the reductions in profit and production apply to different sub-sectors as a whole – not to individual farms. The large reduction in sheep and beef farm revenue in the government’s models reflects replacement by forestry.

Dr Jacqueline Rowarth. Photo / Supplied

And the reason that dairy appears to be less affected than drystock farms is because assumptions have been made about the availability of methane-mitigating technologies by 2025.

These assumptions have been described as aspirational and heroic by those involved in talking with farmers. The likelihood of them being available, approved and rolled out at a price that is affordable by 2025 is small.

The reality has been explained in the latest article by Honorary Professor Keith Woodford, who retired from Lincoln University and is active as Principal Consultant at AgriFood Systems Ltd.

Without the anticipated technologies, the hit on dairy production will also be significant.

In all cases, a decrease in production means a decrease in revenue which means a decrease in export earnings.

The government wants to know what people think.

The consultation process is open until November 18, and the government and HWEN partners are running webinars for people to bring forward ideas, ask questions and learn more to help their submissions.

The “decision date” has been pushed back to 2023, giving time for consideration of concerns.

In the meantime, scientists have been, and will continue, to work hard on solutions … but here’s a thought for farmers ….

What we are experiencing on the land is “this generation’s subsidy-free moment”.

Listen to Jamie Mackay interview Dr Jacqueline Rowarth on The Country below:

But this time we aren’t contemplating the removal of 40 per cent of the gross income of New Zealand sheep and beef farmers as happened in the mid-1980s.

In the 1980s the result of the removal of subsidies was a widespread concern, some hard times, 1 per cent of farmers exiting, and the emergence of the most business-savvy farmers in the world.

Whereas measured agricultural productivity had been stagnant in the years prior to the reforms, it has since grown substantially faster in agriculture than in the New Zealand economy as a whole.

In the last decade, multifactor productivity has exceeded 2 per cent in agriculture, which is almost double that achieved in the OECD.

Land use change was part of the success and has continued to be a feature of New Zealand farming. Farmers have taken up new approaches and new opportunities.

In the 1980s the New Zealand subsidies were attracting negative backlash from export destinations. Removal of the subsidies enabled trade. In 2022 the EU is imposing a “carbon border adjustment tax” on imports, from which New Zealand is currently exempt.

Trading on the global stage requires New Zealand to be playing its part in emissions.

Meanwhile, farmers continue to do everything they can to reduce GHG without impacting food production and scientists do their best to achieve a breakthrough whilst looking forward to better and more stable funding.

The HWEN teams and the analysts in Ministry for Primary Industries and Ministry for the Environment are focussed on finding a way forward. They are open to feedback during the consultation process.

Click here to give your thoughts on how to create a future for New Zealand.

- Dr Jacqueline Rowarth, Adjunct Professor Lincoln University, has a PhD in Soil Science (nutrient cycling) and is a Director of Ravensdown, DairyNZ and Deer Industry NZ. The analysis and conclusions above are her own. jsrowarth@gmail.com