KEY POINTS:
Farmers could have most to lose under the emissions trading law. In the final of this week's series, agriculture editor Owen Hembry examines why they are worried.
Agriculture will not be fully exposed to the emissions trading scheme until 2030 but already the risks and opportunities are
being hotly debated.
The Government is trying to reassure farmers that New Zealand's biggest earning sector will not be hung out to dry.
New Zealand must reduce net emissions to 1990 levels under the Kyoto Protocol or purchase emission units internationally to cover any shortfall.
Participants would count emissions and buy and surrender an emissions unit for every tonne of greenhouse gas.
The farm sector will be included from 2013 with an initial free allocation equivalent to 90 per cent of emissions in 2005, reduced to zero between 2018 and 2030.
Lincoln University professor of farm management and agribusiness Keith Woodford said the biggest uncertainty in attempting to calculate the implication of the scheme on the farming was the unknown value of carbon.
"Is it going to be $15 dollars or $50 dollars?" Woodford said. "It's on the cards that carbon could be extremely expensive."
A Lincoln University colleague estimated a 4000-head sheep and beef farm would produce 1443 tonnes of carbon dioxide equivalent, while a 350-cow dairy farm would make 1632 tonnes. If the price of carbon was $25 a tonne the annual liability would be $36,085 for the sheep and beef farm, and $40,804 for the dairy farm.
Meat & Wool New Zealand has said sheep and beef farm profit was expected to improve from an average of $19,400 in the 2007-08 year to $53,000 in the coming season.
Woodford said under current calculations methane accounted for two-thirds of agricultural emissions but there was almost no prospect of science coming up with anything to help by 2013. The US, China and India had not signed up to Kyoto, while most countries were not including agriculture because it was too hard to calculate the contribution and there were no mitigation strategies.
"If we get this wrong we've got the ability to destroy the New Zealand economy," he said. "There's going to be a need to go back and do a huge lot more work if we don't want to shoot ourselves in the foot."
Federated Farmers president Don Nicolson said the sector would be exposed to transport and energy cost increases from day one.
"The closer you get to 2030 your profitability will be compromised year on year," Nicolson said.
One dollar generated inside the farm gate was multiplied by 4.5 to 5 times through the wider economy, he said. "There seems to be a bit of a negative feeling in our society that agriculture's got off the hook, well agriculture's been paying the bills for this country for a long, long time."
A spokeswoman for Agriculture Minister Jim Anderton said the reduction of the free allocation between 2018 and 2030 would only happen after a review.
"There's no point in penalising people for not reducing emissions if there's no physical means of reducing emissions from livestock," she said.
Millions of dollars were being spent on research and the Government was fairly confident that tools to reduce emissions would be available.
"The Government is well aware of how important agriculture is to the economy and to New Zealand as a whole and it's not going to cut the roots off the kauri tree without taking due notice of what the situation is."
Greenpeace senior climate campaigner Simon Boxer said there were opportunities from being first into a new market.
There was no need for high input farming, while low input systems could increase profitability, he said.
"Essentially not relying on nitrogen fertiliser in such large applications, also having slightly lower stocking numbers can actually improve the health of the soil and the pasture and as a result you get a better uptake of essential protein for the cows to be more efficient in their production of milk solids."
Greenpeace expected agriculture to be included in many emission trading systems internationally within 10 years.
"It's a whole new market there and whoever gets to that first is going to absolutely reap the rewards."
Agricultural concerns:
48 per cent of total emissions come from agriculture.
Dairy grazing produced 5.4 million tonnes more carbon dioxide equivalent emissions between 1990 and 2006.
Nitrogenous fertiliser produced 1.5 million tonnes more emissions.
Sheep grazing produced 2.8 million tonnes less emissions because of fewer animals.
