Opinion: Setting the record straight on emissions pricing

Back in 2018, the Government decided to put a price on agricultural emissions, as a way of driving reductions. Photo / File

Opinion: When it comes to pricing agricultural greenhouse gas emissions, it pays to take a moment to remember how and why we have got to this point and to separate fact from fiction, He Waka Eke Noa programme director Kelly Forster writes.

Crunch time is coming for pricing agricultural greenhouse gas emissions with the Government due to make a final decision by the end of this year.

On the table for consideration is the split-gas, farm-level levy recommended by He Waka Eke Noa, the Primary Sector Climate Action Partnership.

There continues to be debate about this recommended system – which is understandable as this is a world-first and will impact every farmer and grower.

All the primary sector partners involved in He Waka Eke Noa understand why this issue is causing some anxiety across the sector.

That's why they have gone to great lengths to talk over the issues with farmers and growers.

They've picked up their phones, responded to emails and attended hundreds of meetings across the country.

And partners are continuing to offer to talk to those raising concerns.

It's worthwhile taking a moment to remember how and why we have got to this point and also separate fact from fiction.

Back in 2018, the Government decided to put a price on agricultural emissions, as a way of driving reductions. It passed a law to price agricultural emissions by 2025.

Anyone who suggests that we can "just say no" to pricing is ignoring the fact that one way or another, emissions will be priced.

At the time, primary sector representatives convinced the Government to consider an alternative to pricing at the processor level through the New Zealand Emissions Trading Scheme (NZETS).

This led to the He Waka Eke Noa Partnership canvassing an exhaustive range of pricing options with the aim of finding a fair and equitable system that would reduce emissions across the primary sector – from dairy and red meat to horticulture and cropping.

Partners explored the pros and cons of many different options, including some of those now being floated again.

They worked hard to get beyond individual sector positions and work for the interests of all farmers and New Zealand.

I have heard the story doing the rounds that says because emissions from the red meat sector have decreased since 1990, the sector is no longer contributing to global warming.

While the red meat sector's emissions overall have reduced, partly because of conversions to forestry and dairy, in fact roughly half of all New Zealand's agricultural methane emissions come from the sheep and beef sector and half from the dairy sector.

Under the He Waka Eke Noa recommendations, every kilogram of methane is priced the same, regardless of whether it comes from a sheep, a beef animal or a dairy cow.

Put simply, the lower a farm's total emissions, the lower its liability. If it has eligible sequestration, it can net that off the bill.

Partners think that's fairer and simpler than linking the emissions price to the land type or area.

The partnership recognises that for extensive farming systems (sheep, beef and deer), there are different options for reducing the environmental impact of emissions to intensive farming systems like dairy.

Kelly Forster, He Waka Eke Noa programme director. Photo / Supplied

We've worked hard to come up with a system that treats those different options equitably.

Where there are technologies or practices available that reduce emissions, the cost of adopting that technology or practice will be discounted from the farm's emissions liability, so that farmers won't be out of pocket when they take up these options.

Where farms are sequestering carbon, we recommend farms get credit for a broad range of woody vegetation not recognised under the ETS, including established native bush provided stock is excluded.

Importantly, this means that farmers make their own decisions about how to reduce their exposure to methane pricing on their farm.

There are a lot of big numbers being bandied around about the cost and impact on extensive farmers.

These numbers are based on estimates of the worst-case scenarios and should be treated with extreme caution.

However, the Partnership does recognise that extensive farmers are likely to end up paying a higher percentage of economic farm surplus than intensive farmers.

That's why we recommended a maximum starting price for methane of 11c per kilo that is held for three years in order to assess the impact of pricing.

We also recommended that the economic impact on farming businesses and flow-on effects to rural communities are reflected in any future prices. And we proposed a "levy relief" provision for farms that do not have access to tools or sequestration.

We've said to the Government all along that it should take advice from the sector when it decides on the price, to ensure New Zealand farmers and growers remain productive, profitable and competitive.

Another story that's being told is that He Waka Eke Noa is "ignoring the science", especially around GWP*.

To be clear, GWP* is an alternative way of calculating the impact of methane on global warming, compared to carbon dioxide.

GWP* tells us that in order to not contribute to additional warming, methane needs to reduce and stabilise, not get to zero.

The Partnership's pricing recommendations are in line with this because we propose a split-gas approach where methane is priced only to the extent necessary to see it reduced and stabilised.

GWP* is useful for informing targets at the national and agriculture sector level.

National targets are outside the scope of He Waka Eke Noa but Partners are continuing to argue for lower targets and for GWP* to be used in this context.

But it's not practically possible or fair to use GWP* at the farm level. To calculate GWP*, you need 20 years of historical emissions and livestock data, and farmers simply don't have that easily available and it runs the risk of grandparenting emissions.

The partners remain united behind the He Waka Eke Noa recommendations because they are confident they have found the best alternative to the ETS.

The partnership is now, like everyone in the sector, waiting to see what the Government will decide to do with its recommendations.

We understand the Government intends to consult the public on agricultural emissions pricing so everyone will have a chance to have their say.