A recently released Treasury briefing paper on the first stage of the ETS review raised the possibility of placing a carbon obligation on the agricultural sector.
It was presented to Climate Change Minister Paula Bennett as a means to account for the increased cost impact of eliminating the “one for two” carbon allowance given to large emitters, where only one tonne of carbon credit had to be bought for every two tonnes emitted.
That was met with the purchase of dubious overseas-sourced carbon credits that often had no links to activities offsetting carbon.
The one-for-two allowance was removed in this year’s Budget.
However, in replacing the dodgy units with valid international units, the Government faced a fiscal risk ranging from $3.8 billion to $7.5b between 2021 and 2030.
Options to address the impact included requiring agriculture to account for emissions, reducing firms’ entitlement to free allocation of carbon units or “vintaging” carbon units so holders had to surrender them before 2020.
The paper did not examine the impact of pushing some emissions costs onto the agricultural sector but did cite “significant downsides” to do so.
New Zealand Forest Owners Association vice president Peter Weir remained sceptical about agriculture being included in any new regulations to come from the ETS review.
“I think if we were to get a Green-Labour government it would happen but it would be looking quite unlikely if the present Government remains,” he said.
Instead, he suspected it was likely taxpayers would be required to fund any shortfall with the carbon unit changes from emissions that were largely being contributed from one portion of the pastoral sector, dairying.
“It is not all the agri-sector that has contributed increased emissions.
“The sheep and beef sector are down 19% on absolute emissions since 1990 through gains in productivity and livestock performance.”
Peter Weir
Forest Owners Assn
“The sheep and beef sector are down 19% on absolute emissions since 1990 through gains in productivity and livestock performance.
“Maintaining this rate would see that sector achieve the national goal of 50% below 1990 levels by 2050.
“The arable sector is not emitting the same amount of carbon it used to thanks to more direct drilling, less ploughing and therefore less carbon release so that only really leaves the dairy sector.”
However, he was not certain taxpayer funding of the dairy sector would be politically palatable either.
“I think it will depend on whether Paula Bennett stays as minister for climate change and can validate taxpayers funding the dairy sector on it.”
Federated Farmers climate change spokesman Anders Crofoot said he believed the Government had always signalled it would consider including agriculture in the ETS fold if and when other countries did the same with their farmers.
“So from that point of view it is a question of when.
“However, there are root problems around ETS. There is no incentive there for farmers to reduce emissions and putting the emission costs on processors does not give a signal to farmers.
“You could have a methane-free cow and that would have no effect.”
He said the biological variances in methane emissions between animals also complicated any attempts to capture it at a farm level, with as much as 8% variation between animals of the same species.
Crofoot acknowledged it could be easy for sheep and beef farmers to say “job done” and walk away in credit on ETS.
“Our view is we all should be working together to achieve reductions across the entire sector.”
Weir acknowledged it was a “reasonable” argument to put up that no other countries had included farming yet.
But the ability to determine losses at farmgate level in NZ had been significantly improved with the latest version of Overseer, which incorporated a greenhouse gas emissions module in its programme.
“And the only farmers who would have to enter the scheme are those who have grown their emissions. Sheep and beef operators could establish woodlots for offsetting and would not have to register with the ETS to do it.
“In essence, the design work has been done. It is just the lack of political will to carry it out.”
