Industry risk and research company Fitch Solutions believes the Europe Union will be forced to impose a tax as growing methane emissions loom as a major reason for missing its 2030 GHG targets.
“We believe that the EU is highly likely to introduce similar policies by 2030, in particular bringing agricultural methane emissions into greenhouse gas regulations,” the Fitch report states.
“This follows the identification of methane emissions as a major threat to missing the EU’s 2030 climate commitments by the European Commission.”
Fitch rates as a medium chance, Canada, United States and Australia will follow suit.
“For now, we expect these markets to focus on incentivising innovation, although emissions pricing or limits could be introduced as the deadline for climate goals draws closer, with significant effects on the livestock industry,” he said.
It has a low expectation that China and Brazil will impose a price of agricultural GHGs.
In an earlier report, Fitch believes NZ’s agricultural emissions can be reduced without lowering stock numbers.
The report only looks at the dairy and beef sectors and says the goals will be met because of government and industry collaboration.
But it warns some farmers will leave the industry, unable or unwilling to change or adapt.
It was supportive of He Waka Eke Noa, a partnership between the food and fibre industries and the Government to develop by 2025 a plan to lower emissions.
By then farmers and growers will be incentivised to take action to reduce emissions through an agreed pricing mechanism.
That agreement will include systems for farmers to measure, manage and reduce their on-farm emissions, maintain or increase sequestration on farms and adapt to a changing climate.
Failure to reach agreement will result in the Government imposing its own policy.
The passing of the Zero Carbon Act in 2019 aims for zero net GHG emissions, excluding methane, for all sectors by 2050.
For methane, the goal is a 10% reduction by 2030 based on 2017 levels, and a 24-47% reduction by 2050.
Fitch says meeting methane targets will be challenging especially if the Government imposes a price without the ability to offset through sequestration.
This will leave farmers with the only choice of reducing stock numbers, but it believes that within the next decade science will provide a solution either through special feed or inhibitors that target digestive microbes.
It is less confident livestock breeding for low emissions or a vaccine will be substantially successful within the next decade.
Fitch expects farmers to become more active and benefit from selling carbon credits through emissions trading and that agricultural production will continue to rise, albeit at a slower rate, as farmers adapt to the low emissions regime.
It noted farmers need to have a method for measuring their emissions and it predicts carbon sequestration will play a greater role through the use of permanent forestry as carbon sinks.
A Beef + Lamb NZ commissioned report found between 63% and 118% of on-farm carbon emissions could be offset by existing native bush and woody vegetation on sheep and beef farms.
But Fitch warns this vegetation does not comply with international sequestration agreements so does not qualify for carbon credits, a permanent forest sink or the emissions trading scheme.
It cites scientific reports which found that even though such vegetation does sequester carbon, a lack of data or a standardised means of quantifying how much carbon it absorbs, will prevent farmers from using this to offset emissions at least in the near future.
The Ministry for Primary Industries (MPI) is scheduled to release a report in 2022 that will outline what type of pricing scheme will be used for all agricultural GHG, including assessing whether methane emissions should be treated differently.
