Several extensions to the date for our entry to the ETS have kept us off the hook until now.
We need to be realistic about the latest development.
It was always likely we would be the first farmers in the world to be held to account for our emissions.
NZ’s unique emissions profile, where almost half of our emissions come from agriculture, means our government, of whatever colour, was always under unique pressure to act on agricultural emissions.
Most other developed nations that are signatories to the international climate-change treaties enjoy many more options for reducing emissions than we do.
They have opportunities in sectors other than agriculture, which represent lower-hanging fruit and therefore they can afford to delay turning their attention to farmers.
We can justifiably complain it is unfair NZ farmers are being forced to lead the way.
In a sense we are being punished because NZ’s predominantly renewable electricity sector and relative lack of heavy industry leave the country with few easy options.
However, fair or not, the decision had a degree of inevitability to it.
NZ cannot continue to enjoy an excellent international reputation if we fail to act on our emissions. It has also been a nagging worry that the longer we delayed addressing the issue the more aggressive any eventual targets would need to be, resulting in correspondingly greater disruptions to our businesses.
Our focus should now turn to the future.
There are two important issues.
First, figuring out how to leverage our status as the first livestock farmers in the world to take responsibility for their emissions.
Second, ensuring the systems involved in achieving the required emissions reduction targets are optimal and efficient.
In respect of these issues the Bill raises several questions.
The reduction targets for livestock methane emissions are gross targets. To meet them the nation’s farmers will need to reduce those emissions at their source. That will require scientific advances that reduce the amount of methane belched by our livestock or a reduction in the numbers of livestock we farm.
The targets for other sectors of the economy are net targets. Those sectors will have the ability to use offsets to achieve their targets. For example, the fossil fuel sector can grow trees to cancel out the carbon it emits.
It seems odd farmers can’t offset their biological emissions by using biological sinks. The need to achieve gross, rather than net targets might make it more difficult for farmers to extract extra value from markets as reward for our products being climate friendly.
In 2030 it might be possible to extract a premium for milk generating 10% lower net emissions than milk produced in 2017. There will be no premium to be found if we have met the gross target by simply producing 10% less milk.
The system for achieving the reduction targets must be economically efficient. If a reduction in the number of farmed livestock is required then it is economically efficient for it to occur in the classes of livestock that produce the least value per unit of methane.
If expensive methane-suppressing vaccinations are to be used, it is economically efficient to do so in classes of livestock where we achieve most bang for our buck.
Therefore, farmers will need some flexibility to organise the emissions reductions among themselves. This is essentially what the ETS was designed to achieve but there are many details that need to be sorted for it to work correctly for livestock farmers. It is not clear yet how the ETS will be used in achieving the new emission reduction targets. =
The Zero Carbon Bill is the start of a journey for us in the livestock farming sector.
It sets the scene but leaves lots of questions unanswered.
There are many details that will need to be worked through over the coming years if we are to achieve an enduring, long-term response to the problem.
It is clear the very long-term survival of our livestock farming industry will depend on us making it climate-neutral.
Both the Government and consumers will keep the pressure on us.
Fonterra’s recent commitment to put sustainability at the heart of the co-operative is a response to consumer sentiment.
We will need to stay at the front of the international pack but not get so far ahead that we go broke. We need the Government to support research and development on emissions reduction technology. We need it to help us leverage more value out of our markets. We need it to help care for any farmers who can’t keep up with the changes ahead.
Who am I?
Mike Montgomerie is a fifth-generation dairy farmer and Fonterra Shareholders’ Councillor based in Cambridge. He is also a qualified lawyer and recently completed his LLM at Waikato University.
