Action on agricultural emissions

With Nick Davis

In this third instalment of our blog series on climate change action in Aotearoa, MartinJenkins Director Nick Davis looks at proposals announced this week by both government and industry that address a major hole in our country’s climate change policy.

Tuesday 16 July marked a watershed day for climate policy in New Zealand, with the release of a report from the Interim Climate Change Committee on the steps the country can take to reduce greenhouse gas emissions in agriculture.

The publication of the new report, Action on Agricultural Emissions, was accompanied by twin proposals from government and industry, in the form of a new government discussion document and industry leaders’ own primary sector statement of commitment to reducing emissions.

As the Interim Committee notes, New Zealand currently has no policy to reduce agricultural emissions. The emissions from most other sectors are priced through the New Zealand Emissions Trading Scheme. The NZ ETS was always intended to be an ‘all gases, all sectors’ scheme, but emissions from agriculture have not been introduced and remain unpriced.

That lack of a policy to reduce agricultural emissions has been a major hole in New Zealand’s climate change policy. As well as being bad for the country and the planet generally, ultimately that policy gap also does not serve the interests of our primary industries.

In the long run, the economic environment that would be created by global warming in excess of the Paris targets would not be friendly for New Zealand’s primary exports. In the short term, our primary industries will face significant pressure to show they are making real progress in mitigating climate change, due to rapidly changing consumer and societal expectations and from a ratcheting-up of international environmental and food safety standards and regulations. If the sector can’t show they are making serious efforts here, they’ll be penalised in the international marketplace.

The publication of the report from the Interim Climate Change Committee was accompanied by a statement of commitment from the primary sector and a government discussion document.
Image source: MartinJenkins

Interim approaches to take us to 2025

On the face of it, there appears to be a lot of common ground between the Government’s new proposals and the primary sector statement of commitment — most notably a commitment from both to introduce pricing of livestock emissions at the farm level from 2025. The significance of this commitment to farm-level pricing shouldn’t be underestimated, given the very strong opposition in the past from the primary sector to any form of charging for agricultural emissions. Primary sector leaders should be applauded for taking this step.

A potential point of difference between the Government and industry relates to proposed interim measures leading up to the introduction of farm-level pricing in 2025.

The proposals from the Interim Climate Change Committee and the Government favour an interim measure of pricing methane and nitrous oxide emissions from livestock at a processor level, on the basis that pricing emissions at the farm level earlier would be too difficult. This would most likely see dairy processors, meat processors, and fertiliser manufacturers and importers paying a price on emissions from 2021, albeit with a 95-percent free allocation initially.

Over time, the amount of the free allocation would be expected to decrease, gradually exposing the sector to a higher share of the costs of their emissions. However, given the trade-exposed nature of the sector and its economic importance to New Zealand, this will likely depend on other countries taking the same approach.

The Interim Committee’s proposal would see funds raised as a result of pricing emissions, estimated to be at least $47 million per year, and with the funds being recycled through an Agricultural Emissions Fund. The Fund would be overseen by a statutory board, with set criteria for allocating money, and requirements for transparent reporting.

The Government’s discussion document clarifies that the money raised through this fund would be used to incentivise on-farm emissions mitigation now, and also to help build elements of the system required for implementing farm-level emissions pricing from 2025.

Creating behaviour change: Industry’s proposal for interim action

The primary sector climate change commitment includes an alternative interim proposal. Instead of introducing processor-level emissions pricing from 2021, the sector proposes a joint programme of action, to be delivered in partnership with government and iwi/Māori. The programme is designed to create the conditions that will enable and support farmers and growers to make practical changes on their land that will reduce and offset their emissions.

The industry’s contribution to the costs of this action programme would be funded through farmer levies and commercial activities. The proposal also comes with a commitment to explore options for raising additional funding if needed.

Importantly, the sector’s proposal is founded on a model of behaviour change that recognises the significant challenges farmers and growers currently face in measuring and managing emissions at a farm level.

Primary Sector’s Emissions Reduction Plan

The primary sector’s draft five-year Programme of Action is designed to do the following:

• Ensure that by 2022 every farmer and grower in the country understands their emissions sources and ‘sinks’ (trees and other natural means of absorbing emissions), and has confidence in the means of estimating them for a range of farming systems, topographies and soils
• Equip farmers and growers with the knowledge, tools and technologies for mitigating and offsetting their on-farm emissions (through sequestration for example), including access to professional advice on sustainable farming systems and on farming practices and technologies that reduce emissions
• Ensure farmers can confidently make decisions about the best options for reducing emissions, while at the same time maintaining product quality, profitability, and key aspects of their farms’ environmental performance (such as water quality, animal welfare, and biodiversity)
• Accelerate the discovery, development and commercialisation of new emissions mitigation technologies, including through continued investment in R&D and removal of regulatory barriers to the uptake of safe, effective and recognised technologies for reducing emissions
• Provide farmers and growers with incentives to make early progress on reducing emissions — for example, through engaging them in farm extension programmes, sharing best practice, and recognising early adopters through industry awards.

 

The proposed Programme of Action is founded on a model of behaviour change that recognises the significant challenges farmers and growers currently face in measuring and managing emissions at a farm level.
Image source: Pixabay

Who will be in the driving seat?

There are many similarities between the government-led and sector-led proposals for the period 2021 to 2025. Both interim proposals involve raising funding from the sector and recycling the funds to support the sector to transition to low emissions. Both entail investment in a programme of work to implement a farm-level pricing scheme by 2025. Both emphasise the importance of joint work across the sector, government and iwi and Māori groups.

But there is an important difference between the two over where ownership over the process of transition would lie.

The Government’s proposal would see the Crown largely in control of the mechanisms for collecting and investing funds — albeit with a commitment to include representatives from the agriculture sector and iwi/Māori in decision-making.

By contrast, the primary sector’s proposal would put itself in the driving seat. The amount of funding required, and where the funds are invested, would be determined by an industry-led governance group, with representation from each of the primary-sector industry bodies as well as from Māori and government. Importantly, the industry has committed to clear accountabilities for action and transparent reporting on progress.

Industry would also take a partnership approach to delivering the joint action programme with government and iwi/Māori.

The primary sector’s backing of the emissions reduction plan will be critical if New Zealand is to transition smoothly to a low-emissions economy and contribute to global climate change goals.
Image source: Unsplash.

Getting specific

There is a lot of detail in the proposals that will need to be filled in before the Government can confidently make a decision about the best way forward for the primary sector and for New Zealand as a whole.

For example, the government proposal is light on the specifics of the mechanism for recycling funds and, in particular, the activities that would be considered eligible for investment. By contrast, industry has given significantly more detail here, with a range of specific actions and milestones identified in the draft Programme of Action.

There is much to be discussed and debated over the coming weeks as the Government consults on its proposals in this area. It will be important for proposals on both sides to be given proper scrutiny.

The Government will, for example, rightly have questions about the credibility of the primary sector’s proposals. It will want assurances about the sector’s commitment to making the effort and investment necessary to make early progress on reducing agricultural emissions, including through implementing the proposed programme of action. This commitment needs to be formalised and made more tangible, including looking beyond the term of the current government.

It’s likely too that sections of the New Zealand public will be sceptical about the primary sector’s Climate Change Commitment and its alternative interim proposal. But before we all cast judgement, it will be important to give its proposals a close and fair reading. This new commitment statement is potentially a very significant development, backed as it is by a comprehensive group of farming leaders and industry groups. That backing will be critical if New Zealand is to transition smoothly to a low-emissions economy and contribute to global climate change goals.

About the author
  

Nick Davis

Nick is an experienced economist and public policy expert who has advised governments on a wide range of economic, regulatory and machinery-of-government issues. His key skill is breaking down problems to their essence, drawing on evidence and analysis to identify the best solutions, and packaging advice to decision-makers in ways that enable them to make confident decisions.

Nick has specialist skills in public policy analysis and evaluation, public sector financial management, and economic and financial analysis. Before joining MartinJenkins in 2004 he held senior policy roles at the New Zealand Treasury and Ministry of Economic Development, and worked as a regulatory analyst at Merrill Lynch International in London.

MartinJenkins Director Nick Davis