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Robin Grieve

The Government is intent on pricing livestock emissions – but why?

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The Government has released its plan to tax farmers for their livestock emissions. ‘World First’ rang the headlines as journalists celebrated New Zealand becoming the first country to price these emissions. Announcing that we are the first or world leading, implies others will follow but that is unlikely. Why would they be so silly? Most countries don’t regard shooting yourself in the foot as a good idea.

By the Government’s own modelling its scheme will send 20% of beef and sheep farmers and 5% of dairy farmers out of existence. Out of existence will also go their share of the $30b export earnings the sectors earn each year. That’s quite a lot less Keytruda for our cancer patients and is a high price to pay for something that is as uncertain and undefined as the financial cost of any global warming that might be avoided by such a policy. 

The National Party announced that it would repeal the Government’s plan if elected and instead implement the farmers own proposal which is a plan called, He Waka Eke Noa (HWEN).

He Waka Eke Noa either means “It’s a Free Ride” or “We Are All In This Together” depending on which translation tool you choose.

National should not pin its hopes on adopting what it calls the farmers scheme because it was never really the farmers’ scheme. Adopting it is not backing the farmers at all. HWEN is also only marginally less harmful than what the Government proposes and will not be effective climate policy.

HWEN was a proposal produced by a partnership that had only some farmer representation on it, but the Government was in there too. More importantly it was extremely limited in what it was allowed to do. The Government had previously legislated that livestock emissions must be priced in the Emission Trading Scheme (ETS) by January 2025, and it used the threat of the ETS to force HWEN to only propose a pricing scheme, as an alternative to the ETS, that the Government would accept.

The choice farmers had was no more than which of these bad pricing scheme do you want? It was akin to giving a condemned man a choice of execution methods. The Prime Minister made much of the supposed consensus between farmers and the Government when she announced her government’s pricing scheme, but there is no consensus. If there ever was any consensus between farmers and the Government, it was that HWEN was the better of two evils for farmers and it was something the Government would accept.

Ironically had the Government not messed with HWEN and just adopted it, James Shaw would have had a famous policy victory of establishing a pricing scheme that the farmers had agreed to, albeit reluctantly.  There would be no going back from there for farmers or the opposition.

Then along came the Climate Commission to torpedo the dream. It recommended that something like HWEN be adopted but only after it was gutted of the bits that made it almost palatable to farmers. It also reported that livestock emissions should not be put in the ETS because the ETS was too poorly designed to cope with them.

This was the opportunity the farming industry missed to take control of the situation. With the threat of the ETS now gone and HWEN in ruins the Government had no plan. Freed of the constraints of the ETS threat and the cumbersome compromise of HWEN, a new sensible climate policy that did not decimate rural New Zealand was there for the taking had farming leaders only just stepped up and pushed for it, but they didn’t. If National and ACT want to back farmers, they must not only dump the Government’s plan but HWEN as well and work with farmers on a more credible climate policy, one that is really theirs and one that will achieve something.

Despite what the alarmists say, questions persist about how much of a problem global warming is and how much impact anthropogenic emissions of greenhouse gas are having. Questions persist on whether reducing emissions is a credible response to whatever is or isn’t happening. But the one area that is not in dispute is that the way livestock emissions have been characterised by the political side of global warming is wrong. Quantifying them as producing half New Zealand’s greenhouse gas emissions is just scientifically wrong. New Zealand has made commitments to reduce emissions based on false information about livestock emissions and in the absence of a government that is brave enough to fix the errors, we are stuck with them. The irony of it is that if global warming is the crisis the alarmists say it is, it will only get worse because the effectiveness of climate policy is limited due to this error.

Whether we reduce livestock emissions or not it is a political matter not a scientific one and like in all political matters, farmers are as much a hostage to the Government as anyone. If these livestock emissions have to reduce for political reasons, and the voters are prepared to lower their standard of living to achieve it, then farmers know how best to reduce emissions and what policy is best to achieve it. 

The fixation our government has with pricing emissions is blinding it to any meaningful climate policy and with it any chance of real consensus with farmers. The perceived need to price emissions has permeated throughout the global warming industry as well. They seem to believe that unless emissions are priced, they are a problem, and pricing them makes the problem go away. That is the extent of their thinking.

The goal of climate policy should be to reduce emissions in a sensible way, but the ETS and HWEN and the Government’s pricing proposal are not sensible because they are designed primarily to price emissions, not reduce them. That is their limitation. None of these options will achieve anything useful for this reason.  The failure of the ETS to drive any substantive change in behaviour after all these years is testament to the folly of hanging your climate change policy on pricing schemes, yet our politicians never learn. Transport emissions, which have been priced in the ETS since its inception, have increased by 96 percent since 1990, while livestock emissions of methane, which have not been priced, have increased a mere 5.4%. Pricing emissions does nothing but increase poverty and inequality as more and more New Zealand families struggle to pay the inflated prices the ETS delivers.

The Climate Commission is a great fan of pricing emissions too but what does it know about economics? The Commission believes that if you price methane emissions farmers will reduce production to avoid the price. This is nonsensical thinking.  Methane emissions are directly related to feed intake. If a farmer wants to produce less methane, they can simply feed their animals less and produce less meat or milk or wool. If they produce less product, they will produce less methane and pay less tax and that is the incentive they need according to the Commission. Basic economics should tell the Commission that no farmer would forgo $9 for a kg of milk solids to avoid a methane tax that is considerably less than $9.

Worse than that, there is no morality in wanting farmers to pay for these emissions because the Government and the Climate Commission both acknowledge that the carbon accounting system overstates the impact of livestock emissions of methane, and that methane emissions in New Zealand are not contributing to any further temperature increases. This is because methane is short lived, and the emissions are stable. These emissions are just cycling around and do not cause any increase in atmospheric methane. They are by all definitions at net zero now. The only reason the Government wants methane emissions to reduce is because it can offset the increase in CO2 emissions. Trees do the same thing. Climate policy in New Zealand is based around making CO2 emitters subsidise foresters to plant trees to offset their CO2 emissions and now the Government wants to make farmers pay to do for CO2 emitters what foresters get paid to do.  How low is that?

The Government’s pricing scheme is not going to encourage farmers to reduce emissions because there is nothing they can do to avoid or reduce the tax that does not reduce their income by far more. One tragedy of this is that the Climate Commission acknowledges there are useful things that farmers could do to reduce their nitrous oxide emissions but there Is no point in incentivising it because the scientists don’t understand nitrous oxide emissions well enough to devise a system to recognise the mitigations. As well as this the international carbon accounting rules do not recognise these mitigations, so we may as well not bother the Commission says. Instead of recommending the scientists get their act together and that the Government pushes for changes to the inadequate carbon accounting system we use, the Commission recommended just hitting the farmers with a tax. That is the extent of the Commission it seems.

With farmers not able to take any useful actions to reduce emissions and avoid the tax, the Government’s scheme is only going to achieve emission reductions by increasing farm costs and pushing a percentage of farmers out of business. Not only is this cruel to farmers and damaging to our economy, but it is also in contravention of the Paris Agreement which ruled out emission reductions that reduce food production. The UN is acutely aware that previous climate policy initiatives, such as pushing biofuel use, resulted in mass starvation as food producing land was diverted to producing fuel. This was described by one UN committee as the greatest crime against humanity ever. Pushing New Zealand farmland out of food production and into forestry is the same crime.

The Government will argue that its pricing policy will not result in mass starvation because other countries will pick up the slack. Yes, they will, and they will do it with product produced with higher emissions. Their citizens will enjoy the expensive cancer drugs these extra exports will allow them to buy, while we wonder why we can’t afford these things anymore. Some of our foreign exchange might even have to go to import more food.

Not only is it very selfish of New Zealand to want to reduce its emissions by pushing the responsibility of feeding the world on to other countries and at the same time causing global emissions to rise, but it is also just plain stupid.

 The Government’s policy has got so much wrong, it is hard to believe that any reasonable thinking person would support it. The tragedy of it is that there are options that are available to New Zealand that would work – farmers would support 100% a scheme that was fair, recognised the science of these livestock emissions and achieved something, but the politics just keeps getting in the way.

Parliamentarians have shown over the years that they do not understand livestock emissions. and as a result, have made a string of mistakes.

 Parliament so far in terms of livestock emissions has:

  • Adopted climate policy that uses a carbon accounting system which overstates the impact of ruminant methane by several hundred percent if not more
  • Adopted carbon accounting rules which do not recognise real measured on farm mitigations for nitrous oxide emissions
  • Adopted an all gases all sectors emission trading scheme (ETS) which was not fit for purpose and could not cope with livestock emissions.
  • Legislated to include livestock emissions into the ETS even though it could not cope with them.
  • Adopted a split gas approach to climate policy with the goal of net zero emissions by 2050, but it has no idea what net zero methane emissions are.

Farmers and the people of New Zealand are being let down by all these failings by the New Zealand Parliament. The Government’s proposal to price agricultural emissions, if adopted, will be another failure by the New Zealand Parliament to introduce sound and credible climate policy as it relates to livestock emissions. It’s time for them to get out of the way.

Farmers are ready to step up and be part of a scheme that does not penalise them for livestock emissions of methane which are effectively at net zero now and not causing further temperature increases. They are happy to help by reducing methane emissions through efficiency gains rather than production cuts to offset CO2 emissions, if they are compensated for this service in the same way as foresters are. And they are happy to take responsibility for emissions which do cause further warming when calculated using a whole farm system approach with recognition for on-farm sequestration.  Once the Government gets over its blinkered obsession with pricing and gets out of the way, this can happen.