Each time I write about carbon farming, I think it will be the last time I do so for quite some time. But then something new comes up and there is a new twist to be explored. Right now, there are two new twists, potentially pulling in different directions.
First, just prior to the COP26 talkfest in Glasgow, James Shaw and Jacinda Ardern issued a joint press release stating that New Zealand will increase the carbon targets to be achieved by 2030. The specifics are more than a little obscure, but the increase is going to be considerable.
The changes are made more complex by changes in the accounting methods. Here, I am talking about carbon accounting, not dollar accounting.
Sometimes the Government talks about gross emissions that do not include forestry offsets. Sometimes the Government talks about net emissions after allowing for offsets. And sometimes the Government compares different time periods using what is called ‘gross-net’, which gets even more confusing. For example, when we compare the present and future to the past, using 1990 and 2005 baselines, we use net (after forestry offsets) for the present and future, compared to gross emissions (with no offsets) for the past.
It might seem challenging to add even more accounting complexity, but the Government is now achieving this, albeit with good reason, by shifting from end-point emissions, for example as at 2030, to now looking at average emissions over a carbon-budgeting period, for example 2026 - 2030.
On a like-for-like basis, the new targets for 2030 appear to be a 41 percent reduction in net emissions relative to the gross emissions in 2005, whereas previously the headline figure was 30 percent. That is a big step up.
The targets are just the start. The specifics of how we are going to get first to the end of 2022 - 2025 budgeting period, and then from 2026 through to 2030, still have to be worked through. That is a task for the Government and its officials between now and sometime in 2022.
One thing that James Shaw has made explicit is that the new targets are sufficiently demanding that we will have to buy credits from overseas. Prior to 2015, belonged to an international carbon-trading system linked to the Kyoto Protocol, but that turned into an international rort and eventually we stepped away. Based on outcomes from the COP26 conference in Glasgow, there will need to be lots more ‘blah blah blah’ and international head-banging to get to a new international system.
James Shaw says that we will have to buy about 100 million credits by 2030. These will not come cheap. It doesn’t matter what it actually costs an overseas country to make the savings, they will sell those credits at whatever they can get on the international market. If carbon credits rise to $100 on international markets, which many see as likely, then that would be $10 billion for 100 million credits.
One of the big questions to be debated in New Zealand is, if we are going to use overseas funds to buy the credits, then would it not be better to get them through forestry offsets? Does this mean that we need even more forestry offsets than previously?
The second twist
The second twist is that the Ministry for the Environment (MfE) currently has a discussion paper out for comment that includes the statement that we may end up with more forestry offsets than the Government considers to be desirable. The Government wants a major contribution to the targets to come from emissions reductions and not just from offsets.
Without being explicit, the MfE paper is acknowledging that the carbon price needed to drive forestry offsets is much less than the carbon price needed to reduce emission behaviours. For example, and as I have previously pointed out in various articles, a carbon price of $100 could totally blow away sheep and beef farming, whereas the same price only puts about 24 cents per litre onto the price of petrol.
It is a great pity that a government official did not work this out way back in about 2008 when the Emissions Trading Scheme (ETS) was first introduced, or even as recently as two years ago when I and others started looking again at land-use change from sheep and beef to carbon forestry.
The MfE discussion document was published on 13 October but I missed its publication at the time. It is 130 pages and only a small proportion relates to forestry. But there is a real kick within it.
The questions asked by the MfE include how can the ETS be modified to lessen the desirability of forestry offsets being the main way that we meet our targets, rather than though emission reductions. They come up with several alternatives, drawing on advice from the Climate Commission.
MfE says the options include:
• reducing demand by limiting how many forestry units non-forestry participants can surrender;
• requiring emitters to pay an additional fee when surrendering forestry units;
• reducing the rate at which units can be earned by exotic forest; and
• limiting the overall area of forest that can be registered in the NZ ETS each year, or otherwise amending the eligibility criteria.
MfE then asks “what are your views on the options presented above to constrain forestry inside the New Zealand ETS? What does the Government need to consider when assessing options? What unintended consequences do we need to consider to ensure we do not unnecessarily restrict forest planting?”
All of this illustrates a point I have made many times. When it comes to the ETS, the Government both plays the game and sets the rules, with the ability to change the rules as the game proceeds.
But before throwing away one’s bat in total frustration, it is important to remember that the ETS is the key game in town once we get through COVID and can focus on other things. Also, a lot more carbon forestry is going to be needed. And the Government cannot afford to destroy the economics of carbon farming if it is to have a functioning ETS.
MfE is smart enough to know that whatever they do there are likely to be unintended consequences. That is part of the reason why they are seeking submissions from anyone who wishes to do so. Alas, the closing date for formal submissions is 24 November.
Most of the submissions will be from groups who have their own barrow to push and are already well organised. I would not expect much dispassionate analysis of unintended consequences.
One particular group that has clearly enunciated its position is Beef+Lamb, representing the beef and sheep industries. Beef+Lamb argues that carbon forestry needs to be brought to heel right now, given the risk it poses to the beef and sheep industries.
However, this particular perspective does not necessarily align with the thoughts of many Beef+Lamb members. Sheep and beef farmers are increasingly aware that their farms have had massive increases in value this year driven by demand from people who want to convert the land into forests. So, farmers are increasingly torn between on the one-hand wanting to protect sheep and beef farming, but also seeking the dollar gold from carbon farming on at least part of their land, or simply from land-asset capital gain.
This simply illustrates that almost nothing is simple when it comes to climate change, the ETS and forestry. It is going to be quite some journey.
*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. You can contact him directly here.
76 Comments
From a private landowner perspective, afforestation with natives is not a financial option except for some limited situations where natural regeneration of natives is possible.
When landowners undertake native plantings it is typically for non financial reasons. This is to be applauded, but it is not a realistic option for most of the land owned by most of the landholders.
If major replanting with natives is the national goal, then that has to be a community action (at very large financial cost to the overall citizenry), not a private action.
In resolving the complex issues that we all face, I am not confident that thinking of radiata as an 'invasive non-native weed' is particularly helpful.
In relation to wilding pines, I am reliably informed that most of the wildings are Pinus contorta, not radiata. According to DOC, Douglas fir is also higher on the list of problem species than radiata.
If dealing with a perceived risk of 'climate change' is important (as the current Government believes) then it is very difficult to find a pathway forward that does not include radiata pine.
KeithW
Thanks Keith. Excuse my abrassiveness, it just seems so short sighted not to take the opportunity to incentivise the planting of natives. They may not have the carbon performance of a pine but what a legacy it leaves for future generations. You will never convince me pines have any redeeming qualities. What we are doing is removing a productive export activity (Beef/Dairy/Lamb) and replacing it with a contrived industry benefiting the few and funded by the average Kiwi through taxes on getting to work and the kids to school.
tk - as is not uncommon, you miss the point.
First, please compare apples with apples - it's the same land you're "removing a productive export activity" from, whether it's in pines or natives.
The "contrived industry" is actually our economy - which is near 100% fossil-energy-dependent, and largely resource draw-down dependent too. We have commandeered 40% of the global land area just for our food production. Now we are trying to sink below-ground acreage, above ground - any way you look at it that will be a physical displacement - or alteration.
Maybe do some physics lectures? Maybe find a lecture theatre with wide doors above shoulder height?
Yes, but if we used 500 or 1000 year timeframes for the ETS then many things would look very different.
For example, we would put a lot more emphasis on carbon dioxide and less on methane.
But if sequestration is important, it probably does need to get going in the next 20 years.
KeithW
No probably about it, Keith.
We have to be zero by 2030 - and 10-year growth (of anything) is so inconsequential that it's meaningless. And we're in dander territory even now - 1.5 isn't some magical she'll be right, it's the worst we can possibly survive. 2 and up, are feedback loop territory, so are really 6-8-10; unsurvivable by our species.
And keeping below 1.5 means no functioning economy - at least, not a growth-assuming one - which means a lot of bets will be 'off'.
That points to the solution (to whatever the problem really is). Which is instead of all this offset carry on, cut consumption heavily and I guess lifestyle. The feeling I got from Glasgow is that nobody has the stomach yet to take that particular message back to their people.
If you're living below the poverty line in China or India you don't care about the West who have already built their infrastucture and first world lives. For them it's the basics like food, shelter and power, the Tesla X is not on the radar. I don't blame China or India, I would have done the same. You want them to cut C02? Start writing large cheques.
Either every human has the same C02 allowance or the whole thing is a sham. How on earth can someone fly a private jet to COP 26 to argue others need to reduce C02 emission. "oh, now I'm wealthy we need to stop the poor emitting GHG so my lifestyle isn't impacted"
I posted links to articles , at the end of Keith's last article, to some organisations pushing natives. Mpi's native tables are based on naturally regenerating Natives, it appears a lot better results can be achieved from planted natives. However you need over 100 ha to move away from the tables , and use measured results.
Another option would be for the government to require the planting of a number of natives at the same time as pines , with the pines earning the credits , and acting as a nurse crop for the slower shade loving natives.
In most cases, the natives will not compete with first generation pine trees. It is only when the canopy opens up that they have a chance. But one could establish native groves if a pathway over time to natives was considered important. It would still not be easy.
KeithW
Keith, from my reading of the guide , The classification of a mixed species block is governed by the dominant species of the Ha. Presumably a block with more than 51% pine or exotic is classifed as Pine or exotic. Add to that , the requirement for only 30% > 5 metre canopy cover, you could create a native block with exotic nurse plants, that has a lot better chance of reverting to native over time. and to many of us , is a lot more attractive in the meantime.
There is no doubt that such a block would be more expensive to plant and maintain than a pure pine block , but for those that prefer natives , maybe its a pathway . .
Which government department in Wellington do I send the bill to for cleaning the pine pollen out of the pool each spring? That invasive non-native weed releases a cloud of yellow dust over the BOP during spring.
On a more serious note, as an alternative to planting pines on fertile productive land and as a long term objective, why is the government not buying up marginal or non-economic back country land and letting it revert to native, particularly in central North Island and where such land adjoins existing national parks?
It's really simple - all countries will need to do at least their fair share of carbon reductions or they will face increasing trade barriers, international shame, and domestic political pressure as the impacts of climate change hit here (goodbye South Dunedin). NZ is tiny, but that also means our share of the remaining global carbon budget is tiny - about 250 megatonnes from 2020 (about 8 years of emissions at current rates).
"That won't change without govt regulation and policy changes." Yes. That was my point. If it was going to have worked already by now with these voluntary feel good campaigns, then it would have.
Sure there are stories of families making some changes to their lifestyles. Got rid of the cars and bike or walk or bus only. Reduce their waste drastically. But the majority of us still wheel the recycling bin out every week or two and think we've done our bit.
It's going to take some big sticks to get things moving.
Well, at some point it will be forced on us without regulation.
xing,
That's an easy question to answer. One; there is a moral dimension to this. We must ,as part of a global community be seen to be 'doing our bit' to combat global warming. That may seem like a very quaint notion to you, but the second reason is entirely pragmatic. Our economy largely rests on our ability to export and there is a real risk that we are seen to dragging our heels by consumers overseas, that business is likely to suffer.
I agree that one of the unintended consequences is a rapid increase in the price of second class land. Apart from some sales proceeds going to fund overdue retirements much of this money is being recycled back into better (easier contour) farmland. This means land that probably should never have been cleared of bush is returning to trees and famers are migrating to more productive land.
Hopefully this will lead to less sedimentation entering our lakes and rivers - so a win for the environment and a win for those who remain farming who will have a more efficient, productive future..
The downside is that the economics of entering farming, especially for the next generation, has been made even harder.
Always enjoy these articles Keith.
It is pretty clear that James Shaw has lost faith in the ETS and is shifting to policy / regulation, whilst the rabid marketeers (eg NZ Initative) are sticking to their ridiculous argument that the ETS will magically deliver a societally optimal path to reduced emissions.
It is a shame that the debate has got so binary to be honest. The obvious solution is policy + ETS. For example, spending $10 billion on overseas credits rather than investing in green infrastructure (or supporting indebted farmers to move to more sustainable business models) is beyond stupid.
There are alternatives to the ETS which would be acceptable internationally as long as they were consistent with the augmented 'Paris commitments' that NZ has made.
Within those commitments, the ETS is a market-related tool. The alternative would be much more prescriptive regulations. There is indeed a debate to be had around the appropriateness of the Paris commitments, but I have not entered that debate in my public writings. In that regard I am just one person within a somewhat polarised five million. Rather, my focus in my writings is on helping people to understand the consequences and options that derive from various commitments that the country is making, and hence I hope to contribute in some way to informed decision making.
KeithW
Amongst the confusion lies an opportunity.
If NZ will have to keep buying carbon credits on the international open market (assuming an escalating price over time with a good dose of market expectation), NZ will deplete its foreign currency reserves much faster. Like a two headed prong, the cost of carbon credits rises flows to the cost of production which results in higher selling price pressure for NZ produce. As NZ produce becomes dearer, international consumers will eventually seek cheaper alternatives.
This may create a wonderful recurring scenario for currency traders to dump NZD and its futures to profit from a destabilising NZ dollar.
One would think at some stage the price of carbon would rise to the point where it is cheaper to reduce emissions than buy overseas credits.
The elephant in the room is private automobile use. The government has signalled a move to electric, rather than any meaningful reduction in use.To be fair, any attempt to do so would be political suicide.
Once we link up domestic and international carbon markets, it is perfectly possible that we will be able to continue buying credits at say $120 per tonne, which will be cheaper than reducing many of our emissions (this is about 50c on a litre of petrol I think). The challenge comes when the international regulator spots that emissions are still going up despite everyone claiming that they are reducing emissions by buying offsets - that is when we get hit with offsetting limits (which were actually in early draft of cop26 agreement but NZ and others argued them out)
More diesel is consumed than petrol. This was not the case in the 1970s and 80s. Data source is spreadsheet downloaded from: https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc….
I suggest another elephant is how we substitute for current uses of diesel.
I listened in to a zoom call with Prof Frame yesterday - he’s a lead author for chapter 6 of the latest IPCC report. According to him, if we measured actual warming instead of ‘carbon equivalent units’ NZ will achieve a point where we no longer contribute to warming somewhere in the mid 2030’s based on our planed trajectory.
This is because a large chunk of our emissions are from methane which is largely stable and will in fact act to cool the climate if it meets the targets set in the next 10 years.
Gotta wonder why we will then keep paying billions into overseas coffers all the way till 2050? Surely it’s the warming that matters? Or is there something else going on here?
The problem with that is that Agri gets off scot-free and the rest of the population then has to look at what they do to contribute.
This is simply not politically viable no matter how logical. There also seems to be some sort of masochistic need to flay ourselves in front of the world..
Landgirl,
Unfortunately there is something else going on, or needing to go on, to obtain international acceptance of the arguments put forward by Professor Frame (and others).
The particular metric, GWP100* which he and colleagues have put forward (more than one version) is not easy to explain. The Climate Commission had a go at explaining it, but then were criticised by the proponents for a lack of understanding. If the professional bureaucrats could not explain it correctly, then it is going to be hard to get it accepted internationally.
Some of our rural leaders are supportive, but at least in part that is because it gives answers that they like. I have yet to meet any of those leaders who can actually explain the calculations that get to those results.
The key issue is that methane is a short-lived gas whereas carbon dioxide and nitrous oxide are long-lived. That makes any comparison a bit like comparing apples and oranges. The relativity depends on the particular metric. It is just like if if you compare apples to oranges you will get a different answer depending on which biochemical component you use for the comparison.
I might have a go at explaining this in more detail in a forthcoming article. It is going to be yet another big issue in the next couple of years. The Carbon Act lays out that 2025 is when, one way or another, charging of GHG emissions from methane and nitrous oxide will occur. The rules have yet to be determined. But a pan-industry group is beavering away trying to come up with something to take to Government as an alternative to inclusion in the ETS.
KeithW
Add to that the increasing focus on methane because the big players see it a relatively easy reduction AND it offers a relatively quick return (temp reduction) for each tonne of emissions reduction.
The GWP100 is interesting but the hard reality is that crashing methane emissions gives us the best chance / quickest route to holding warming down whilst we tackle the massive task of weaning ourselves off carbon
Agree Keith on Methane, Even if it is right big offshore countries don't agree and we are minnows so its not just our pollies here but getting acceptance internationally.
Adrian Macey was on the meeting and said as much.
Ag need to be very careful at this stage as its now really optics and they have to be seen to not trying to avoid the topic. This will be a PR disaster for them otherwise I fear.
From what I see HWN will only on non ETS forest and be about additionally - small gains and then the need to stop all grazing and control pests (not cheap or easy). Any ETS forest will still be through the ETS - I can't see them getting acceptance from the Ag community and they will simply slip into the ETS.
I have no idea who's going to help them all through this.
Landgirl - you might be cherry-picking; hearing hat you want to hear?
https://www.rnz.co.nz/news/national/435440/climate-change-needs-real-ch…
"I'd like to see some focus on gross reductions, as a core part of it. There are other levers, such as international offsets, and forestry sinks in New Zealand, and agricultural sector gases which contribute to the climate change mitigation portfolio.
"But it would be a mistake inter-generationally to rely on those while leaving gross CO2 emissions high."
Fossil energy is leaving us anyway - and Big Ag doesn't look like it temporarily did, beyond fossil energy. Get thinking about a much more local, much more regenerative, smaller farm/more worker per acre scenario. It's where we're going.
It's working! It's working!
"More than 20 vessels are either stuck or struggling to make it through increasingly thick sea-ice on the Northern Sea Route.
Over the past years, shipping along the Russian northern coast has proceeded rather smoothly in late October and early November. But not this year. Large parts of the remote Arctic waters were in late October covered by sea-ice. And the white sheet is quickly getting thicker and harder to navigate."
https://thebarentsobserver.com/en/arctic/2021/11/critical-situation-mig…
http://ocean.dmi.dk/arctic/icethickness/images/FullSize_CICE_combine_th…
"To meet the goals set out in the COP26 Glasgow declaration by 2040 would require over 7 million tonnes of lithium (LCE) annually, which is 17 times more than lithium chemical production in 2021, according to Benchmark’s Lithium Forecast.
It would also require over 5 million tonnes of nickel sulphate, which Benchmark’s Nickel Forecast shows is 19 times more than nickel sulphate production in 2021.
At the moment there is insufficient investment into raw material supply to meet battery demand in 2030 let alone 2040, Simon Moores, CEO of Benchmark Mineral Intelligence, said.
“Right now lithium demand is growing at three times the speed of lithium supply,” he said. “That’s a big problem that needs to be solved.”
While building a battery cell production facility can take two years, it takes a minimum of five years to bring on a new lithium mine."
https://www.benchmarkminerals.com/membership/can-the-auto-industry-meet…
A very big challenge - especially if you want some money left over to recycle the dead battery.
"If batteries are to be made without cobalt, researchers will face an unintended consequence. The metal is the main factor that makes recycling batteries economical, because other materials, especially lithium, are currently cheaper to mine than to recycle."
The forestry statements in the paper come straight from the CCC report so are no real surprise. This area was always going be discussed at some stage and as the CCC say this really is an issue for the end of this decade as we need first to get around 380,000 ha of new exotic planting undertaken alongside the same of native.
The exotic will get here but land will be the strangle point - land prices have already risen but we are probably only at @100,000 ha bought/committed - still 300,000ha to go on that front. As Keith says some farmers are very happy campers getting a great tax free capital gain on sale after years of low cash returns.
Farmers planting trees are getting very excited as well - they will be grumpy campers if restrained and this group is rapidly growing.
The discussion is starting as to what the controls will be once we get to this target.
The real issue will be what to do if none of the native happens to a large extent?
Whats going to make up the difference then?
I was also on the zoom call with David Frame - in effect he was saying methane needs to be reduced by around 10% to keep warming from Ag at t@1.5 degrees. I assume Nitrus Oxide is on top of this which would have come to zero some how.
He made a couple of good points
1. Methane from animals has warmed the atmosphere. With a reduction it will still be warming as it cycles around so it will hold at the warming level - say 1.5 degrees.
2. Ag (Beef and sheep) can't claim its made reductions in the past so its done its bit. Everyone will have to reduce from here.
Im personally very dubious that HWN will work - if theres uproar from farmers, groundswell etc it will be straight into the ETS. Funny enough a few top farm leaders I have spoken with in the last few weeks think this maybe the best way to go and have the processors drive the change via price - rounding up individual farmers is to hard.
Planning to spend billions offshore is a disaster - Ive worked in these countrys in the past in forest planting projects and in all honesty we may as well just send the suitcases of money over and hope. Better to spend it in reduction projects here or buy everyone an electric car.
Jack,
If methane does go into the ETS it will affect the economics of sheep and beef more than dairy. And probably sheep and beef breeding more than dairy beef. I need to run a few numbers on it. But a quick back of the envelope calculation shows that sheep and beef industries (combined) have a similar GHG output (methane plus nitrous oxide) to the dairy industry but generate only half the export income. Dairy really has nowhere else to go, but sheep and beef have carbon farming. If methane and nitrous oxide do go into the ETS then a lot will depend on the free units linked to the EITE scheme for export-exposed industries.
KeithW
Paying other countries to plant trees on our behalf is beyond stupid - it's such a temporary fix even if the trees did get planted, survive and grow, and not get cut or burnt down.
If we were going to buy offshore credits it should be for something that will genuinely reduce emissions, like providing funding to replace coal fired electricity with renewable. And we should take care of our own backyard first.
It's very smart - as trees are grown much quicker overseas whereas out sheep and beef is the lowest carbon foot print on the planet on a commercial scale. From a carbon point of view the meat/milk/wool should be grown here and the trees grown elsewhere. Specialisation and the division of labour to produce the best outcome - I'm sure someone has written about it somewhere before.
We could be carbon zero tomorrow for $600/million per year using the above method - the surplus cash could be ploughed into R and D or a hospital system. Instead we go for the most expensive methods like electric cars, windmill, and planting sheep and beef country in softwoods, and other virtue signalling boondoggles. That just demonstrates this is not an emergency as the elites don't act like it - the elites just use the marketing opportunity to enrich themselves and get the largely ignorant workers to pay for it.
Hmmm. Will there be changes in govt policy to stop off shore companies buying farms to off set ? Would this drop the value of sheep and beef farms suitable for carbon ? Keith is it time for young farmers going foward in farming to consider the advantages/disadvantages in purchasing a dairy unit or a sheep and beef unit (for carbon) given the info coming through ? Where will the wins be.
Overseas buyers cannot plant for a permanent carbon forest - recently NZ Carbon Farming (NZ Company)tried to sell a portion for there so called permenant forest, to an offshore owner - rejected by OIO so thats that.
Im not saying we should allow overseas buyers in to the extent we have, even for carbon and timber (they get carbon for 16 years then no more and harvest as per normal) as they have so much capital.
Interesting a number of farms selling on East Coast at the moment are being bought by farmers so its not one way traffic at all.
Young farmers are going to have to consider timber and carbon simply based upon the economics of it. In fact all hill country farmers need to wake up and look at it - many are. It doesn't mean all the farm in trees but really getting best use in the best place to improve PROFITABILITY - not right tree right place - best use best place.
Even if we took overseas buyers out there is growing number of NZ companies coming into the area(I know of one group looking at setting up a Sharsies type online fund - fractional ownership of a forest) so the pressure will stay on. There will be controls and the CCC considered 380,000ha the target of new exotic forest - the early bird gets the worm.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.