The biggest game in rural politics for many years is being played out right now.
On one side are some key Government Ministers saying that they are not impressed by current He Waka Eke Noa (HWEN) proposals for greenhouse-gas levies being calculated at the level of individual farms. Their strong preference is that levies, at least initially, should be at processor level and passed down to farmers from there.
On the other side are what is probably a majority of farmers, whose preference would be for no levies at all, but who grudgingly support farm-level levies as definitely preferable to processor levies, and even more preferable than the Emission Trading Scheme (ETS).
Further out to the side, there is another group of farmers who would like to stop any HWEN negotiations. This group, or at least some of them, are still arguing for no levies at all.
Stuck right in the middle are the 11 mainstream industry organisations, with DairyNZ and Beef+Lamb taking a leading role, and getting hammered from both sides.
Elsewhere, there is the rest of society, largely oblivious to what is going on. If they have an opinion, it is largely that agriculture must pay its way, but also largely operating in blissful ignorance as to how their own well-being is so dependent on primary-industry exports.
The so-called consultation period between HWEN and farmers is now over. I say so-called, because it was largely a selling exercise. However, in among all of the disquiet, the meetings with some 2000 farmers who turned up the ‘roadshows’, out of about 23,000 commercial pastoral farmers across the country, did indicate a strong preference for farm-based levies that captured the specifics of each farm rather than processor-based levies. The caveat to that was acceptance by many that a hybrid system combining processor and farm-based levies might be necessary initially.
As the consultation period was coming to an end, Climate Change Minister James Shaw and Agriculture Minister Damien O’Connor called a meeting with HWEN industry partners. That meeting was not public, but the drumbeats coming though on the gale from Wellington were more than a little critical of DairyNZ and Beef+Lamb.
Perhaps influenced by their officials, the ministers indicated big concerns at an emerging consensus that each farm should be levied based on its own specific emissions. Their fear is that getting this in place will delay implementation of the levies, and any such delay is politically not acceptable to them.
Subsequently, the HWEN partners have decided to continue working on a farm-level scheme. But to get it across the line they will have to do a much better job of designing the system and then convincing Government that their plans are administratively feasible.
Early in March, I became involved in trying to bring together Groundswell with DairyNZ and Beef+ Lamb. I did so because I was asked to do so. My rural readers at least will recognise that Groundswell has had a strong voice over the last twelve months, led by farmers who feel disaffected over a multiplicity of issues.
For a while, I was hopeful of some success in bringing the various parties together. My modest optimism arose from all parties apparently agreeing on fundamental principles within HWEN that included a split-gas approach combined with all levy revenue being used within the sector.
I also knew that the Government was open to proposals developed on that basis. That had been stated in public, despite no doubt some diverse views within Cabinet and Caucus. Some of the dissident groups had failed to recognise the foundation that this provided, albeit with a lot further work needed.
Alas, my initial optimism, albeit cautious, was misplaced. The level of mistrust between the disaffected farmers in Groundswell and the mainstream industry groups was too great.
Then in mid-March I got together with leading Christchurch farm accountant and business mentor Graham Brown, and North Otago farmer and environmental advocate Jane Smith, to see if we could come up with a joint submission to HWEN. All three of us were supportive of HWEN as being the path forward for agriculture, but all had major reservations about the HWEN documents that HWEN was consulting on.
Writing the joint submission took about 10 days as we all had other tasks to distract us, but we came up with something that all of us thought provided a path ahead. That document has now been submitted and it has also been widely circulated within the agricultural industries. Now we have to wait and see whether or not we have had influence.
The document itself is four pages and somewhat long to provide here. However, it is here as a pdf.
In essence, we are saying that there are guiding principles that seem to be generally agreed. One of these is that a split-gas approach is essential. The second is that all levies should be used within the sector to reduce emissions.
Related to this, the scale of the levies should be determined solely by the need for relevant greenhouse gas levies for research, development, extension and education (RDE&E), together with support as necessary for initial funding of mitigation strategies.
We have also emphasised that trying to tax agriculture out of existence through punitive levies in the ETS is inconsistent with the Paris Agreement that NZ signed up to. That agreement is very explicit that climate change policies must not threaten food production.
Accordingly, we have emphasised that the path forward is to focus on RDE&E that will reduce emission intensity from each unit of pastoral production. Personally, I am confident that there are pathways to achieve these emission reductions, but we won’t get there without a concerted RDE&E programme. I am also frustrated that the existing RDE&E policies in relation to reducing emission intensities are poorly targeted.
A key area where HWEN has drifted away from fundamental principles is by advocating for carbon sequestration within the HWEN system. Sequestration issues belong within the ETS.
It is very important within the HWEN system that there is clear delineation between each of methane, nitrous oxide and carbon.
Given that the HWEN system will impose levies on methane and nitrous oxide emissions from dairy and meat production, these levies should be solely used to develop and implement strategies that will reduce methane and nitrous oxide emissions from these same meat and dairy products.
In contrast, the ETS is already set up for carbon emissions and also carbon sequestration. This is where sequestration belongs.
Unfortunately, there are currently important sequestration anomalies within the ETS. In particular, the process for regeneration of native forests is far too bureaucratic and this needs to be addressed. But there is no good reason why that and other anomalies cannot be sorted out as long as the sequestration is authentic.
The alternative of trying to bring these sequestration components across into HWEN is greatly flawed. If it is in HWEN, then it will be Peter Farmer being robbed to pay for Paul Farmer’s carbon sequestration, with no net benefit to the sector. Ironically, it will also mean that this sequestration will not be included in New Zealand’s emission reductions as reported internationally to the UNFCCC.
Alas, Beef+ Lamb has got itself in a bind by saying to its sheep and beef farmer members, many of whom have sequestration projects of one type of another, that HWEN can provide them with carbon credits for these forests. What Beef+Lamb did not communicate to its members was that this would involve robbing Peter Farmer to pay Paul Farmer.
The situation has been made worse by plans to include what I call ‘rats and mice’ sequestration issues within HWEN, which will have low sequestration but high administration and auditing costs. Those costs will have to be paid jointly by all farmers through their HWEN levies.
Walking back from misguided proposals is never easy, but it has to be done. The fundamental principle is that if sequestration is genuine it has to belong in the ETS. And if it is not genuine, then it sure does not belong in HWEN.
Another way of saying this is the fundamental principle of a split-gas approach is that levies on methane and nitrous oxide must be used to reduce emissions of methane and nitrous oxide. That is the essence of split-gas approach that gets away from all of the flaws of carbon-dioxide equivalence.
In our submission, we laid out further specific issues that HWEN needs to follow to ensure administration costs are reasonable. In essence we think that HWEN lost the plot once it started looking at the specifics of the levy system. The staff working on the proposals need much better insights as to how an administratively simple, fair and accurate system can be made to work. Our fear is that if HWEN does not bring those with necessary insights into the tent, then the HWEN proposals are going to crash.
*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.
62 Comments
It is a game alright and the big end of town is laughing all the way to the bank.. "A whistleblower who spent years working on the integrity of the Australian government’s carbon credit system has launched an extraordinary attack on the scheme, describing it as a fraud that is hurting the environment and has wasted more than $1bn in taxpayer funding.
Prof Andrew Macintosh, the former head of the government’s Emissions Reduction Assurance Committee, said the growing carbon market overseen by the government and the Clean Energy Regulator was “largely a sham” as most of the carbon credits approved did not represent real or new cuts in greenhouse gas emissions."
https://www.theguardian.com/environment/2022/mar/23/australias-carbon-c…
Keith, what fraction of the levies will be returned to the Ag sector?
After all, administrative costs for the alphabet soup of new and existing bodies involved will be a first call.
Political vampire squids will surely smell the booty and stick their blood suckers into the treasure chest.
And if the competitive model for research is followed for whatever fraction leaks out finally, then only 'research' which reinforces then current narratives will end up getting funded....
waymad,
We don't have a good idea yet as to what the admin costs will truly be.
I am confident that there are administratively efficient solutions, but I am not confident that the HWEN Team is going to find those solutions.
I am also concerned that the research needs to be conducted in an environment that is not constrained by existing narratives.
KeithW
Thanks Keith a good summary. The problem is that the incredibly complexity and beauty of the living carbon cycle is reduced to just ruminant methane emissions. All the sequestering phases of the cycle are ignored.
Logically if ruminants cause global warming then so must grasslands as one cannot exist without the other. 40 million years ago God/nature made a mistake?
I do not believe an equitable (in terms of true carbon accounting) is possible for each and every farm. The arguments will inevitably continue like the blind men discussing the nature of an elephant. The end result for us as farmers is just another tax. No chance of mitigating climate change as it does not address the cause.
As to be expected, a balanced and reasoned explanation of complex circumstances to which there are no easy answers. Yet it would seem logical the elements in the rural sector that are dissatisfied with both the status & outlook, would see a solution in the offing, politically. That is a change of government. Already previous National deputy leader Paula Bennett is acquiring substantial donations to National from let’s say, commercial identities and it stands to reason that similar inflow from the rural sector will be forthcoming too. Way back, prior 1984, Mike Moore colourfully warned his incoming government associates not to piss business off. Next time round Dr Cullen came to agree. But it looks like this Labour lot has no political nous in this regard at all.
It all seems such a ridiculously futile exercise to me, when the solution to both water and atmospheric pollution is to apply a carrying capacity approach by limiting un-natural inputs to land. Farm/produce within the limits that the ecosystem of your property allows.
Kate
My back of the envelope calculation is that if we stopped all nitrogen fertiliser, then dairy production would drop by about 20% and this would happen quickly. That would decrease exports by about 5 billion. If we stopped using PKE then production would drop another 8-10%.
And if we stopped using phosphate fertiliser then dairy production would steadily drop to considerably less than half current production.
Methane emissions would reduce but by somewhat less than the drop in production. In other words, methane intensity would increase.
Nitrogen fertiliser is less important for sheep and beef, but still has a role to play, particularly in spring before soil temperatures warm up. Without phosphate fertiliser, our sheep and beef pastures would revert over time to browntop plus an assortment of weeds, and animal production would totally crash.
Bring those things together, and we are talking about exports dropping by more than $20 billion per annum. Those exports are what funds current lifestyles, including medicines, computers, machinery, fuel and so on.
Accordingly, I don't think the solution is simple.
KeithW
"Sri Lanka has announced compensation for more than a million rice farmers whose crops failed under a botched scheme to establish the world’s first 100-percent organic farming nation.
…The government will pay 40,000 million rupees ($200m) to farmers whose harvests were affected by the chemical fertiliser ban, agriculture minister Mahindananda Aluthgamage said on Tuesday.
“We are providing compensation to rice farmers whose crops were destroyed,” he told reporters. “We will also compensate those whose yields suffered without proper fertiliser.”
The government will spend another $149m on a price subsidy for rice farmers, he added.
About a third of Sri Lanka’s agricultural land was left dormant last year because of the import ban."
https://www.aljazeera.com/news/2022/1/26/sri-lanka-200-million-compensa…
Rick,
I think we have been making considerable progress with sediment and phosphorus runoff. Nitrogen leaching reduction are slower but reductions are occurring. These show up first in rivers and streams but will take much longer to show up in groundwater because of long lags.
KeithW
Good summary Keith
New Zealanders although complaining about some food items rising in price have not had consider food shortages like a growing number of countries.
I get disillusioned with this disconnect of NZ as a food producer where the populous is well feed, yet are antagonistic too producers.
Keith keep up the education
Wow - a 30% drop in dairy production sounds better than I thought - meaning I'd have thought dropping all nitrogen fertiliser + PKE would have been much worse reductions than that. We can so live with that as a nation - in fact we have to live with that as a nation - otherwise our own health and the health of our rivers, have no chance.
And if our sheep and beef pastures were to revert over time to weeds - what kind of weeds are we talking about - are these undigestible plant species for ruminants? Surely, if our R&D expenditure focused on pasture management under natural inputs, we've got the brainpower to make it work..
And if we have to live less extravagant lifestyles in order for us to share this country with our native flora and fauna flourishing - well then so be it. I'm all in and we can all do without the waste we currently spend up large on and then toss out the following year.
We will get there soon enough - so why not pre-empt an otherwise inevitable chaotic transition;
https://en.wikipedia.org/wiki/Nicholas_Georgescu-Roegen
We simply cannot carry on as we currently are. That we can is a cruel myth - a false hope.
And the drop in dairy production that I am suggesting does assume that the systems are reconfigured back to contain a lot more white clover. But would you allow that, given that white clover is not natural to NZ? And neither are the other legumes that we use, such as lucerne, red clover etc, Matagouri does fix nitrogen from the atmosphere but I can't see that being a goer.
Actually the natural system for NZ was always free of all mammals except for some bats until the Maori people arrived about 1000 years ago.
KeithW
As one organic farmer said to me a long time ago, you have to choose your soils and location very carefully to make organics systems work in NZ.
And as another organics farmer said to me, who, following many years of organics reverted away from strict observance of the system, he simply did not have the resilience to withstand difficult biophysical events without some use of chemicals.
KeithW
Yes , it is hard work , and yes , it can be very tempting to reach for the chemicals. ( I still use slug bait , I can't stand seeing my tree seedlings eaten , and don't have time for alternative methods atm). Organic rules do allow for chemicals to be used in case of infestations , or if animal health is at risk, but that part of the farm , or those animals may go into a transition stage afterwards. Not withstanding there are some very successful organic farms out there. Its not for everyone.
Mebe you should take a good look at New Zealand flora Kate, we have a lot of it. Everywhere I travel, huge swathes of bush. And seeing we cant get Moa back, not sure what fauna you are on about. Have 40 Kaka fly over the house each morning and night. Though that can change suddenly after a poison drop. The devotees to your religion do that.
Our many mountains mean our country is swathed in native bush. Let us farmers have the hills and flats and we will feed and clothe you. Cheers
I can understand the governments scepticism of the farmers proposals.
The farmers proposal could be viewed as levy as little as possible for completely unpredictable outcomes.
There needs to be some portion of a levy that taxes emissions based on their contribution to global warming, just as is planned for the road users.
It reminds me of overhearing a discussion between our neighbours, who without going into their race as it is traditional, are extremely tight fisted and a rather rotund would be arborist. The former wanted to get a lot of work done for very little money. The latter wanted to get a lot of money for very little work. Needless to say, the trees are still sky high.
Just as planned for road users? Well in that case we'll pay 3/5 of bugger all.
About the same as Fletchers and Tiwai and a large number of others.
In another article it's noted the dairy herd has dropped 400k in number. I don't see much of a problem with dropping another 10% over the next five years and becoming progressively more efficient.
It certainly appears much more possible than road users cutting back, the counties record there is appalling.
And simply taxing with no decrease in GHG because of offsets is a waste of time.
Thinking and being willing to do so are not the same. Dairy numbers in Ireland have increased every year for the last 10years. Not comparable.
https://www.rte.ie/news/primetime/2021/1026/1256029-farming-dairy-clima…
positivelywallstreet
The problem is that if farmers are taxed in the ETS then the carbon price needed to change behaviour (essentially enough to close the farm gate) is much less than the price needed to get users of fossil fuels (including you and me) to change our behaviours. Somewhat belatedly this has dawned on the Government.
At least some people in Government understand that the NZ economy is export led.
KeithW
For reasons I don’t understand, most countries are export lead, including the USA in a way because it exports currency, but perhaps I’m oversimplifying.
I wasn’t thinking about linking an agricultural emissions levy to the ETS system, that is up to the government to decide.
Good article Keith and as clear thinking as ever.
My only challenge would be whether the Paris Agreement view on protecting food production should be viewed as protecting the status quo. For example, 1000 kilocalories of beef requires around 120m2 of land, and the equivalent amount of milk requires around 15m2 of land. If even a fraction of this land were used for crops instead, you would get much higher yields in terms of calories, lower emissions, and less consequential environmental impacts (e.g. on river quality). Obviously, such a change would be absolutely consistent with the Paris Agreement in terms of emissions reductions and protecting food production.
My view (as you can probably guess) is that we need to see the writing on the wall and support our primary sector to shift over time to more sustainable products.
Jfoe
The problem is that NZ does not have a competitive advantage when it comes to crop production. We cannot produce wheat economically at world prices. Similarly for barley, corn, sorghum, soy, rice and sunflowers. Kiwifruit and apples are exceptions. We used to grow apricots in Central Otago but most of that land is currently used for cherries or is under water (Lake Dunstan). So what are these sustainable products?
KeithW
Thank you for the response Keith.
Two points in response if I may.
Firstly, surely it would be worth us having a secure domestic supply of some crop staples given the level of global unrest and the threat that climate change and conflicts pose to global food production? Would that be worth marginally higher domestic prices (or some form of bufferstock)?
Secondly, our dairy industry might be economically viable, but only because we don't price in the externalities. If NZ had to meet European river quality standards (for example), the costs of production would be significantly higher.
Firstly, surely it would be worth us having a secure domestic supply of some crop staples given the level of global unrest and the threat that climate change and conflicts pose to global food production? Would that be worth marginally higher domestic prices (or some form of bufferstock)?
With respect, it sounds here that you're suggesting some form of central planning of crop staples, which invariably results in higher prices and less production - to get any farmer to oblige would require agricultural subsidies. These are inefficient and place the cost of production partially on the taxpayer, when the more efficient model would be to let consumers decide that if they want a buffer stock and its higher prices.
Keith's point is that we already use the best arable land in the country for cropping - shifting production in that land would push out production of other food sources like squash, cabbages and onions - we can't just take land suitable for dairying and suddenly turn it into wheat fields (ask James Cameron how his little organic experiment in Featherston went).
Your second point is a chimera - what we're talking about is how to price the climate related externalities, a different problem with a different solution.
EU water standards: Exactly which standards are those? If these, we would meet them. https://ec.europa.eu/environment/water/water-nitrates/index_en.html
I'm curious about why we can't produce wheat economically, as I saw this graph the other day which says that we produce the most per hectare. What am i missing?
https://ourworldindata.org/grapher/wheat-yields
that says US is around 3 tonnes per hectare and we're around 8...
Land isn't abstractly substitutable like that. The qualities that make land economical for dairy are different to what makes it economical for arable uses. Parts of NZ have a (global and national) comparative advantage in dairy (e.g. due to rainfall, slope, etc.). We could possibly substitute production of, say 10 units of dairy for 10 units of arable crops, or we could simply trade 10 units of dairy for 15 units of arable crops. You're proposing we switch from the latter to the former. (Unless what you really mean is that you want to adjust consumer preferences away from dairy. This is remarkably different from centalised land use planning.)
The rush to tax farmers when the basics still aren't nailed down. Settled Science (TM).
Historically inconsistent productivity and respiration fluxes in the global terrestrial carbon cycle
"This study explored the consistency of global gross primary productivity (GPP) and soil respiration (RS) estimates in the global carbon (C) cycle.
...Here, we show large discrepancies between published estimates of global GPP and RS, producing uncertainties that hamper our capacity to close the global C budget. Despite substantial efforts to understand carbon-climate feedbacks2,35 in the last decades, changes to carbon uptake rates in response to climate change remain uncertain.
Resolving the inconsistency between global GPP and RS is a necessary precondition for understanding the future of the global carbon cycle, and thus the possible future global climate change."
...For scale, the difference between the currently accepted amount of 120 petagrams and this is estimate is about three times the global fossil fuel emissions each year.
Apology for wrong name Keith. Corrected now. I believe the difference between farming sectors is quite different. From what I see majority of dairy accept levies need to be paid but are not happy with the way HWEN was presented almost as a fait accompli, with what many saw as Claytons consultation. Whereas significant numbers of non dairy sector farmers from what I see, don't accept levies. Non dairy sector may have the majority of farmers, so technically your comment may be correct, but given I don't believe that is correct for dairy, let's not lump all sectors together.
Farmers include not just livestock farmers but also arable and horticuture and these organisations, and others, were also part of developing HWEN.
Your, Jane's and Graham's submission is well done.
I see your point , but think that could be worked around. i would have thought the levies would be based around the industry wide averages , and the rebate could be for farmers who can show their calculation they are below that average.
And some things would be cumulative , i.e , a 5 year old shelterbelt would be calculated to be storing more carbon the a 1 year old one.
but yes , abit like school, reward the bad students for been as good as the good students are anyway , not much incentive for the good students.
I posted this interview in Guy Trafford"s older rural column , here again in case one hasn't read back.
https://www.rnz.co.nz/national/programmes/morningreport/audio/201883718…
We need to get serious about emissions.
Cap the large sources first.
Ruapehu - 2300t of CO2 on ONE day last year.
Plus White Island, Rotorua etc. Probably 15million+ tons by 2050. How else will we be carbon net zero?
Otherwise, we are pissing into the wind.
And while we're looking at it, as the Ute tax was meant to pay for the EV's, and now there are almost no EV's coming into the country as the shipping company has stopped moving EV's, can we stop the ute tax as well. Seems fair?
I'm confused. Are you saying that the volcanoes are our biggest emitters?
As Keith points out, Ruapehu's only about 1% of the total 82 million tonnes CO2e in 2019..?
That's a bit nuts. Soil is our best hope for sequestering large amounts of carbon. I guess the issue is it's pastoral farming which increases soil C, which obviously has other impacts (can one balance out the other...?), whereas as you say arable generally depletes it (depending on what system is being used to grow crops. I imagine no tillage and regen ag might be soil C accumulating).
It just seems a bit crazy not to account for the changes in carbon in one of the biggest sinks there is. I'm a bit surprised that Beef and Lamb aren't pushing for it to be counted if generally their systems would be carbon positive for soil.
Technology is on it's way to make this accounting easier ;)
Credits cannot be claimed for carbon levels that are high and stable.
They can only be claimed if carbon is accumulating
That is fundamental to the international system.
Within NZ agriculture, there is considerable momentum to include soil carbon but much of the momentum is based on mis-understanding of the realities
KeithW
One method of otganic farm is to grow a green crop , like oats or other grains , and plow it in to increase soil carbon . I'm not sure if there is any reason why the grain can't be harvested first.
i think the main problem with soil carbon is it would be very complex to measure.
You will return more carbon and nitrogen by incorporating a green crop. Stubble from a grain crop will be nitrogen deficient and this will damage the following crop. Minimal cultivation is required to prevent overall loss of carbon. In general, cropping systems reduce carbon and pastoral systems build it up. it is relatively easy to measure the carbon content in the soil but a very big job if all farms have to be monitored for auditing purposes
KeithW
Fonterra kind of makes a statement.
https://www.stuff.co.nz/national/politics/300570049/fonterra-breaks-pub…
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