Guy Trafford traces the myriad pressures on climate policies in an election year, the unhappy farmers, Climate Change Commission, and failed carbon auction. He wonders what the costs will be post-election as we race to meet our international commitments

The Government’s reluctance to listen to what people have been saying has yet again created a problem for it.

In the latest case, it is sheep and beef farmers (again) who are pushing back. Beef and Lamb NZ are threatening to pull out of the HWEN process unless government delays the implementation of charging farmers (currently set for 2025) and also implements more of the HWEN sequestration recommendations.

With the Beef and Lamb NZ elections not long completed and a new Chairperson at the helm, Kate Acland, it appears that Beef and Lamb NZ are adopting a policy that better reflects what its constituent is feeling. 

Quoting their release “Farmers concerns relate to the disproportionate impact on the sheep and beef sector and its ongoing viability, the need to develop a robust and practical on-farm system for calculating emissions and fairly recognising the carbon-sequestering vegetation on our farms, the availability of mitigation options, and also the potential for emissions leakage overseas”.

The release goes onto to say that Beef and Lamb NZ still supports the HWEN approach and supports the principles of a farm level approach, but “it needs to be the right changes, for the right reasons, at the right pace”.

The pushback from Beef and Lamb NZ comes as the recent MFE release shows that the majority of gains in the drive to lower GHG emissions has come from the Sheep and Beef sector while transportation continues to grow.

To add to the Government headaches, the head of the Climate Change Commission, Dr Rod Carr, has criticised them for not following the Commission's advice on tightening the ETS settings and supply of NZ Units, thereby putting upward pressure on the NZ units.

At the last auction (March 15th) prices failed to reach reserve and no additional government units were released. A reasonably strongly worded rebuke within their report from the Commission did spark a minor revival in the ETS price from $53 per tonne of CO2e to $63 but well short of the $80.64 trigger price and the $88 high of November last year.

It is apparent that the Government is trying to navigate a route through the current cost pressures on society which have been latterly compounded by the impacts of Cyclone Gabrielle. They also seem to be aware of the impact on land conversions that the previous high ETS prices were having. Unfortunately, they appear to be keeping nobody happy in the process. Such is the burden of government.

The CCC’s major concern is that through the lack of action now, and arguably the reliance upon domestic forestry offsets government is just ‘kicking the can down the road’ but the day of reckoning is rapidly approaching. They say that delays in decisions now have led to uncertainty in many sectors leading to a failure to ‘invest’.

Low prices are failing to lead to a change in emitters behaviours, domestic forestry offsets are just masking emissions, not reducing them and overseas units (OU’s) are yet to be approved. These OU’s also come with many fish hooks which apart from the flow of money also have several moral issues involved.

If the CCC gets its way and governments are serious about meeting their (our) national commitments then future government decisions around the ETS will involve having to go into catch-up mode. This may well apply to the agricultural sector also. The two likely results may be the ETS goes rapidly higher and more land goes into forestry and the cost of emissions for agriculture, however they are set, may will be higher than initially expected. Or a combination of both.

The failure to sell any of the Government reserves last month also mean the Government climate mitigation coffers have missed their payday. There was already speculation about how this windfall money could be spent (from future auctions) ranging from emission reduction spending, to mitigation efforts to now paying dividends back to the public to help offset higher energy costs.

Whatever the future of the ETS and HWEN policy holds it is going to become interesting and decisions will/are further complicated by the impending election.

Given the potential impact upon taxpayers costs plus the pressure from environmental groups, it is going to get messy and it could be that agriculture becomes the very messy filling in the sandwich.