Stating the pleading obvious (big dairy and the ETS review)

by Mr February on October 1, 2011

A commenter or two has started to hit back at the NZ Emissions Trading Scheme Review 2011 and the New Zealand Herald editorial Farmers must share burden on emissions for saying that there should be no further delay of the 2015 date when agricultural emissions will enter the New Zealand Emissions Trading Scheme (NZ ETS). The Herald editorial had the temerity to comment on the government’s “extraordinary generosity to farmers” in changing the “modest impositions” of the NZ ETS on agriculture so that it “will become truly timorous”.

David Anderson, who is described as a former editor of Rural News and a communications consultant in “teh” (sic) agribusiness sector, has just had an opinion piece in the Herald (27 September) arguing for further delaying agriculture’s entry into the NZ ETS.

Just as a brief re-cap, in the Clark-Cullen Labour Government’s original version of the NZ ETS, agriculture was ‘last in’, with unit surrender obligations starting on 1 January 2013; i.e. after the 2008-2012 Kyoto Protocol first commitment period. In November 2009, Nick Smith and National changed the start or entry date to 1 January 2015 and confirmed that it would be processors and not individual farmers who would have the obligation to report emissions and surrender units. That was done in the Climate Change Response (Moderated Emissions Trading) Amendment Act 2009

As we know, Federated Farmers can be a bit emotive about the NZ ETS, with past President (and now ACT Candidate) Don Nicholson) describing the NZ ETS in 2009 as the road to hell paved with good intentions.

So lets have a look at David Anderson’s arguments. The first argument is:

Why would we want to unfairly penalise New Zealand’s agriculture sector – and one of the few sectors with the ability to help the country out of the current economic hole – by imposing taxes when our international competitors are not doing the same?

Because agricultural GHG emissions are the New Zealand’s largest source of emissions! It’s not that hard to understand.

In 2009, agricultural GHG emissions were 32.8 million tonnes (mt) of CO2-e out of a total of 70.6 million tonnes or 46.5 per cent of New Zealand’s total greenhouse gas emissions. The energy sector emitted 31.4 mt (44.4%). Industrial processes emitted 4.3 mt (6.2%). Waste emitted 2.0 mt (2.9%). Solvents and other products emitted 0.03 mt (0.04%) according to the Ministry for the Environment Greenhouse Gas Inventory 2011.

Other developed countries who have signed up for the Kyoto Protocol obligations just don’t have agriculture dominating their GHG emissions like New Zealand. For example, here’s a chart comparing New Zealand and Australian agricultural GHG emissions.

NZ & Australian agricultural GHGs

Lawyer Toni Moyes points out in a 2008 paper in the Ecology Law Quarterly, 35:4, pp. 911–966; Greenhouse Gas Emissions Trading in New Zealand: Trailblazing Comprehensive Cap and Trade that New Zealand is “fundamentally different” from European countries where carbon dioxide from the energy sector emits 80% of GHG emissions. Moyes concludes “Thus, if non-CO2 gases were excluded, the NZ ETS would ignore over half of the problem. Likewise, sectors typically excluded from ETS must be included in the NZ ETS in order to address the majority of emissions. The NZ ETS would be far less effective if agriculture, the single biggest emitter, was ignored.” I could not put that better. It is not “unfair” to include agriculture in the NZ ETS, it is essential.

Also, I have to point out that Anderson completely omits to mention the fact that agriculture, once it does enter the NZ ETS, will have (arguably) the most generous free allocation of emissions units of any sector of the economy. Under an ETS, emissions units must somehow get into a trading market. They may be either auctioned to emitters (obviously most wealth-enhancing for the tax payer) or “grandfathered”, allocated for free to existing emitters. New Zealand has chosen to ‘gift’, or allocate for free, all domestic NZ units.

According the Ministry for the Environment, free allocation of units to agriculture will be 90 per cent of the emissions baseline and will phase out at 1.3 per cent per annum from 2016. The baseline will be the industry average emissions per unit of output. The allocation will be uncapped, meaning that there is no set limit on the number of units that may be allocated. Further, there are NO eligibility tests or thresholds for agricultural allocation, meaning that all agriculture participants will be eligible for an allocation.

So the entry of agriculture to the NZ ETS in 2015 will be cushioned by 90%. Or the GHG price signal will be reduced by 90% (compared to other sectors) down to 10% via free allocation. The free allocation percent will be based on “average output”, which will be gazetted in regulations. Any processor who does ‘better than average’ will be in for a windfall gain. Again this is hardly the imposition of an unfair tax.

His second argument is:

greenhouse gases. Surely all that will do is shift the production of these agricultural greenhouse gases from New Zealand to another country?

This is the carbon leakage argument. That businesses and their emissions will relocate to other jurisdictions to escape a carbon price.

Dr Jan Wright, the Parliamentary Commissioner for the Environment, pretty much shot to pieces the agricultural carbon leakage argument in her submission on the 2009 amendments to the NZ ETS.

Dr Wright noted that National was proposing to base allocation of units to agriculture on the industrial allocation model in the Australian Carbon Pollution Reduction Scheme (which was in 2009 only a proposal and which was withdrawn in 2010).

“There is no justification for treating allocation to the agricultural sector the same as industrial processes, either here or in Australia. The impact of the ETS on agriculture is very different to that of industrial process sectors. Productive agricultural land can not be shipped offshore…Carbon credits should not be allocated to prevent an unlikely event.”

The nail in the coffin comes from Suzi Kerr, an economist who has specialised in permit trading. She had this to say in her submission to the NZ Emissions Trading Scheme Review 2011:

.”A small, but crucial, point on agricultural emissions is that all available empirical evidence suggests that leakage of land and production out of the agricultural sector in response to greenhouse gas costs would be small. This evidence is summarised in Kerr and Zhang (2009).

Number three argument:

It has always argued that it’s crazy for New Zealand farmers to be hit with the costs of an ETS when they had no way of mitigating these…

This is the ‘Agriculture can’t mitigate’ argument. As blogger Idiot/Savant said in his blog No Right Turn, this is simple untrue. The Sustainability Council wrote a report A Convenient Untruth in 2007 that argues that there are significant mitigation options for agriculture.

Anyway, Anderson almost immediately contradicts this statement in the next paragraph when he states:

“There is already evidence — which is also noted by Caygill’s Review Panel — that the agriculture sector is reducing its greenhouse gases (my emphasis). Emissions per unit of product from agriculture have fallen by about 1.3 per cent a year over the past 20 years – due to improved management, animal genetics, pasture and crop genetics and technological changes. Opportunities for further reductions included the use of forestry on marginal or erosion-prone land, nitrification inhibitors, and “good practice” management techniques that increase productivity.”

Its great that agriculture is reducing emissions! Those responsible deserve all credit for it. However, the advocates of agriculture such as Anderson need to be reminded that reducing emissions is the same as mitigating them!

Anderson’s fourth argument is that “critics and environmental doomsayers” are “making claims about farmers being subsidised”. And that it is unfair and selective to say farmers are getting a free ride.

As far as I’m concerned, we all have an obligation to do something about climate change. New Zealand’s climate change policy reflects that. NZ has emissions reduction targets and climate change policies and commitments under the Kyoto Protocol and the UNFCCC. All of us share the responsibility of making NZ’s emissions reductions policies work. If we leave out agriculture, the sector of the economy that is the biggest emitter of GHGs, then that is unfair to everyone else.

{ 10 comments… read them below or add one }

Bob Bingham October 1, 2011 at 2:33 pm

One of the big differences between NZ and other industrialized countries is that we make our electricity without burning much coal or even gas. Our transport is about the same as other nations in that we run on oil and our farming is about as clean/dirty as other countries. The point about an ETS or Carbon Tax is that it gives renewable energy a subsidy to get started so that we can stop burning carbon fuels.
It we are not going to stop farming then we must learn how to deal with the CO2 and other pollution. We need a farming deal where, if the farmers grow more trees to lock up carbon and preserve the soil and clean up the water then we can let them off the tax. They are more in control of the country side than anyone and can make a huge difference to CO2 capture, soil erosion and water quality than any other group.
We need to do a deal in which if they look after the country side in a big way then they don’t have to pay.

Australis October 1, 2011 at 3:32 pm

The reason agriculture forms a larger percentage of New Zealand emissions is that hydrocarbon-based electricity forms an exceptionally low percentage of those emissions.

Should we set the precedent that countries with high renewable energy will be penalised by having their obligations shifted to another (normally exempt) sector?

Rog October 2, 2011 at 10:11 am

Countries with high renewable energy production are not penalised currently, nor should they be. Emissions liabilities are per unit of CO2e, not the percentage of emissions from that sector. The reason the sector matters so much here is how the political power of the NZ agricultural sector is employed to get out of paying for their emissions.

Mr February October 1, 2011 at 8:12 pm

Bob,
Good point. Farmers growing trees and sequestering carbon can earn emissions units through either the MAF Permanent Forest Sink Initiative and through Forestry in the Emissions Trading Scheme.
According to the Ministry of Economic Development Chief Executives S89 report, 1,159 ‘post-1989′ foresters were registered in the NZ ETS at 31 December 2010. They reported 9,17 million tonnes of CO2-e sequestered and were rewarded with 9.45 million NZ emission units.

Trevor October 3, 2011 at 3:35 am

Hi Bob,
regarding your comment on farmers & carbon… how about them becoming part time carbon farmers. Biochar offers a win-win-win pathway.
– carbon sequestration
– soil and pasture benefits
– reduced fertilizer requirements
– emission & pollution reductions from air, water and food
– animal health (they can eat it as well!)

The science & economics are ongoing but it looks promising enough (I think) for a much larger focus than it currently gets.

Beaker October 4, 2011 at 1:54 am

By all means promote complimentary good practice so water quality is not trashed as an unwanted side effect of management to reduce greenhouse gasses, but dont use the climate measures to reward water management instead of GHG management.
Biochar is a long long way from demonstrating anything close to the soil carbon panacea claims for it. Good soil organic matter management is well understood and benefits production, water quality and C sequestration, but you are looking at 10 to 15 years to be able to detect a signal for C sequestration. Worth doing for its own sake but not a useful tool in reducing atmospheric CO2.
Concentrate on making management that deplete soil OM uneconomic – and work on the livestock + manure emissions.

Trevor October 4, 2011 at 2:42 pm

Hi Beaker,
I don’t think you many scientists claiming biochar as a panacea. Maybe some industry enthusiasts like me, but even I qualified the claims. I think you are wrong about the long long way tho. I have not read all of the 634 articles listed in the IBI bibliography on biochar research / findings (www.biochar-international.org/biblio …a search on soil comes up with 306) but the trend I see in the peer review work is generally positive. The potential benefits for dairy and the NZ environment are being explored but the dairy industry could be funding much more work.

Could you reword your 1st & last paragraphs for me – I don’t understand.

Beaker October 4, 2011 at 10:54 pm

The first sentence refers to Bob’s comments, the last, as significant and sustained increases in soil carbon take a very very long time to achieve (at considerable effort and opportunity cost) concentrate on stopping depletion of soil carbon through land management through economic measures (carrots and sticks) ahead of investing in raising soil C. There are plenty of GHG emission reduction opportunities in agriculture that are far further down the cost curve than significant sequestering of C in soil on agriculturally productive land.
Biochar and Dairy systems there may be far better systems of returning cattle manure to land than biochar. If you mean taking land to grow a crop just to pyrolise for biochar – no, better just leave that land as semi natural regeneration giving water quality, habitat and soil carbon benefits.

Trevor October 7, 2011 at 10:01 pm

I don’t pretend to be an expert on soil science but from what I’ve read, the decline in agriculture based soil carbon relates to current fundamental agriculture practices (tillage, NPK, etc). Maybe this is more applicable to other agriculture – not NZ pasture farming? Is it possible to maintain our current productivity and intensive farming without reducing carbon? Can you describe the low cost GHG emission reduction opportunities and carbon management opportunities that you are prescribing?

Scientists are describing carbon sequestration and emission reduction opportunities with biochar. Like other sunrise industries, its currently to expensive to consider for broad application but NZ pastoral farming should be chasing this opportunity (along with the ‘low hanging fruit’ you hint at, above).

Dairy manure may not be the preferred biomass for biochar on the dairy farm. Low cost home, farm and community scale pyrolysis technologies are rapidly developing that can process any dry waste biomass.

Coppicing for pyrolysis/biochar should not be dismissed – it offers us opportunities on marginal land for soil improvement, carbon sequestration and RE solutions.

Beaker October 8, 2011 at 12:08 am

Hi Trevor. Cultivating land is a sure-fire way of mobilising the soil carbon. This was one of the early advantages of ploughing land up because the mobilised OM released a flush of nutrients. Intensive Dairy pastures are also ploughed and reseeded – and I understand that NZ agriscience is at the cutting edge of forage genetics (including mixes that can reduce cattle enteric GHG emissions). There are alternatives to ploughing. Minimum tillage is better for soil OM retention. It tends to rely on herbicides for weed and volunteer control, but their embodied energy costs can be more than offset by the reduced tractor diesel alone.
From what I have seen of Biochar and Pyrolysis it falls into the recycle part of the ‘Reduce Reuse Recycle’ hierarchy. After reducing our waste biomass it can be returned to land (composting and sewage treatment if required). For marginal land in the vast majority of cases I think we will be far better off leaving that land alone to sequester OM, filter and attenuate water flow, provide habitat etc, than to start sweating that land for a product of uncertain benefit.
I am a big fan of Masterful Inactivity :)

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