Self-interested, myopic hot-air

AtomHeartMother.jpgNew Zealand’s farming leadership have not distinguished themselves in the debate about climate policy. Federated Farmers president Don Nicholson has called for NZ to set no target for emissions reductions and for agriculture to be excluded from the emissions trading scheme, and former vice-president Frank Brenmuhl is still ruminating on the need for more debate on basics:

Political expediency has ensured the scientific debate has been reduced to a battle between believers and deniers.

No prizes for guessing Brenmuhl’s position… It gives me great pleasure, therefore, to point to an excellent analysis of agriculture’s role in the ETS by Adolf Stroombergen at Infometrics. He is scathing of Federated Farmers:

Once again we hear Federated Farmers bleating about the potential burden placed on them by an emissions trading scheme, proclaiming that farmers are doing all they can to reduce greenhouse gas emissions. Hence any carbon charge on agriculture would be pointless. Rubbish.

Stroombergen doesn’t mince his words:

Arguing that agriculture should not be part of this mechanism has as much merit as arguing that it should not pay ACC premiums linked to its accident rate, or that it should not face fines for polluting waterways.

Merit has seldom been a key feature of Federated Farmer’s arguments about emissions policy, but Stroombergen notes that:

The self-interested myopic hot air from some in the agricultural sector has fortunately been given little credence.

Perhaps Nicholson and Brenmuhl haven’t got the ear of the right people in the National Party. We should all be grateful for that.

38 thoughts on “Self-interested, myopic hot-air”

  1. Maybe he should read the conclusions and recommendations from his own regulatory impact assessment!

    “9. If the aim of climate change mitigation policies is to change producers’ behaviour, it is vital to be able to measure emissions in a cost effective manner. If the transaction costs of measuring emissions outweigh the benefits of emissions reduction, the policy may not be net welfare enhancing. Therefore the transaction costs of implementing an all-sectors all-gases ETS need to be evaluated. It may be advisable to exempt sectors such as agriculture where measurement costs are high relative to the benefit that would be gained from that sector’s inclusion. Our modelling suggests that, in the short term, such exemptions do not reduce economy wide welfare.

    10. On balance, our recommendation in the short run is to introduce an ETS with free allocation to competitiveness-at-risk sectors, with agriculture excluded if measurement of its emissions is prohibitively expensive. Free allocation should be output-linked and phased out as our competitors adopt carbon pricing. If agriculture is initially excluded it should be transitioned into the ETS, with free allocation if required, as measurement becomes economic.”

    Select Committee Report:

    “For the agriculture sector, placing the point of obligation at the farm level—the direct source of emissions—would provide the best incentive to reduce emissions. However, there are currently practical and administrative impediments to requiring individual farmers to measure and report their emissions. It is therefore desirable for the point of obligation to initially be set at the processor level, which would place obligations on only a small number of firms. The price impacts are likely to be passed through to farmers.”

    Note they said the price impacts and not the behavior change signals.

    So, if the aim of the ETS ‘is to change producers behaviour’ farming shouldn’t be in. If the aim is to pass on the Kyoto cost (2008-2012) there is a case. What is the aim of an ETS Gareth?

    Under the purpose statement of the ETS:
    ” Purpose
    (1) The purpose of this Act is to—
    (a) enable New Zealand to meet its international obligations under the Convention and the Protocol, including (but not limited to)—
    (i) its obligation under Article 3.1 of the Protocol to retire Kyoto units equal to the number of tonnes of carbon dioxide equivalent of human-induced greenhouse gases emitted from the sources listed in Annex A of the Protocol in New Zealand in the first commitment period; and
    (ii) its obligation to report to the Conference of the Parties via the Secretariat under Article 7 of the Protocol and Article 12 of the Convention:
    (b) provide for the implementation, operation, and administration of a greenhouse gas emissions trading scheme in New Zealand that supports and encourages global efforts to reduce greenhouse gas emissions by assisting New Zealand to meet its international obligations under the Convention and the Protocol, and by reducing New Zealand’s net emissions below business-as-usual levels.”

    So we have two purposes in the Act itself, including farming can only address one of these purposes – therefore it shouldn’t be in.

    1. Nonsense, R2. The section of the NZIER/Infometrics report commissioned by Nick Smith that refers to agriculture was just “bolted on” and is not based on any analysis presented in the report. It looks as though it was put there (perhaps by NZIER, to judge by Stroombergen’s article) to please the minister.
      The select committee report makes an interesting point about the point of obligation, but that does not mean that emissions reductions signals will not be sent to farmers. If a processor (meat, dairy etc) has to bear the cost of emissions, they will develop ways to send that signal to their suppliers. Fonterra, for instance, could reward farms who use nitrification inhibitors or take steps to manage emissions from manure — it’s in their interest to reduce the emissions load they have to account for.
      In theory, it’s better to have farm-level point of obligation because that allows each farmer to take direct responsibility for emissions under their local circumstances, and as Stroombergen points out, our farmers are easily smart enough to do that. On the other hand, measurement difficulties and the administrative burden might be make it difficult it implement.
      Any ETS has to address both the Kyoto and subsequent obligations and should be a major tool (but not the only one) to implement the desired long term emissions trajectory. The government’s proposed amendments fail on both scores. Stroombergen’s points on agriculture are quite correct: from both the perspective of farmers (who will find early cuts far easier to make than later big ones), and from taxpayers, who will otherwise be subsidising our biggest emitters.

      1. “Nonsense, R2. The section of the NZIER/Infometrics report commissioned by Nick Smith that refers to agriculture was just “bolted on” and is not based on any analysis presented in the report. It looks as though it was put there (perhaps by NZIER, to judge by Stroombergen’s article) to please the minister.”

        What basis do you have for this claim? ie the Minister was interfering with the report? Thats libel otherwise. This was supposed to be an independent report.

        Yes the equilibrium model did not look at sectoral effects, but that does not mean the report did not.

        The economic analysis said ‘If’ the costs of measurement are high, and ‘if’ the aim is to reduce emissions. It did not say they were, because the model did not look at this, as you say, but the report still advised that “Therefore the transaction costs of implementing an all-sectors all-gases ETS need to be evaluated”, which has still not been done.

        You are confused between what the report looked at and what the model looked at.

        “Objectives of this Report: This report examines the macroeconomic effects of policy options for climate change mitigation in New Zealand.”

        That does not mean they are limited to quantitative assessment. It is within their rights and expertise to provide qualitative assessment as they have done here. Because you do not agree with it you claim it is ‘bolted-on’, but the truth is it is the expert opinion of some of New Zealand’s leading economists.

        It is not the output of a model, which in previous posts you have not approved of either. You simply dismiss analysis that you do not agree with. The conclusion is decided, the method for you is to find the evidence that agrees with it.

        “If a processor (meat, dairy etc) has to bear the cost of emissions, they will develop ways to send that signal to their suppliers. Fonterra, for instance, could reward farms who use nitrification inhibitors”

        But how does Fonterra pay for emissions? The point is to reduce measurement costs – so I presume all meat and dairy processors emissions are not measured at the farm level.

        I presume the answer is, the government decides an emissions factor for milk, and different meats, and then applies this to processors of milk and meat.

        Your example works OK for Fonterra because it is more or less a monopoly.

        But apply it to Westlands, Tatua or OCC (3 of the other processors) (or the meat industry). If they reward farmers for reducing emissions how do they prove that their milk is less emissions intensive than other milk? Unless the government surveys all their farms?

        The explanatory note outlines 3 factors that need to be proven for an on-farm point of obligation. These are:
        – the ability to enforce compliance
        – the costs including administrative and compliance costs
        – the benefits in terms of additional mitigation

        How is a the government surveying farms to ensure they have done what the processor says reducing administration costs? Increasing mitigation over an on-farm PoO? Easing compliance?

        No all your model does is transfer some of the cost of compliance onto the processor, while still in practice being an on-farm PoO. But the Government’s administration costs aren’t really any lower, there is just another level of costs.

        My guess is that a processor point of obligation will mean a single national emissions factor for milk. And that all processors pay the same amount per litre of milk, effectively being a tax that only goes to covering NZ’s Kyoto liability.

        As both the purposes of the ETS are not covered agriculture should not be in the ETS. If you really wanted to cover the liability you could implement a low level carbon charge (which is effectively what happens with intensity allocations on a emissions factor run processor point of obligation I guess).

        1. My word, what a lot of guesswork! Or perhaps more accurately, straw men to rail against…

          My views on the NZIER/Infometrics report are entirely consistent with what I wrote when it was released back in June. The reference you are placing so much emphasis on is a very small part of the report, apparently conjured out of thin air. There is no supporting analysis. That’s not expert comment, as I said at the time, because the “experts” were happy to ignore the many factors they couldn’t model, as well the true technological and international context for their modelling.

          But they did say that a broad-based domestic carbon pricing scheme is the least cost way to meet New Zealand’s international obligations. In this case, broad-based cannot be taken to exclude agriculture, and that is Stroombergen’s key point.

          The rest of your comment is simply fact-free speculation designed to bolster your (poor) argument for keeping agriculture out of the ETS. A fair amount of work has already been done on how to send an emissions reduction signal down to farm level – in many respects it’s no different to applying supply chain quality control standards, and that’s something that most farmers are familiar with. (Fonterra, for instance, has to be able to track milk back to individual farms in order to provide traceability for contamination problems and to track payment levels). These can easily be made regional – what works in Northland may well be inappropriate in Southland, and vice versa. If Southland is the region with lowest emissions per kg of milk solids, then farmers there could well receive higher payouts – thus encouraging production to shift to those areas best suited to emissions reductions. That’s good for the farmer, Fonterra, the NZ taxpayer, and ultimately the atmosphere. And if it means a shift away from dairying in some regions towards other, lower carbon, crops then that will also be a good thing. There are plenty of land use options available…

  2. “The reference you are placing so much emphasis on is a very small part of the report”

    That comment is false. The report gave 10 ‘Conclusions and Recommendations’. I referenced number 9 and 10.

    The tenth point was in bold in the report and starts with “On balance, our recommendation is..”

    The fact that you do not interpret this as a significant part of the report is strange and alarming.

    “apparently conjured out of thin air”

    No. These are expert economists. Any recommendation is based on years of work and dedicated research in the area.

    This is again an example of Gareth double-think. In this article he places weight on the opinion of Adolf Stroombergen, but does not accept the recommendation of the report because it is only opinion and “plucked of thin air”.

    No the reason you don’t accept it is because it does not fit your world view. You apply different logic to different events based on your preconceived conclusion.

    1. But you can’t trust what economists say, because they are paid to say it. After all, they’d be out of a job if they didn’t say what the politicians want to hear.

      1. CTG, I agree you shouldn’t ‘trust’ what anyone says. You should think for yourself and draw on the opinion to aid your own thought (ie this report raises good points that have got us thinking).

        In this case the recommendation makes perfect economic sense to me, so I value the opinion (it does not matter who paid, but rather what is said). Why include ag in an ets if the cost of measurement out weighs the likely mitigation?
        Why include ag in an ETS but then target production instead of emissions removing all behaviour signals?

        And regardless, they were paid but given independence. Do you not trust the independence of select committee research?

    2. I was referring to the NZIER/Infometrics report, not the ETS Review. The committee had a much better basis for its comments, having heard from interested parties.

      “Expert economists” who expressly exclude key features of the emissions regime such as forestry? The NZIER/I report was an exercise in economic modelling, not policy design, and useless as a means of informing the latter. I would also suggest that if using “expert judgement” in a report to government, they should at least justify that judgement. There is no such justification in the report.

      You are correct in assuming that I “prefer” the point of view expressed by Stroombergen. That is because I find his economic analysis of emissions policy a great deal more useful and relevant than that of Federated Farmers. No double think involved. And my view in that respect has been consistent. You can check that by re-reading my book.

      1. Again incorrect and moving the goal posts.

        “I was referring to the NZIER/Infometrics report, not the ETS Review”

        Here is the report:

        Read the conclusions and recommendations, my comments are there. Next time read the report properly before telling me I am drawing on an inconsequential part of it.

        “That is because I find his economic analysis of emissions policy a great deal more useful and relevant than that of Federated Farmers.”

        I never said anything about FedFarmsers. The opinion you claimed was ‘bolted on’ and disregarded was from the RIA (ie Stroombergen, Schilling and Ballingall). My you have confused yourself.

        I have read the start of your book and did not find it told me anything I had not already read before. Maybe when you show you have read the RIA I will read your whole book.

        1. First of all, the NZIER/I report is not a “regulatory impact analysis”, it’s an economic modelling exercise designed to reconcile the divergent views of an NZIER study (done for big emitters in 2008) which found economic costs of an ETS to be very high (which is why Hide loved to quote from it), and the modelling done for Treasury by Infometircs, which found the costs to be low. The reports recommendations re measurement and transaction costs (point 9) could be taken to be “expert judgement” (and not terribly controversial), but the mention of a possible delayed entry for agriculture “if measurement of its emissions is prohibitively expensive” is not supported by any discussion in the report of the expense of measuring emissions.

          Before you impugn my reading of the report, you might make sure you understand it yourself…

          1. I understand the report don’t worry.

            You were the one that said I was drawing from an inconsequential part and then getting confused and thinking the recommendations were from the Select Committee report.

            Can you send me the link to where you got your info on why the regulatory impact assessment report was commissioned?

            I thought it was due to the committee’s terms of reference #3 reading: “require a high quality, quantified regulatory impact analysis to be produced to identify the net benefits or costs to New Zealand of any policy action, including international relations and commercial benefits and costs”

            but maybe I am wrong and you are right, so please post the link.

            If it was to address this term of reference of the committee as I thought then it makes sense for the authors to give recommendations that get behind the model. Ie the model assumes costs are felt where the behavior signal is so therefore they need make a conclusion “on balance” that recognises both the qualitative and quantitative assessment.

            1. You can do your own research: I’d Google here, and also look for a Herald news report sometime in April, from memory. You may also recall that the ACT minority report attached to the ETS review report bitched about the lack of a proper RIA. But perhaps you haven’t read that… 😉

  3. The second part of your comment is also flawed.

    You have yet again moved the goalposts Gareth. Now, Fonterra is not going to measure on-farm emissions but only estimate regional emissions. But you still claim I am wrong and you are right. Even though you are agreeing with what I said.

    How is this going to incentivise N inhibitor use? If a regional average cost is applied?

    Of course my comment is speculation, we don’t yet know how an on-farm point of obligation will be implemented. But we do know how it may work under certain models.

    I never said Ag should be given a free ride ride. I only said an ETS does not work for ag unless emissions can be measured. A processor point of obligation is a tax, so why not implement a tax??

    An ETS aims to incentivise behavior change that will result in the investment in the lowest cost mitigation. A processor point of obligation is a tax that will, like you have said, only move production (within New Zealand and to outside NZ).

    1. No goalposts were moved in the writing of my comment. I was not attempting to be prescriptive, merely pointing out that there were plenty of avenues that can be explored to make a processor level PO send the right signals to farmers.

      And ag emissions can be measured — are being measured — on all sorts of scales, from farm level up. Bear in mind that much of the emissions resulting from the production of a kilo of milk solids are due to transport and processing and are already measured. Fonterra’s already done the work on carbon footprinting, and has just signed up to an international effort to take that further. See here and here.

      A well-designed ETS, whatever the PO for agriculture, should drive least-cost mitigation. That’s a plus. It might also prompt land use change. That’s also a plus. It won’t drive our farms overseas, however. It’s difficult to ship land…

      1. If ag emissions are measured on farm why not have the point of obligation on farm?? This contridicts the select committee report. You are going around in circles.

        Much of the emissions are not agricultural and already measured. Well yes, and those enter next year and the point of obligation will be with the diesel importer, coal miner, gas supplier etc – which makes perfect sense. Only ag emissions are being talked about here – CH4 and N2O

        “It’s difficult to ship land”

        This shows a strong lack of understanding. Let me try and educate you.

        How much a farmer produces is dependent on the farm gate payment per kg of milk solids. If they receive $8 a kg they will invest in feed pads and buy supplementary feed, increasing production per cow, they will also increase stocking rates as they can.

        When the price falls these things are less economical. Production will decrease. Some intensive farmers may go out of business, ie the Crafers.

        If this price reduction is only felt in NZ then only NZ production will decrease. This will cause a gap in supply and increased demand felt by competitors in other nations. They will then increase supply to fill this gap.

        Big price changes are observed more easily but any increase in price will have this effect.

        Overseas farmers are often less emissions efficient and so the irony is that global emissions may rise.

        This is basic stuff, hope you understand now.

        1. No circles involved. Farm-level measurement but processor level PO might be preferred for ease of administration. There are many fewer processors than there are farmers (approx 40,000 of the latter, from memory), and I know many of my neighbours would not welcome a significant increase in paperwork.

          Before you accuse me of a “lack of understanding” you ought perhaps to think a little more deeply about the issue. Global supply and demand of course affects farmers here, but does not necessarily in other parts of the world (EU and USA, where subsidies have to be taken into account). If domestic policy here results in a decrease in — say, milk production — then it is perfectly correct to assume that some of that shortfall might be picked up by overseas producers. But that does not necessarily translate into either wealth loss for NZ farmers or increased global emissions.

  4. “But they did say that a broad-based domestic carbon pricing scheme is the least cost way to meet New Zealand’s international obligations. In this case, broad-based cannot be taken to exclude agriculture”

    Really? Is the EU ETS broad based?

    It does not contain ag, and in fact only covers 40% of emissions. We could 52% of emissions without ag.

    1. Agricultural emissions are a very small part of the overall EU emissions profile. The EU ETS was designed for their big emitters, and is not the only policy tool being used by EU governments.

      It’s important that NZ’s emissions policy drive emissions down. Excluding agriculture means that the rest of the economy has to bear the cost of all emissions reductions. It is both a subsidy to farmers, and a way to ensure that our emissions trajectory remains higher than it need be. And there are plenty of ways that farmers can respond, what ever Federated Farmers claims.

      In one respect, and one respect only, did I support the original ETS late start for agriculture, and that was the need to sort out the measurement and PO issues, which are not trivial. (And I pointed that out two years ago.)

  5. Are there really plenty of ways farmers can reduce emissions?

    Depends what kind of reductions you mean. If you mean actual emissions then I am not an expert, but if you are referring to UNFCCC reductions I think you will find there are little to none, not even nitrification inhibitors are recognised yet (although they were used in our inventory, we are awaiting acceptance).

    Emissions are calculated by stock numbers and feed intake. So the only way to reduce emissions in the eyes of the UNFCCC is to kill stock or feed them less.

    In the inventory there is a measure ‘time spent on pasture range and paddock’. So you would expect that time spent on a stand off pad would reduce emissions, however our government only looks at time spent at the milking shed because they can not prove and verify time spent on stand-off pads.

    The truth is that we have a VERY flawed international system, that only places a property right on some users of a global commons. Furthermore, due to emissions profiles and the ability to ‘absorb’ certain costs, emphasis is placed on agricultural production in some nations but not others.

    Inadequate international agreements should not be signed. If they are signed it is silly to then say the agricultural sector is subsidising the rest of the country because they will not pay for the silly agreement signed by the Government.

    If it decided that it is in the foreign relations interests of the nation to sign an inadequete international agreement, inadequate international law should not be reflected domestically. All members of the nations are receiving the supposed foreign relations benefits, the burden should not be placed on a few.

  6. I have been reading this and am a tad lost in your crossfire. Don’t shoot me down, I am not as au fait with all these reports but read what I can. Maybe I can give something as a farmer in situ.

    To me, the ETS is a huge concern. I accept the concept of agriculture being counted but I have concerns over the science as all the emissions have been recorded by science but none of the carbon sink opportunities (grass, crops, soil, the natural carbon cycle which has been ocurring for aeons).

    Also the Point of Obligation is crucial as it will cause anomalies. For example if it is a flat tax at the works farmers will need to increase production on farm to pay the tax. There is no incentive to spend money on mitigation/reduction as suggested. Why would a farmer spray on costly inhibitors when his neighbour doesn’t?

    We have an averagely large family farm with 20% in mixed forestry. Most of these trees are over 10 years old and there is no point in joining them into the ETS (no carbon credits we can safely sell). We won’t but some farmers may take out trees to increase production to pay an ETS tax. We don’t put on nitrogen and run an extensive (light on the land) system, but we might have to change to survive.

    The other issue is that farming cannot add these costs to its price, it is always been driven down by the auction system. Energy, fuel and all other expenses are likely to go up for us as or suppliers add their carbon related costs. We can’t. On top of that we have just experienced several droughts (climate change!) and much lower returns. It’s actually pretty difficult to see how we could come up with another $50k or more each year. The option is to sell. Usually wealthy overseas people are buying farms these days. I guess that is the real future.

    I read that the US farmers are being lauded as future carbon sinks if they change to pasture grazing. How come?

    Can you offer any suggestions for farmers who care and want to grow food? or is this all theory?

    1. No worries, no shooting involved… 😉

      There are plenty of people looking at soil carbon farming opportunities in NZ — we’ve covered it recently here (with comments from one of the key people involved).

      I don’t think anyone is proposing a “flat tax” at the works. It’s far more likely that there will be a scale of payments, with premium (ie lower carbon) production attracting better payouts. Structured properly, that could give farms the incentive to move towards lower carbon systems. And practices that encourage increased soil carbon could easily be a part of that, even if they’re not part of formal carbon trading, because it could be used as offsets for other parts of the operation.

      Can’t comment on your specific trees… not enough info (and I’m no expert), but at a high enough carbon price you might be able to leave them in the ground and cash in the credits you earn, or run them as part of the “permanent forest sink” initiative, which allows some harvesting if canopy is maintained. Again, you might even shift the balance of the farm towards more trees if the carbon price is high enough…

      The other point is that the amount of free credits being allocated to agriculture (was 90% of production before the Nats started fiddling with the ETS) means that the cost exposure is at the margin, not in the bulk of production.

    2. Thanks hay6. I will not shoot you down either (no reason to), but I will offer you a different perspective than Gareth’s.

      You have rasied a lot of issues and forgive me if I do not cover them all.

      Yes the ETS will work as a flat tax to farmers, if and when agricultural emissions enter the scheme (currently scheduled for 2015).

      At present present the point of obligation is at the processor. So if you are a meat/milk/wool producer your processor now has another cost – your emissions. They can not pass this through to customers because the world price does not have this cost, so they will pass onto farmers. Payouts will go down but no incentive to reduce emissions will be felt.

      It is true that if all farmers work together to reduce emissions this cost will go down. But free rider behavior would result until the Government measured emissions on all farms.

      Besides, there are currently no emissions reductions techniques recognised by the UNFCCC (this is the international authority) or our Government. So even if you fed you cattle/sheep a feed that would reduce emissions it would not count under the current accounting standards.

      There is also the issue of soil carbon. Government’s can opt in to measure soil carbon, but it is a risky venture until you know if it is going up or down. Our Government has not, so no farmers can recieve credits at present for soil carbon.

      Although the US is planning on crediting farmers for soil carbon it is not a clean cut mechanism. In reality when carbon is sequestered in the soil there is always the risk that it will re-enter the atmosphere at some stage, say for example if there is a drought or if farming practices change.

      In the proposed US system once the carbon is the ground for 5 years it is thought of as permanent sequestration. This is logically flawed – the US will allow people to offset carbon emitted into the atmosphere that is hundreds of millions of years old by trapping carbon in the soil for five years.

      If New Zealand allowed soil carbon credits it is unlikely the same system would result. It is likely that farmers would be required to pay back soil carbon credits if the carbon re-entered the atmosphere. I have been advised by a MAF scientist that soil carbon will always reach a maximum where it is difficult to further increase (ie the soil reaches equilibrium). So then the prospect becomes a lot less attractive, farmers can only receive credits for a short period of time while carbon is rising but will carry a risk of loss of soil carbon.

      The issue with grass etc adding to the soil carbon is also complicated.

      If the soil on your farm is in equilibrium, and therefore the ‘carbon dioxide budget’ is neutral, there are two ways agriculture is thought to contribute to global warming,

      First, ruminants convert some CO2 to methane (CH4). This methane will revert back to CO2 after 8.5 years, but in the meantime it has a much higher radiative (warming) force than CO2.

      Second, ruminants convert nitrogen in grass to amonia in urine, this amonia can then oxidise to N2O, (keep in mind people do this as well!) a high value greenhouse gas (290 times stronger than CO2), and also long life greenhouse gas (there is a smaller amount of N2O that oxidises directly from fertiliser).

      One of the problems with including agriculture in the scheme is that it may actually increase global emissions by doing so. New Zealand farmers are very efficient due to not receiving subsidies. This also translates into emissions efficiency – we produce less emissions per unit of output than our competitors. No other nation has included agricultural emissions in an ETS. No other nation charges farmers for agricultural emissions. The atmosphere is a global commons, The NZ govt can only place a property right on some emitters. By limiting NZ ag but not overseas ag, overseas ag production increases. This will likely result in increased global emissions.

      This is all a result of the flawed Kyoto Protocol. This places obligations on some nations but not others. What is needed is a global sector by sector approach. For example – all cement manufacturers set industry benchmarks for emissions and agree to pay for emissions over that level one year. The following year all aliminum producers do the same. Then another industry, and another.

      This way there is no competitive advantage given to some nations and production remains in the most efficient location.

      Anyway this is long enough now, let me know if you have further questions. 🙂

      1. 1: There is no reason to believe that farmers will face a “flat tax”, because wherever the point of obligation, producers will have an incentive (in a properly designed ETS) to reduce their emissions. In any event, with 90% credits available free of charge, the gross cost to agriculture will be small.

        2: Any “free riders” in the scheme will be dealt with at the point of obligation, not by government running around measuring everyone.

        3: Export customers are already looking for carbon labelling (see Tesco initiative in the UK), so farms that demonstrate lower carbon will have a competitive advantage – not a disadvantage.

        4: Any change of farming practice (away from dairying, for instance) does not mean there will be a loss of income to NZ because farmers will move (where possible) to equivalent value crops. It’s worth noting that at some of the carbon prices that were used by the NZIER/govt/lobbyists to generate scary costs to frighten the public forestry would be so profitable that no-one would bother to do anything else.

        5: The impact on global emissions of any land use change in NZ would be so small as to be meaningless.

        6: The world is moving towards pricing the cost of carbon. One way or another, that will happen. The exact form may vary, but there will be international carbon trading, and low carbon products will have an advantage. Far from being penalised by that future, NZ stands to benefit enormously, precisely because we’re good at producing agricultural.

        7. Sectoral targets are very unlikely to form the basis of international action. There is too much already invested in emissions trading for that to be credible.

        Otherwise, what I said in my first comment still stands. Better advice than R2, anyway… 😉

        1. Claiming you are right does not make it so.

          OK, one point at a time.

          Point 1: Flat tax

          Fonterra “The assessment of emissions at an individual
          farm level will be required to recognise the individual use of mitigation technologies”

          Meat and Wool, Meat Industry Association

          “It is the very strongly held view of M&WNZ and MIA, and others in the agricultural industry, that any trading scheme for agriculture will not be efficacious and transparent in promoting direct incentives to pursue innovation, technology and emissions efficiency relating to on-farm GHG emissions if meat processors and fertiliser manufacturers / importers are the participants responsible for on-farm emissions.”

          “Another option that has been advocated by various government departments is a hybrid model that incorporates farm and processor level options and information. M&WNZ and MIA’s view is that it is not practical to implement a hybrid model apart from on a very small scale as a pilot for farm level.”

          Fed Farmers (I know you don’t like them Gareth but they do know a thing or two about this)
          “The end result under a processor as point of obligation
          is that any efforts undertaken on-farm, any distinctions between producers, would be averaged out on a per kg of product basis. This is effectively a flat tax. One has to ask where the incentive for behaviour change can be found in a situation like that.”

          1. All you’re doing is making my point for me. A properly designed system will send the right incentives down to farm level. A bad one won’t. So let’s not design a bad one…

            As I’ve said before, about the only good reason for delaying agriculture’s entry to the ETS is the need to sort out this sort of issue. But it is not, and will never be a sufficient reason to keep agriculture out of the ETS in the long term.

            1. OK, so just to complete the circle, if a properly designed ETS is prohibitively expensive, does it make sense to implement a poor ETS?

  7. All members of the nations are receiving the supposed foreign relations benefits, the burden should not be placed on a few.

    Which is precisely why an all-sectors, all gases ETS is good for NZ! 😉

    Phew. It’s taken all afternoon, but R2 has finally managed to argue himself round in a complete circle…

  8. Maybe its time we considered a different type of land use. NZs present form of agriculture is very inefficient from a energy input to energy output consideration – and lets face it – we are merely producing for the rich. As a “breadbasket” for the world (which many of our farmers think they are)- our current production is way below what we could produce if we stopped thinking that everyone wanted dairy and beef. Let’s face it – the majority of people in the world don’t have a diet of dairy and beef or mutton for that matter. We could produce far more food with far less emissions if we chose a different form of primary production.

      1. Its not the countries R2 that we sell to – its the RICH in those countries who can afford our produce that we sell to. And it will always be so, for dairying by its very nature is a high end product – it takes one cow to produce 280kg of Milk Solids per year (on average). That’s less than 1kg of MS per day. It can be boosted to about 400kg per year – but that requires special management etc etc. The average in the mid 90’s was 280 kg over NZ. Depending on how much fertilizer etc you pour on the land there are about 3 cows per hectare in NZ on a typical dairy farm. A hectare of land receives on average 1.64 Megawatts of energy per day. That’s one hell of a lot of energy (roughly 550kW per cow) going into producing grass for 3 cows to convert into less than 3 kgs of milk solid. Milk is a product for the RICH R2, and always will be. It’s going to get even more expensive when all the real costs of production are taken into account.

  9. This is what I’m going on about R2
    “Planet into ecological overdraft: overshoot day 2009 was Sept 25th, world expected to consume 40% more than sustainable” the top tweet
    While the rich will continue to consume our product – and I for one enjoy it as much if not more than any NZer – the fact is that as a human population we are living well beyond our means. Essentially though it is the well off in all countries who must come to realise that they cannot continue to be as profilgate with the Earth’s limited resources as they are at present.Now I know that according to Classical neoliberal Economic theory growth is infinite – but I’m sorry – that is just NOT SO! And any one who opens their eyes can see that it is the case. Eg Titanium, and other rare elements used in LCDs etc – running out.

    1. Thomas Malthus predicted catastrophe due to unsustainable growth in 1798, this is nothing new. People have been predicting the end of the world since we can remember but they are yet to be right.

      1. Malthus himself did not predict “the end of the world”. What he said was that population growth was exponential, whereas resource growth was linear, and that therefore population growth would at some point exceed the ability of resources to support it. He said that “positive checks”, i.e. disease, famine etc, would then reduce the population back to subsistence level, i.e. at the resource limit, not all the way back to zero.

        This is represented in today’s population models by the logistic function, where exponential growth is tempered by the carrying capacity.

        But yes, plenty of other people have predicted the end of the world and have been wrong.

  10. Sorry, coming very late to this, but if NZ ring-fences farming from ETS, how to make a commitment of 20% reductions by 2020? This is a 40% reduction below current levels. Because half of emissions are in farming, if you dont create sinks, then this means 80% reduction in non-farming section – in 11 years (and assumes farming will emissions constant). Making big strides in getting rid of fossil fuel from electricity and direct home/industrial use is indeed possible but 25% of our emissions are from transport. An 80% reduction in the amount of fuel used for transport in 11 years? This is NOT going to happen. We cant electrify transport that fast. So we have to look to sinks. 1 million ha of new kyoto forestry would make it feasible I think. Is this going to happen? If farmers start paying for emissions, then this will make dairying less attractive and forestry look a better. Farming has to in.

    1. These are all very good questions to ask the Minister Responsible for Climate Change Issues. Because the obvious answers at the moment are that to make the “10-20%” reduction, credits will need to be purchased on the world market, out of the public purse.

      However unless the National Government is going to propose stealing Kyoto credits from foresters without a sale (ie, counting forestation as credits but not paying the foresters for them), foresters could simply bank the credits until the intellectual tide in government is back in and they can be sold at market rates. As forestry assets have a much longer maturation date, this might work – should the appropriate investors be convinced…

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