Fonterra’s new capital structure brings its own risks, designed for choppy seas but not for a storm
The Government has been wrestling for many months as to how to respond to Fonterra’s proposed new capital structure, which its farmer-members voted for overwhelmingly. The Ministry of Primary Industries, on behalf of Agriculture Minister Damien O’Connor, has now released a discussion paper indicating the Government proposed response. Essentially the Government is conceding to Fonterra’s wishes, but with some shackles proposed to constrain Fonterra‘s subsequent behaviours. Continue reading
Pine-forest regulation proposals are creating lots of heat with big implications for land-use and the landscape.
Right now, there is a fervent debate underway as to where pine trees fit within our future landscape. On one side stand Forestry Minister Stuart Nash and Climate Change Minister James Shaw. They are proposing that existing legislation should be reversed so that pine trees would only be for production forestry and not so-called permanent forests.
Minister Nash has recently come to a position that only native forests should be permanent, and he is supported by many who hold strong environmental values. Dame Anne Salmond is one of the leaders in that camp.
In contrast, Minister Shaw is concerned that if permanent pine forests are allowed, then too much carbon will be stored in this way and urban people will no longer be forced to modify their carbon emitting behaviours. There are some huge ironies there.
On the other side stand iwi groups who own large areas of steep erodible land, often far from ports, for which permanent pine forests linked to carbon farming are by far the best income earning opportunities. These forests are also an excellent solution to the erosion problems. Continue reading
Rural industry leaders are caught between unhappy farmers and unhappy ministers as they try to find a pathway through the GHG dilemma
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. Continue reading
Readers of this website will be aware that I have been supportive of the HeWaka Eke Noa (HWEN) concept as an alternative to agriculture being included in the ETS (Emission trading System). However I have been critical of what I regard as muddled thinking and poor communication of the HWEN proposals.
Accordingly, over the last ten days, I have come together with Graham Brown and Jane Smith to put together a joint submission on the path forward. This is laid out below, and also attached as a pdf.
I plan to write a further article setting out some of the challenges now facing HWEN, including managing internal tensions, together with emerging tensions between HWEN partners and Government Ministers, plus tension between HWEN and some industry groups. It is indeed a complex situation! However, that article is some days away. So here in the meantime I present the submission itself which the three of us, as well as submitting to HWEN itself, are now sharing with industry. Continue reading
More forestry upheavals are coming as the Government foreshadows big changes to the rules of the game. Sheep and beef farmers including iwi are the big prospective losers.
In 2018, the Government announced that it was moving towards a new regime for New Zealand forestry within the Emission Trading Scheme (ETS). The plans included a new so-called ‘permanent forestry’ category for introduced species, also known as exotics.
The relevant legislation was passed in 2020 with regulations subsequently added for enactment on I January 2023. Industry has been moving forward on that basis. Things are now about to be upturned.
Over the last 12 months, the Government has been getting nervous about what it had set in place. It took a while, but Government now understands what some of us understood somewhat earlier, that carbon forestry has become the most profitable game in the country. That was not what they intended. Continue reading
He Waka Eke Noa was always going to be controversial. Right now, it is in some trouble.
Four weeks have slipped by since I last wrote about the He Waka Eke Noa (HWEN) proposals for dealing with agricultural emissions of methane and nitrous oxide. During that time, DairyNZ and Beef+Lamb have been conducting roadshows around New Zealand trying to convince their members to support the HWEN proposals.
If the HWEN proposals are accepted by farmers and the Government, then this will be the framework for agriculture’s greenhouse gas (GHG) levies through to 2050. So, we have to get it right.
My assessment is that the roadshows are not going particularly well. I make that judgement in part from the flood of emails I am getting from upset farmers, but more importantly because of the fundamental flaws within the current proposals. Continue reading
There is considerable evidence that the Government plans to change the carbon-farming rules and to do so in the coming months. The big risk is that unintended consequences will dominate over intended consequences.
Forestry Minister Stuart Nash has made it clear that he does not like the idea of permanent exotic forests. In an opinion piece published in the Herald on 1 February of this year, he stated there are 1.2 million hectares of marginal pastoral lands that should be planted only in native species. He says that there is another 1.2 million hectares that is also unsuitable for pastoral farming but that is suitable for production forestry.
Minister of Agriculture Damien O’Connor states his opinion somewhat differently. On January 26 he was reported in the Herald as saying that he too disagrees with permanent exotic forests, but that it is up to famers not to sell their farms to people planning to plant forests. Instead, they should sell to those who will farm the land. Well, my experience is that this is not how markets work.
Minister Nash is convening a workshop in early March with groups described as key stakeholders. Production-forestry groups, plus Beef+Lamb, plus various local councils will be there. However, I am not convinced that there is anyone, and that includes Beef+Lamb, who truly represents the interests of the existing farmers.
The role of Beef+Lamb includes protecting the sheep and beef industries from other land-uses. In contrast, the challenge for sheep and beef farmers is to find a pathway that protects their livelihood, which is not quite the same thing. Continue reading
Refocusing agriculture’s greenhouse gas emissions from CO2e to a genuine split-gas approach requires a reset of thinking, with big decisions ahead
The coming weeks are crucial in sorting out the long-term charging framework, right through to 2050, for agriculture’s greenhouse-gas emissions. Right now, things are not going well.
The cross-industry plus Maori plus government group charged with developing the framework is called He Waka Eke Noa (HWEN). Currently, there are two options out for discussion among farmers.
If no consensus is reached as to the path ahead, then the backstop is that agriculture comes into the emission trading scheme in 2025, with that legislation already in place.
The worst outcome for agriculture would be as part of the ETS with its inherent inflexibility. Among other things, it would mean that charging for short-lived methane emissions would be based on the fundamentally flawed 100-year carbon dioxide equivalence (CO2e) figure. Carbon-dioxide equivalence is a seriously confounded measure.
I first wrote about the flaws in CO2e thinking in relation to methane more than fifteen years ago. But at the time no-one seemed very interested. Now it is a real big issue. Continue reading
NZU investors are now driving the price of carbon as they play the market
As I write this in late January 2022, the carbon price in the open market is $75, with this measured per tonne of carbon dioxide equivalent (CO2e). That is an increase of just over 10 percent since the last auction of units by the Government less than two months ago in December 2021. It is also 95 percent higher than the price of carbon this time last year.
The most recent 10 percent increase may not sound much. But the fact that the market price has now breached $70 is significant. It means that there is a developing consensus among players in the carbon market that, at the next auction on 16 March, the Government’s seven million NZU cost-containment reserve for all of 2022 will be exhausted.
If the reserve is exhausted in March, it is likely to be onwards and upwards from there for the carbon price, with three further auctions in 2022 unconstrained by any cost-containment reserve. Continue reading
This year is not going to be just any year for the food and fibre industries. On the prices front, things should go well for most products. However, on the policy front, it is the second year of the three-year political cycle, and that has implications.
This is the year when key implementation decisions must be made on multiple political issues. It is all about setting up the glide path for the next election.
For the food and fibre industries, and this includes carbon farming, these key decisions have potential to determine the path for the next decade. I reckon there is going to be quite some heat, and I am not referring here to the weather. Continue reading