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.
Short-lived methane emissions from New Zealand agriculture have changed very little over the last 20 years. That means that there is now minimal growth in the invisible ‘atmospheric cloud’ of methane sourced from New Zealand agriculture, with inflows and outflows approximately in balance. That in turn means that agriculturally sourced methane from New Zealand agriculture is having very little additional warming effect on climate, despite methane being a well-acknowledged greenhouse gas.
This warming situation contrasts strongly to the situation with long-lived carbon dioxide, with new emissions piling up in the atmosphere on top of prior emissions which are only leaving the atmosphere very slowly.
The alternative HWEN proposals take a split-gas approach. That is an important step forward that allows the short-lived and long-lived gases to be considered on their merits. But there are still lots of nasty fish-hooks out there. These include both the measurement metrics and the administration of the system.
There are some who say that methane should not be charged at all. However, the counter to that is that methane is indeed a powerful greenhouse gas. If New Zealand’s methane emissions were to decrease, then with all other things being unchanged, the world would cool, albeit by a tiny amount, given that the world is big and New Zealand is small.
There are also a lot of people, including it would seem Minister of Climate Change James Shaw, who remain wedded to the confounded CO2e framework.
The consequence of thought diversity is that it is very hard to have constructive conversations about these matters. Most people seem confident that their own perspective is the only correct one.
I first wrote in broad terms about the HWEN proposals back in late November 2021. I then planned to sit back on the side-lines and watch the shouting and stone throwing that I knew would occur between the protagonists. I had no particular wish to get caught in the middle.
However, I now find myself increasingly drawn into discussions by farmers and farmer groups as to whether any of the proposals are satisfactory. As things stand, the answer is that neither of the HWEN options, nor the ETS backstop, is acceptable to most of the interested parties.
Among the more rational thinkers, this then leads inevitably to questions as to what can be done to improve the proposals?
In these discussions, I consistently hold to the position that being in the ETS is the worst outcome of all. In the long term, it would do great damage to the land-based industries, with small pain initially but then increasing inexorably over time. The damage would not only be to agriculture but to the overall New Zealand economy.
I have said multiple times before, but I can see that I will have to remind some non-rural people again, that primary industries provide more than 80 percent of New Zealand’s export income. Pastoral exports alone now comprise 50 percent of exports. There is nothing on the horizon to replace the pastoral exports.
Many urban folk do not comprehend that New Zealand’s pastoral soils are in general highly unsuited to cropping. It won’t happen for the simple reason that it would be both an ecological and economic disaster.
If agriculture does enter the ETS, then levies will be collected by processors per unit of production. This would mean that all producers pay an emission charge based on the average efficiency, with no incentive to be more efficient.
Within the ETS system, and with the levy applied at the processor level but inevitably charged back to farmers, the only response behaviour that reduces the levy is by producing less product. That means less export income.
The HWEN proposals provide an alternative framework that has potential to shift the focus from reducing output to encouraging production systems that reduce the intensity of greenhouse-gas emissions per unit of output. But for that to be achieved, there has to be a major focus on research and development (R&D) programs that can unlock those improvements, with this knowledge then flowing through to extension and education programs. The levies on methane and nitrous oxide are the funding tool to make all of this happen.
When the HWEN draft proposals came out in November 2021, I was cautiously optimistic that this was indeed the key focus. However, with more details now available in the latest draft dated February 2022, which extends to 50 pages, warning bells are ringing strongly.
I note that only a very small proportion of the levies are now proposed to be used for emission-efficiency research. A large proportion of the levies will be taken up by administration. The other major use of the levies will be sequestration payments for carbon-storing activities that are currently excluded from the ETS.
Most forestry activities that sequester new carbon are already in the ETS and this is the place they belong. However, there are some components of forestry, for example related to riparian plantings, that are excluded. Also, some of the rules relating to regenerating indigenous vegetation need amendment. However, such changes should be occurring within the ETS rather than dragging these issues across into the HWEN proposals. HWEN should be for agriculture.
Minister James Shaw has indicated in recent days that he does not think the HWEN proposals go far enough in reducing agricultural emissions. That is because he is focusing on the so-called direct effects whereby farmers would reduce production. The reason that the direct effects of levies are expected at least initially to be small is that most farmers have no alternative to pastoral activities.
What the modelling shows is that pricing is not the way to solve the emissions problem and get the change that is needed. Environmental regulations plus emission- efficiency research, together with afforestation of the steep erodible soils within the carbon-based ETS, is the way to go.
Perhaps Minister Shaw and others need to be reminded that the Paris Agreement which New Zealand signed up to is very explicit that greenhouse-gas policies should not be at the expense of food production. Accordingly, there is a need to refocus on what can be done to increase the emission efficiency of pastoral production and thereby reduce emissions.
Research into technologies and systems to reduce the emissions intensity of agricultural production is an issue very close to my heart. I am astounded that HWEN could now be proposing an indicative R&D allocation for emissions efficiency of only $10 million per annum for the pastoral industry that earns $30 billion of export earnings. This level of proposed R&D is indeed trivial. And that means that HWEN, linked at least in part to internal tensions within its members, has lost the plot.
The message back to HWEN needs to be that there is strong support for a split-gas approach. However, a reset of thinking is now required to focus on the amount of money that is needed and can be spent productively on R&D. All parties to HWEN and also Minister Shaw need to be reminded that the aim is to reduce emissions, not production. A fundamental principle is that the levies, both on methane and nitrous oxide, need to be no more than is required to achieve those reductions.
Getting the HWEN proposals back on track is not going to be easy. Given the multiplicity of parties involved, together with the diversity of thinking both within HWEN itself, and also between HWEN and Minister Shaw, there is no easy way forward.
Increasingly I am of the perspective that this is not going to get sorted out before the next election. All of the key political parties therefore have some work to do.
Posts from Keith Woodford 
Thanks Keith. It still amazes me that the split gas approach is not strongly advocated by all of the pastoral countries like New Zealand and Ireland worldwide. I guess there are no votes to be gained by James Shaw in (rightly or wrongly) protecting agriculture. In addition, he’ll be long gone before the real downsides of the demise of pastoral agriculture are evident in the New Zealand economy.
It also still frustrates me that emmissions associated with food production are allocated to the producing country but emmissions associated with the fossil fuel industry are alliocated to the using country, i.e. New Zealand gets whacked for the entirety it’s meat & milk emmissions even though 90%+ ends up overseas AND it’s oil and gas emissions, even though 90%+ is imported!
David,
New Zealand, Ireland and Uruguay are the three countries that come to mind as having high animal-sourced methane emissions relative to the overall size of their economy. And the issue is even more important to us than it is for Ireland and Uruguay. Nobody else has their overall economic foundations threatened by the issue. In my opinion, both the politicians and the general populace lack understanding of the issues. And our farming institutions like B+L and DairyNZ have not been able to enunciate the key issues with sufficient clarity. Sitting on the sidelines, it is all rather frustrating
KeithW
Hi Keith. “The consequence of thought diversity is that it is very hard to have constructive conversations about these matters.” This is an incorrect statement. Thought diversity is essential (as any good Board Director knows) as part of the process of getting to good decisions. What is lacking is 1/ effective Chairing (moderation) of discussion (political leadership) 2/ Many participants unwilling to see others point of view either due to simply being dogmatic (as you note), confused or lacking intellectual horsepower to think these difficult issues through. It is my observation that in this covidized and somewhat fearful (especially in NZ) world many people just do not have the energy to put into this long term nationally (if not globally) strategic conversation. Cheers
Vincent, I agree that thought diversity is important. I could have worded it much better. It is the tribalism within society, and the false thinking that one’s own perspectives are the only valid way of thinking, that is problematic. This also links to people ‘knowing the answer’ and then organising information, often sub-consciously, to fit that answer. Just yesterday, when I was talking to a journalist about carbon farming and permanent exotic forests, who was looking for simple answers, I said that ‘if you think there are simple solutions then you don’t understand the problem’. Most of the thorny issues involve trade-offs between conflicting objectives. One of the challenges of my own career has been that perspectives outside the current mainstream of thinking on an issue are not often welcomed. People like the certainty of ‘knowing’ that they are right.
Keith
Keith – good article. As a farmer, I am more than happy to pay for my contribution to warming (CO2, NO), so long as other sectors (power gen, transport, steel manufacture etc) do so at the same rate.. However… I am not willing to pay a tax on my methane emissions if they are in balance with my prior emissions breaking down and therefore not causing any warming. I believe farmers should be insisting on 2 fundamental principles before agreeing to any pricing mechanism:
1. No methane warming = No methane tax
2. Account for the whole equation, not part of it – by including our on-farm sequestration. Sheep and Beef farmers have approx. 1.4M has of native vegetation on our farms and we get zero credit for the huge sequestration derived from that.
Once these two things are acknowledged by govt. and properly accounted for – we can all move forward with increasing emission efficiency etc.
I agree with you Jason but can I add something. I think that it’s more important that ruminant industries in other countries are taxed equally rather than CO2/methane emitters in other industries in New Zealand. If steel has to pay for emmissions but the Australian ruminant industry doesn’t have to pay, it will hamstring New Zealand farmers severely. Therin lies the problem with this. If a government somewhere is climate change denying or just wants to give their industry an easy ride it makes it really difficult for New Zealand farmers.
Also, I agree in principle about sequestration but the more I read and hear from scientists without an axe to grind about the complications of measurem,ent and the transient nature of sequestered C, it is mighty difficult to get a true figure that you can hang your hat on.
Good points David.
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Fantastic article Keith – prior to reading this I had not fully understood the argument for split-gas accounting
I think a good way to explain the fundamental difference between methane and carbon dioxide emissions is to imagine what would happen if we could zero out one but not the other:
– If we could zero out methane emissions then we would see a one-time drop in the global temperature, but after that the earth would continue warming due to the ongoing carbon dioxide emissions.
– By contrast, if we could zero out carbon dioxide emissions then global warming would stop, even with the ongoing methane emissions, as long as the rate of methane emissions did not increase beyond what it is today.
On this basis, the ‘usual’ way of equating the gases…
one tonne of methane emissions = 28 tonnes of carbon dioxide emissions
… is fundamentally flawed as you say. But it seems like the CO2e measure could be modified to become valid:
a one tonne INCREASE in methane emissions = 28 tonnes of carbon dioxide emissions
(I just did a search around for info on this, and it looks like a bunch of scientists have proposed exactly this, though in a more rigorous and mathematical way: https://www.nature.com/articles/s41612-021-00226-2)
On this basis, it seems that a farmer who reduced their methane emissions from a total of 10 tonnes last year to 9 tonnes this year (e.g. by switching to an alternative cattle feed) could reasonably claim 28 tonnes worth of carbon credits (NZUs).
If you agree with this line of thinking, then perhaps the ETS is a suitable framework for handling short-lived gas emissions, as long as the definition of CO2e is amended to reflect changes in emissions, rather than absolute emissions? (Although measurement + admin for this level of methane accounting could be tricky – perhaps that is why you prefer HWEN?)
Jamie
Yes, this is the way the GWP* metric works.
There are several challenges.
The first one is to make it work at the farm level, you need 20 years of historical records for the farm.
And then what happens when a farm changes hands? And does a farm with low emissions sell for less because the new owner is constrained by the historically low emissions. In contrast, a farm that has been emitting a lot is worth a lot more to the new owner!
The GWP* metric has received quite some publicity in NZ because of our unique profile with methane being particularly important to us. And so some farmers like it without actually understanding the fish hooks. But the rest of the world has close to zero awareness about GWP* as a metric so it lacks international credibility.
What we always need to remember is that the aim is to reduce emissions, and the charges are simply a way to get there. So we have to find a way to reward farmers who mitigate emission intensity per unit of of their product and penalise farmers who have high emission intensity per unit of product. That is where we are trying to get to with HWEN but the quality of thinking within the HWEN team has not always been of high standard. It is a complex issue and a lot more work is needed. One of the challenges is that some of the people within HWEN do not take kindly when fundamental flaws are pointed out. It hurts their egos and they tend to become defensive. And those who are outside the tent think they are not being listened to.
KeithW
Hi Keith,
Thanks for your reply and for introducing me to the GWP-star metric – that does seem like a good way to go with agriculture.
You raise some good points about the challenges. A couple of thoughts…
The nice thing about embracing a GWP* accounting approach for methane emissions is that, if we start it from today (rather than going back 20 years), then there is no need to penalize farmers for what they are already doing. They can carry on exactly as they are, methane concentrations will stay the same, and the earth will not warm up anymore. BUT farmers who are able to find ways to reduce their methane emissions (and cool the planet) could pick up a financial reward in return (e.g. 28 NZUs for 1 tonne of reduced CH4 emissions). And anyone who increases their emissions (warms the planet) will need to pay the cost. This seems like a great way to incentivize positive outcomes.
Regarding your point about historical activity affecting new owners: these sorts of issue are also present with forestry in the ETS. Land that happened to already be forested in 1990 is worth less than land that happened to be bare at that time. This is viewed as an unfortunate irritation in the ETS (and an area where future improvements could perhaps be made), but it was not a fundamental stumbling block to getting the scheme up and running.
Final thought… If ultimately we need to reach a state where high-emission activities are not happening in NZ, then would it be so bad to have a ‘gold rush’ on buying high emission properties / businesses and converting them to low-emission operations? Lots of things that seem crazy or even ‘perverse’ by traditional standards are less so when the environmental costs are factored in…
Jamie,
A key problem with GWP* (there are multiple problems) is that 20 years of farm-specific data is required to apply it at the farm level. And we need it for each farm if farmers are to be rewarded according to the GWP* principles as to whether their own specific sourced cloud in the atmosphere is increasing or decreasing.
Under what ever system is used, a farmer whose animals emit less methane than previously will also be levied less than previously, but NZUs can only be issued if a farmer is actually sequestering carbon.
KeithW