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.