He Waka Eke Noa caught in crosswinds

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.

My assessment is that there is some sort of consensus emerging that HWEN, rather than the Emission Trading Scheme (ETS), is the way to go, although there are dissenters even to that. However, there is great unhappiness, and with good reason, in relation to the specific proposals.

The dissenters to HWEN who say ‘chuck it out’ tend to be people who would like to throw a figurative grenade into the overall process of levying agriculture for its GHG levies. Well, they are unlikely to succeed.  One way or another, agriculture is going to be levied.

Like it or not, all major political parties recognise that New Zealand has to do something to live up to the principles that it signed up to in 2015 at the ‘Paris Agreement’. So, one way or another, New Zealand agriculture is going to be included in an emission reduction programme. It can either be the ETS or an HWEN scheme.

I am very clear that it has to be HWEN. This is because agriculture is a total misfit within the ETS. Being in the ETS would be destructive not only for agriculture but for the New Zealand economy.

There is a lot of misinformation about the importance of agriculture within the New Zealand economy. This is in part because of the crazy way we measure the contribution to GDP of what is called ‘agriculture’.

The crazy GDP measurement system assumes that shearers are not part of agriculture. Nor are any of the contractors that supply farm-level services to farmers, such as silage contractors or crop harvesters.  Inputs such as seed and fertiliser are regarded as costs which are deducted from agricultural revenue in the calculation of GDP. Similarly, all rural professionals are excluded from agriculture’s contribution and included as part of the services sector. Fonterra and the meat companies also lie outside the sector.

Some clever Americans at Harvard University figured out way back in 1957 that the way to look at agriculture’s contribution was to look at the whole agribusiness system from inputs through to the plate. But here in New Zealand, many people are still locked into ways of thinking that go back to peasant-farming days in Europe when a large proportion of people worked on farms, and the economy could be divided into three simple categories of farm-based agriculture, manufacturing and services.

To understand the importance of the agribusiness sector, or as I often term it the ‘agrifood sector’, we have to look at the whole system from farm inputs through to the plate.

Within our current crazy system of collecting and presenting statistical information, the best way of getting an insight into the overall New Zealand agribusiness system is to look at exports. What we see is that primary sector exports, including forestry and fishing, total around $50 billion per annum. Returns have been steadily increasing and now total well over 80 percent of total exports.

Within this $50 billion, more than $30 billion comes from dairy and meat.

Quite simply, our primary industries, and particularly dairy and meat, are what underpins our whole economy. These are the products that allow us to pay for vaccines, medical equipment, pharmaceuticals, fuel, computers, vehicles and machinery.

Accordingly, New Zealand needs to think very carefully before it brings in levies that destroy our economic base.

A key element of the Paris Agreement is that although we must reduce our emissions, we must do this in a way that does not threaten food production. That is very explicit and right up-front within lines 9-11 of the substantive statements that follow immediately after the preamble and definitions.

That requirement within the Paris Agreement does not let us ‘off the hook’ from doing something about emissions, but we have to do it without shooting ourselves in the foot, or perhaps shooting into even more important organs of the body.

That leads me to a perspective that there are fundamental principles within HWEN that almost all of us should all be able to agree with. However, I am also of the view that the current HWEN proposals are somewhat of a dog’s breakfast when it comes to the specifics. A lot more work is going to be needed on those specifics to bring them into line with the fundamental principles.

So, what are the fundamental principles? There are four of them.

The first principle is that there must be a split-gas approach. Lumping things into a single-gas approach of carbon dioxide equivalence leads down a deep rabbit hole from which there is no way forward.

The second principle is that what we do must not threaten food production. That is what we signed up to in Paris. The particular value of New Zealand’s pastoral production is that it is protein rich. That also happens to be why its dollar value is high. It is what people want.

The third principle is that levies on methane and nitrous need to be channeled exclusively to researching and implementing emission-reduction technologies.  The aim is not to arbitrarily tax agriculture. Rather, the aim is to have the necessary funding for addressing our Paris commitments to reduce emissions within that framework of not threatening food production.

This principle of recycling of all levies is currently a proposal but it now needs to be locked in with Government.

The fourth principle is that HWEN needs to focus on the ‘main game’, which is methane and nitrous oxide. Anything to do with carbon sequestration should be handled within the ETS.

One of the problems with the specific proposals is that there is far too much emphasis on sequestration within HWEN. This drags things back into the mess of carbon dioxide equivalence and away from a genuine split-gas approach.

Currently there are anomalies within the ETS in relation to sequestration. Also, the bureaucracy associated with getting a lot of indigenous forestry into the ETS is destructive. But the answer to that is to sort out those anomalies and bureaucratic hurdles, not put forestry into HWEN.

Those sequestration issues in the ETS can be handled right here in New Zealand, without going anywhere else in the world seeking approval, as long as the ETS retains carbon-sequestration integrity.

In contrast, shifting aspects of sequestration across into HWEN simply means that instead of being issued with valuable NZUs, it becomes a case of robbing Peter Farmer to pay Paul Farmer, and with both Peter and Paul Farmer paying for lots of administration to make that happen.

What we now need to do is lock in those principles. That could mean Groundswell, for example, agreeing with HWEN that this is the path forward, and putting out a joint statement to that effect.

The next step is that HWEN needs to acknowledge that the current proposals are somewhat of a dog’s breakfast, although no doubt HWEN will prefer some more polite language for that. And the following stage of getting the proposals sorted out needs to be more inclusive, with less focus from HWEN in selling the specific proposals, and more on genuine ongoing consultation with leaders from groups who are currently unhappy.

The significant group of people who are outside the tent need an invitation to work with recognition from inside the tent. This would be consistent with the meaning of He Waka Eke Noa which is that ‘we are all in this together’.

One of the big things that has to happen is for HWEN to ask itself some hard questions about the amount of necessary RDE&E, with that acronym standing for research, development, extension and education, that is required for emission reduction within an industry that generates $30 billion of export income per annum. It certainly needs to be more than the current indicative figure of $10 million per annum.

It is this RDE&E, and the associated support of specific mitigation responses, that needs to be the focus of HWEN funding.

I had planned to also say something here about the various mitigation strategies that need to be focused on through RDE&E. But that will have to wait for another article.

About Keith Woodford

Keith Woodford is an independent consultant, based in New Zealand, who works internationally on agri-food systems and rural development projects. He holds honorary positions as Professor of Agri-Food Systems at Lincoln University, New Zealand, and as Senior Research Fellow at the Contemporary China Research Centre at Victoria University, Wellington.
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8 Responses to He Waka Eke Noa caught in crosswinds

  1. Paul says:

    Interesting take.
    I disagree around the detractors are ones that say Ag shouldn’t be part of GHG & climate change policy /costs.
    I also disagree that Sequestration should be out off HWEN. Intact more needs to be in it! Food producers not being able to use ETS eligible sequestration to offset their or wide sector biological GHGs flies in the face of what PCE stated in 2019.
    Further, ETS is a hard beast to work with, so many don’t. We can demonstrate how we will reduce & offset our biological emissions as a sector and product climate neutral whole food. Our marketing companies & their customers can use but the credits to go with the product (like; zero carbon milk – Fonterra, or beef – SFF).
    That is what ‘all in together means’.
    As for ‘split gas’. Really what is the point of HWEN claiming this? The gases are split anyway. If you not going to treat them differently (not use annual emission snap shots for short term GHGs), then it is a joke to claim the ‘split gas’ narrative.

    Ka mua, ka muri. We have missed a BIG step. Going from Te Taiao industry vision, straight into HWEN was a function of the wrong question being asked – How to price ag emissions’. That is an outcome, not the strategic question. Back up the train and you will fix the ‘dogs breakfast’.
    Leadership needed.

    • Keith Woodford says:

      Paul, to the extent that sequestration of carbon is in HWEN then it is simply robbing Peter Farmer to pay Paul Farmer. All of the sequestration payments in HWEN have to be paid for by other farmers.

      However, sequestration payments in ETS are paid for by society.
      The first step in making ‘split gas’ work, is to separate methane and nitrous oxide into HWEN and make sure all carbon is in the ETS.

      Once you have carbon sequestration in HWEN then immediately you are forced into some system of CO2 equivalence with all the confounding that creates.
      Keith

  2. James Morrison says:

    Keith, you quite rightly highlight in this article (and your previous one) that the issues surrounding HWEN are complex. I also understand its been a difficult process to formulate the proposals within HWEN prior to the roadshows – precisely because the issues are complex and the stakeholders each have their own interests. I think you are asserting the (apparently) mixed response to the roadshows means HWEN has to go back to the drawing board again and resume a new round of consultation? Further, that carbon sequestration needs to be taken out of HWEN (requiring that sequestration is recognised and earns ETS credits separately) and that more thought should also go into channeling the HWEN carbon levies into a much more substantial RDE&E program for emissions mitigation on-farm. Before that next round of consultation ensues, how do you propose HWEN itself is governed to better cope with the evident complexity and competing interests?

    • Keith Woodford says:

      James,
      That is a very interesting question.
      There is no doubt that there is tension among the partners.
      The most public lack of confidence comes from Fed Farmers who declined to be involved in the roadshows.
      My understanding is that there is private disquiet among at least six of the 13 partners.
      I would not necessarily argue for changing the governance.
      Rather, I think it is at the Steering Group level where there has been a lack of strategic vision. They need more intellectual firepower there. I think that is where the strategic thinkers and analysts have to be.
      Also, there has to be a willingness to listen to new ideas – the roadshows have been somewhat defensive, trying to sell the exsiting proposals rather than genuine consultation, which is of course very difficult.
      Arguably there are enough ideas floating around (not all of which are in the public arena) that there needs to be an attempt to analyse and synthesise from those ideas before further consultation. But it won’t happen without the right leadership at the steering committee.
      KeithW

  3. Jason Barrier says:

    Keith, I am one of those ‘dissenters’ who refuse to be cajoled into paying a levy on my methane when our ag methane cloud has been stable since the 1980’s and therefore has not caused additional warming since then (ignoring the 3% residual CO2 post breakdown for the moment). Happy to pay a levy on my NO however which is accumulating in the atmosphere and is warming the planet. If Minister Shaw wants me to reduce my methane output he is effect asking me to cool the planet, to offset other NZ sectors and overseas farmers who are not being asked to do the same – and therefore he should be offering me a rebate to do this rather than a punitive tax. Is that so unreasonable???

    • Keith Woodford says:

      Jason,
      Our methane emissions have been approximately stable since about 2000 but the atmospheric cloud has only reached approximate stability much more recently.

      There is a strong argument that methane should be charged at a lower rate than what comes out of the CO2e calculations, and I started saying that publicly 15 years ago.
      There are several ways that argument can be couched. One argument is that the 100 year basis captures well over 99% of the methane warming but only a modest amount of the CO2 warming. Another way of couching the argument (which I could not make 15 years ago, because it was not true at that time) is that the Aotearoa New Zealand’s agriculturally-sourced methane cloud is not growing, so taking both our past and current emissions into account, then the net effect is that no further net warming is occurring from this source.
      These are strong arguments, and I have been making those arguments.

      However, there is also another perspective. It is also true that each methane molecule emitted leads to a warmer world than would be the case if that methane molecule was not emitted. So, given that we cannot stop using fossil fuels immediately, then the likelihood is that the world is going to get warmer, albeit to an extent that is contestable. So, there is an argument that we should be doing our utmost to reduce emissions from all sources.

      Another way of saying this is that just because we were emitting lots of methane 20 years ago, does not provide a justification for continuing to emit it now.

      There is of course, also the counter argument that our Paris commitment is not only to reduce emissions but to not threaten food production.

      My own perspective that we can reduce methane emissions somewhat without threatening food production and without threatening the agricultural sector. And if we get our As into gear there is nothing too frightening about a 10 percent reduction by 2030. All it needs is a good RDE&E programme.

      One of the great things about both agricultural production efficiency and also a reduction in methane intensity is that they actually go together. As we make agriculture more efficient with less feed required per unit of output, then our emission intensity also drops. And this is what we have been doing for the last 20 years (or more).

      One of the ways we have done this for sheep is by reducing the ‘maternal overhead’. This occurs by increasing lambing percentage and by increasing slaughter weights of lambs relative to ewe liveweights. With dairy, it occurs by increasing kg milksolids production per kg of cow liveweight. And with beef it occurs by raising increasing numbers of surplus calves from the dairy industry.

      You might note that my argument for methane is that the size of the levy should be determined by what is required to run a RDE&E programme and to fund mitigation strategies as necessary. it should not be seen as a tax.
      KeithW

  4. Jason Barrier says:

    Keith

    Thanks for a very detailed and thoughtful answer. The figures I am aware of “A Note on Methane Emissions from Livestock:– Andy Reisinger(2018)” show gross methane emissions from NZ livestock appearing to peak in the late 1980’s, You are right however, in pointing out that there is a lag of some years until the methane cloud itself becomes ‘approximately stable’. I agree with many of your thoughts above but I still maintain that it is foolhardy for NZ, a country heavily dependent on exports of milk and meat to head down a solo track of restricting and (until some other technology such as a methane vaccine is proven) reducing animal numbers when the rest of the world is not doing so.
    Indeed whilst our government is vociferously demanding that NZ farmers reduce methane by 10% by 2030 and up to 47% by 2050, the recent Royal Society paper on methane https://royalsocietypublishing.org/doi/full/10.1098/rsta.2020.0452 reports that the rest of the world is on a trajectory to INCREASE livestock methane production by 30% by 2050!! Why should we be restricting and imposing costs on our own farmers when other countries (many with highly subsidized farmers) are not prepared to do this? Worse, our forging off on our own like this, is most likely to be counterproductive in arresting global warming because any reduced supply of meat and milk from NZ will simply be substituted for meat and milk from those other countries with a much higher carbon footprint and the end result of this ‘carbon leakage’ will be MORE warming. This is simply absurd. Far better to do what other countries are doing and target CO2 reductions (whilst maintaining a stable methane cloud).

    • Keith Woodford says:

      I agree that there is no sense in NZ being out front ahead of everyone else.
      Remember that although NZ-sourced agricultural methane is not increasing, global methane is increasing rather rapidly.
      KeithW

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