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.
A pathway for improving the quality of the He Waka Eke Noa proposals
A submission to He Waka Eke Noa
Authored by: Keith Woodford, Graham Brown and Jane Smith
Keith Woodford Managing Director, AgriFood Systems Ltd. Email: email@example.com
Graham Brown Business consultant and farm accountant Email: Graham.Brown@brownglass.co.nz
Jane Smith Farmer and environmental advocate. Email: firstname.lastname@example.org
We are three people working outside of the He Waka Eke Noa (HWEN) system but closely engaged with rural matters as rural professionals and in one case also directly involved in farming. We have come together to write this submission because of a mutual concern that the He Waka Eke Noa (HWEN) documents are seriously flawed and that there is major distrust within important segments of the agricultural sector. Our purpose is to constructively influence the reworking of those documents.
Our approach has been to first take note of the HWEN terms of reference, recognising that fundamental policy aspects of climate change are the responsibility of Government and the Climate Change Commission, and not of HWEN. Therefore, our starting point is to note the specific targets of 10% reduction in methane emissions by 2030 and a minimum reduction of 24% in methane emissions by 2050.
Without in any way endorsing those targets, we accept that it is the framework within which HWEN must currently work, unless or until there is a subsequent change in Government policy. Accordingly, although debates about those targets are important, and clearly relate to the context in which HWEN must operate, they lie outside the bounds of this submission.
Similarly, we acknowledge that Government has made a commitment that all long-life greenhouse gasses net of carbon sequestration must reach zero by 2050, but without stated specifics as to the balance between nitrous oxide emissions, carbon dioxide emissions and carbon sequestration. As with the methane targets, we do not endorse those targets. Rather, we simply note that the target setting and possible modification of those long-life GHGs targets lies outside the terms of reference for HWEN and hence of this submission.
We consider that a significant contributing factor leading to the inadequacies of the current HWEN documents and consequent controversy has been the poor understanding within New Zealand society, including the rural community, of the underlying science associated with short and long-lived gases, together with poor understanding of the commitments that New Zealand has made to the United Nations through the UNFCCC. This includes the commitment to take actions “in a manner that does not that threaten food production” as per Article 2 of the Paris Convention. We acknowledge that it is not the duty of HWEN per se to educate the New Zealand public on these matters. However, it is an important duty of individual partners within HWEN, acting either individually or collectively on behalf of their members, to engage proactively on these issues.
Accordingly, we emphasise that the HWEN partners acting either individually or collectively or both, do have a major responsibility to educate society in relation to:
(a) the scientific rationale for a split-gas approach,
(b) the necessity for New Zealand to undertake emission reduction strategies within the context of not threatening food production, as laid out in Article 2 of the Paris Convention, and
(c) the importance to the New Zealand economy of the agri-food sector.
In parallel with this, HWEN partners must recognise that currently there is huge distrust and associated confusion within broad segments of the agriculture sector in relation to the HWEN proposals. Weaknesses within the HWEN documentation and associated communications have exacerbated that situation. Accordingly, relevant HWEN partners must now take direct responsibility to correct that situation. This is a large responsibility and requires a new approach. The current risk is that agriculture will end up within the ETS where it will be taxed on the flawed basis of CO2 equivalence linked to GWP100e, rather than on a split-gas basis.
Following this introductory section, there are two separate parts to this document. The first part hereafter sets out what we consider to be the fundamental guiding principles. The second section lays out more specific issues that must be considered in operationalising the principles.
We contend that the fundamental guiding principles set out below should not be controversial as the logic thereof is soundly based. However, we also contend that the current HWEN documents have drifted badly from these principles. Accordingly, the more specific issues outlined in the second part of the hereafter document are aimed at ensuring that the overall process gets back on track.
The Guiding Principles
1. At a high level, we strongly support HWEN rather than the ETS as being the path forward for agriculture in relation to reducing methane and nitrous oxide emissions.
2. A commitment to the principle of split-gas levies is fundamental to our support.
3. Our support for HWEN reflects a conditionality that recycling of all levies will occur within the agriculture sector, including recognition by HWEN that this will need to be ‘locked in’ with Government.
4. We note that the Paris Agreement commits New Zealand to reducing emissions but doing so without “threatening food production” [Article 2, lines 9-11]. There are no caveats within the Paris Agreement to this requirement.[See https://unfccc.int/sites/default/files/english_paris_agreement.pdf%5D.
5. We note that a direct consequence of the Paris Agreement is that Aotearoa New Zealand must focus on reductions in emission intensity rather than reducing food output from what is currently pastoral land.
6. Consistent with the split-gas approach, we contend that HWEN should focus solely on methane and nitrous oxide. There are issues relating to each of these gases that need to be considered carefully and separately.
7. In contrast, we recommend that carbon issues are best handled within the ETS and that all genuine carbon sequestration needs to be within the ETS. This too is consistent with the split-gas approach and avoids the inherent flaws of CO2 equivalence.
8. Given various anomalies and bureaucratic hurdles affecting registration in the ETS in relation to some aspects of genuine carbon sequestration, we note that resolution of those issues is likely to require representations to Government by both the partners to HWEN and other industry groups, so as to ensure all significant categories of genuine carbon sequestration are operationalised within the ETS.
9. We state strongly that the purpose within HWEN of greenhouse gas levies on methane and nitrous oxide must not be perceived as an attempt to tax agriculture. Rather, the purpose is to provide the financial resources required to fund the necessary research, development, extension and education (RDE&E) relating to methane and nitrous oxide mitigation strategies, plus funding as appropriate for the implementation of these mitigation strategies. Accordingly, the scale of the levies will be determined by need, and not by any false alignment to carbon within the ETS.
10. We consider the name ‘He Waka Eke Noa’, which means that ‘we are all in this together’, to be highly appropriate. It captures the essence that there is a need for all relevant parties to be listened to and respected as we now move forward. To date, this has been problematic.
11. Given the significant flaws within the current proposals, and as we all move forward, there will need to be careful analysis and cross checking to ensure there is no drift from the above principles.
12. There needs to be clear separation between scheme-level administration costs and administration costs borne by farmers. Scheme costs must be estimated in dollars. In contrast, farmers can estimate their own burden of information documentation once they know precisely what is required of them.
Some more specific issues
1. The focus on carbon sequestration within HWEN is fundamentally flawed.
2. Including sequestration within HWEN provides no overall benefits to the agricultural sector and incurs considerable costs. It means that sequestration payments to farmers are carried by other farmers rather than by society. In essence it requires Peter Farmer to be levied to pay Paul Farmer for Paul Farmer’s carbon sequestration, whereas it is all of society that benefits from this.
3. There will be considerable administration costs within HWEN associated with documenting sequestration and the administration thereof. This means that the more that sequestration is included in HWEN, with associated administration thereof, then the worse the overall sector will be from inclusion of carbon sequestration. It is a negative-sum game.
4. We emphasise that there is no logical reason why all genuine sequestration cannot to be included in the ETS. The sector has an important role to play in advocating for the removal of various bureaucratic anomalies within the ETS.
5. The failure to advise farmers that sequestration payments within HWEN will have to be funded through taxing of other farmers has been a major flaw within existing HWEN documents.
6. Accordingly, we emphasise that HWEN should be for methane and nitrous oxide, with all carbon sequestration occurring through the ETS.
7. HWEN documents have got lost in the detail and have drifted away from the fundamental principles. The purpose is not to tax agriculture or to generate taxation income. We emphasise that the purpose of HWEN is to generate RDE&E strategies that can reduce emission intensity and thereby reduce overall emissions, and where necessary to fund mitigation strategies. It is the emission reduction that is important.
8. A refocusing on this basis will lead to modest levies. Success will be measured by the reduction in emission intensities and hence the reduction on overall emissions of methane and nitrous oxide, with the overall reductions for each gas measured and reported separately in absolute and percentage terms, using units of methane and units of nitrous oxide.
9. There has been inadequate focus on nitrous oxide within HWEN. Although nitrous oxide is a long-lived gas, it has an atmospheric residency of approximately 120 years which is considerably less than the mainstream scientific perspective on the residency time of carbon dioxide. As with methane, the focus with nitrous oxide has to be not on taxing per se, but on providing the financial resources to fund the necessary RDE&E, together with funding of specific mitigation strategies where this is necessary to facilitate adoption of specific nitrous oxide emission reduction strategies. This means decoupling the nitrous oxide levy rate within HWEN from carbon dioxide levies within the ETS.
10. Increasing emphasis must be give to an administration system that is efficient. Rigorous externally audited cost-benefit analysis of funding decisions and allocations is essential.
11. Flaws within the current HWEN documents demonstrate the need for HWEN to be open to bringing in additional expertise from outside of the current HWEN team. This includes people with capacity for clear strategic thinking combined with a deep understanding of the agriculture sector, and a capacity to provide independent assessment of operational rules in terms of operational efficiency, equity and alignment to the guiding principles.