He Waka Eke Noa is now the main game in rural politics

 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.

Elsewhere, there is the rest of society, largely oblivious to what is going on. If they have an opinion, it is largely that agriculture must pay its way, but also largely operating in blissful ignorance as to how their own well-being is so dependent on primary-industry exports.

The so-called consultation period between HWEN and farmers is now over. I say so-called, because it was largely a selling exercise. However, in among all of the disquiet, the meetings with some 2000 farmers who turned up the ‘roadshows’, out of about 23,000 commercial pastoral farmers across the country, did indicate a strong preference for farm-based levies that captured the specifics of each farm rather than processor-based levies. The caveat to that was acceptance by many that a hybrid system combining processor and farm-based levies might be necessary initially.

As the consultation period was coming to an end, Climate Change Minister James Shaw and Agriculture Minister Damien O’Connor called a meeting with HWEN industry partners. That meeting was not public, but the drumbeats coming though on the gale from Wellington were more than a little critical of DairyNZ and Beef+Lamb.

Perhaps influenced by their officials, the ministers indicated big concerns at an emerging consensus that each farm should be levied based on its own specific emissions. Their fear is that getting this in place will delay implementation of the levies, and any such delay is politically not acceptable to them.

Subsequently, the HWEN partners have decided to continue working on a farm-level scheme. But to get it across the line they will have to do a much better job of designing the system and then convincing Government that their plans are administratively feasible.

Early in March, I became involved in trying to bring together Groundswell with DairyNZ and Beef+ Lamb. I did so because I was asked to do so. My rural readers at least will recognise that Groundswell has had a strong voice over the last twelve months, led by farmers who feel disaffected over a multiplicity of issues.

For a while, I was hopeful of some success in bringing the various parties together. My modest optimism arose from all parties apparently agreeing on fundamental principles within HWEN that included a split-gas approach combined with all levy revenue being used within the sector.

I also knew that the Government was open to proposals developed on that basis.  That had been stated in public, despite no doubt some diverse views within Cabinet and Caucus. Some of the dissident groups had failed to recognise the foundation that this provided, albeit with a lot further work needed.

Alas, my initial optimism, albeit cautious, was misplaced. The level of mistrust between the disaffected farmers in Groundswell and the mainstream industry groups was too great.

Then in mid-March I got together with leading Christchurch farm accountant and business mentor Graham Brown, and North Otago farmer and environmental advocate Jane Smith, to see if we could come up with a joint submission to HWEN. All three of us were supportive of HWEN as being the path forward for agriculture, but all had major reservations about the HWEN documents that HWEN was consulting on.

Writing the joint submission took about 10 days as we all had other tasks to distract us, but we came up with something that all of us thought provided a path ahead. That document has now been submitted and it has also been widely circulated within the agricultural industries.   Now we have to wait and see whether or not we have had influence.

The document itself is four pages and somewhat long to provide here. However, it is published at my own website here  and also downloadable from there as a pdf.

In essence, we are saying that there are guiding principles that seem to be generally agreed. One of these is that a split-gas approach is essential.  The second is that all levies should be used within the sector to reduce emissions.

Related to this, the scale of the levies should be determined solely by the need for relevant greenhouse gas levies for research, development, extension and education (RDE&E), together with support as necessary for initial funding of mitigation strategies.

We have also emphasised that trying to tax agriculture out of existence through punitive levies in the ETS is inconsistent with the Paris Agreement that NZ signed up to. That agreement is very explicit that climate change policies must not threaten food production.

Accordingly, we have emphasised that the path forward is to focus on RDE&E that will reduce emission intensity from each unit of pastoral production. Personally, I am confident that there are pathways to achieve these emission reductions, but we won’t get there without a concerted RDE&E programme.  I am also frustrated that the existing RDE&E policies in relation to reducing emission intensities are poorly targeted.

A key area where HWEN has drifted away from fundamental principles is by advocating for carbon sequestration within the HWEN system. Sequestration issues belong within the ETS.

It is very important within the HWEN system that there is clear delineation between each of methane, nitrous oxide and carbon.

Given that the HWEN system will impose levies on methane and nitrous oxide emissions from dairy and meat production, these levies should be solely used to develop and implement strategies that will reduce methane and nitrous oxide emissions from these same meat and dairy products.

In contrast, the ETS is already set up for carbon emissions and also carbon sequestration. This is where sequestration belongs.

Unfortunately, there are currently important sequestration anomalies within the ETS. In particular, the process for regeneration of native forests is far too bureaucratic and this needs to be addressed.  But there is no good reason why that and other anomalies cannot be sorted out as long as the sequestration is authentic.

The alternative of trying to bring these sequestration components across into HWEN is greatly flawed. If it is in HWEN, then it will be Peter Farmer being robbed to pay for Paul Farmer’s carbon sequestration, with no net benefit to the sector.  Ironically, it will also mean that this sequestration will not be included in New Zealand’s emission reductions as reported internationally to the UNFCCC.

Alas, Beef+ Lamb has got itself in a bind by saying to its sheep and beef farmer members, many of whom have sequestration projects of one type of another, that HWEN can provide them with carbon credits for these forests. What Beef+Lamb did not communicate to its members was that this would involve robbing Peter Farmer to pay Paul Farmer.

The situation has been made worse by plans to include what I call ‘rats and mice’ sequestration issues within HWEN, which will have low sequestration but high administration and auditing costs. Those costs will have to be paid jointly by all farmers through their HWEN levies.

Walking back from misguided proposals is never easy, but it has to be done.  The fundamental principle is that if sequestration is genuine it has to belong in the ETS. And if it is not genuine, then it sure does not belong in HWEN.

Another way of saying this is the fundamental principle of a split-gas approach is that levies on methane and nitrous oxide must be used to reduce emissions of methane and nitrous oxide. That is the essence of split-gas approach that gets away from all of the flaws of carbon-dioxide equivalence.

In our submission, we laid out further specific issues that HWEN needs to follow to ensure administration costs are reasonable. In essence we think that HWEN lost the plot once it started looking at the specifics of the levy system.  The staff working on the proposals need much better insights as to how an administratively simple, fair and accurate system can be made to work. Our fear is that if HWEN does not bring those with necessary insights into the tent, then the HWEN proposals are going to crash.