At times I despair at the GHG debate in New Zealand. There are multiple teams firing firecrackers masquerading as missiles into the debate, thereby creating noise but little substance.
Here my focus is on the agricultural gases, methane and nitrous oxide, for which the Government has recently released a discussion paper outlining its preferred pathway for taxing agricultural emissions. The discussion paper also asks questions and seeks responses as to the specifics of the plan.
This latest Government paper has created outrage within the rural industries. The Government must surely score a zero for the way in which its messaging has been managed. Quite simply, the Government stuffed up mightily in relation to the messaging that it put around the proposals, and has been shocked by the consequent reaction.
The key message received by the sheep and beef industry is that they will carry the main burden with 20 percent loss of production, perhaps by 2030, and with profitability damaged greatly for those who survive.
Agriculture Minister Damien O’Connor has said that the 20 percent figure is based on just one set of assumptions and he does not think the industry interpretations of the report are correct. This illustrates the extent of the communication foul-up.
Ironically, the Government proposals align closely with the He Waka Eke Noa (HWEN) proposals put forward by the rural industries. The two important aspects where Government demurred were the specifics of how sequestration rules could be improved and who would be responsible for emission-pricing decisions.
The Government proposals contain constructive elements relating to sequestration and how existing weaknesses could be addressed. I have been arguing for such proposals for many months but industry partners had told me it would not happen. Well, the Government has indicated a clear willingness to move, which is a significant win for farmers. However, this was all lost in the noise created by the messaging stuff-up.
The key modelling paper that Government relied upon within their overarching messaging is what I have described to colleagues as the most incoherent Government modelling paper I have ever seen. One of my friends, who has extensive experience of interaction within the Government bureaucracy on these and related matter, described that paper to me as a ‘castle built on a cloud’. I like that description.
This key modelling paper was prepared by staff from Landcare Research using assumptions provided by MPI. It contains approximately 120 pages of detail from which the correct big-picture never emerges. The scientists who wrote the paper, the MPI folk who provided the modelling assumptions, and the officials who then organised the material for the Cabinet paper, may all be able to claim they did their job faithfully. However, the outcome is a total mess. This is what happens when there are lots of ‘details people’ in the mix but no ‘big-picture integrator’ conducting the orchestra.
I pondered whether I would try within this article to explain more about the Landcare Research paper that derailed the Government messaging but my initial attempts led only to my own despair. It wasn’t possible to unscramble the egg.
Over the last year, I have written many articles about various aspects of greenhouse-gas issues and I have received lots of nice comments about the understandings I have been trying to communicate. However, I have also upset some leaders and perhaps others within the rural industries.
For example, although I have supported an HWEN split-gas structure as much preferable to agriculture being within the Emission Trading Scheme (ETS), I have also been forthright in identifying fundamental flaws within HWEN. Some of the industry partners have not liked that.
The reality is that the HWEN documents were shaped by 11 industry partners who were at odds among themselves. In among all of the horse-trading, they lost sight of fundamental principles. Some of the industry partners have not taken kindly to having HWEN deficiencies pointed out and there have been some interesting phone calls.
I have also come in for criticism from some farmers who think that agriculture should not have to account at all for its emissions. Ironically, some of these people have used a limited understanding of what the science does and does not say to then suggest that people with different perspectives to their own are ignorant. That makes for a hard policy environment in which to move forward.
It is not only the rural industries that are struggling to put forward coherent policies. There is diversity of view on both sides of politics, and the level of understanding in both major parties is not high.
In finding a path forward for Aotearoa New Zealand, the starting point has to be to find overarching points of agreement. My own perspective is that there are two overarching principles on which, with some perseverance, it should be possible to achieve consensus, if not unanimity, across both major political parties and also within rural industries.
The first principle is that primary industries in general and pastoral industries in particular are fundamental to New Zealand’s economic wellbeing.
This principle rests on the reality that primary industries comprise more than 80 percent of New Zealand’s physical export earnings. Pastoral industries make up some 50 percent of these total export earnings. In terms of how New Zealand will pay for all of the imports that it needs, there is nowhere else to go.
It is more than forty years since the sun was supposedly first setting on New Zealand’s agricultural industries, but that same sun keeps popping up again and that is just as well. It makes perfect sense to those who understand the principles of both comparative advantage at a country level, and competitive advantage at the level of individual firms and industries.
Let me also put to rest the notion that New Zealand agriculture will ever shift to being predominantly crop-based. For anyone who understands the climate, the topography, and the soils of Aotearoa New Zealand, that notion is ridiculous. Nature designed New Zealand to be a land of trees and grasslands, not crops. The percentage of New Zealand soils with the climate, topography and inherent fertility to support a crop-based agriculture is very small.
The second overarching principle is that New Zealand does have international commitments to do whatever it can to reduce its greenhouse-gas emissions. These commitments cannot be ignored. But that does not mean that New Zealand has to be the first country to destroy its most important export-earning industries.
No other country in the world is considering going down a self-destruction path for mainstream industries that underpin that nation’s fundamental economic well-being. It is not happening and it is not going to happen elsewhere in the world.
If we can reach a consensus on the above two principles, which is not quite the same as requiring unanimity, then there is a pathway ahead towards good economic and greenhouse-gas policy.
Entry to the path requires acknowledgement that agriculture needs a focused programme of RDE&E (research, development, extension and education) that reduces the emission intensity of pastoral products. The levies on agriculture should be no more than is required to fund that program.
In discussions with HWEN partners and also some people close to Government, I have found there is agreement that this should be the path forward. Yet remarkably, this is not laid out anywhere within either the HWEN documents or the Government proposals as the basis both for pricing and for action.
Yes, there is mention of R&D and the recycling of levies within the industry, but there is no mention of the levy being set so as to operationalise an agreed RDE&E programme, and with this agreed programme being the driver of what the levy needs to be. Instead, Government and HWEN are at odds about who will make the levy decision rather than focussing on the principles of how the levy will be set. I have run some numbers and the levy would not need to be large.
When I started writing this article, in the back of my mind there was much more I wanted to say about the points I have made here. But that must wait for other articles. In any case, it is always best to focus first on the foundations, to make sure that the castle is not being built on a cloud.
So, can we agree that the overarching principles are that pastoral agriculture must remain vibrant and prosperous, and that we do have international commitments to do whatever we can to reduce greenhouse-gas emissions consistent with maintaining a vibrant pastoral industry? And can we agree that the journey starts with defining the RDE&E needs, and then setting a farm-based levy in relation to that agreed programme?
Speaking as an outsider, if we’re looking at first principles, I would add these two: carbon offsets and credits are licences to pollute and therefore should be banned–actual reduction at source is the only thing that achieves the outcome; and land-based reductions must be for land-based industries only. No markets, no fungibility, no prices. Law; and fix the problem, don’t band-aid it.
That first one probably sounds hopelessly idealistic to most. Well, I think the idea that carbon markets can get us where we need to be is misty-eyed faith in the power of markets, which, under ideal conditions with powerful central governments and strong rule of law, barely limp along, being fixed and patched as they continually fail. We wouldn’t need a Commerce Commission otherwise. The evidence that cap-and-trade markets work actually runs the other way, even, when you look closely, with the much-trumpeted sulfur emissions market in the US. Time to quit the BS and face reality.
The second principle follows from the first. If your transport pollutes, fix your transport, don’t grow trees or pay someone in a far-off country who promises to grow trees for you. Likewise, if you’re using too much nitrogen on your pasture, or your milk powder plant burns coal for heat, fix that. Don’t buy offsets. Law is how we co-ordinate actions that are individually costly.
Since you mention the hard realities of the macro picture, there are two other points besides soil and climate.
First, NZ is too small and too capital poor to do the R&D required. When the USA, Brazil, Argentina and/or the EU have come up with solutions, we can aim to import some of them, maybe.
Second, countries renege on their commitments all the time, without penalty in most cases. Every COP, the G7 promises hundreds of billions of financial aid to emerging economies, and the following COP it turns out that they have reneged, with maybe a token billion or two handed out–with strings. Yet no-one is penalised.
NZ is not in a position to be a leader. A fast follower is the best we can hope for. That’s the reality for a global minnow.
Sure, this might lead to tariffs or non-tariff barriers being hypocritically imposed by the large markets. We’ve had tariff and non-tariff barriers to our exports all my adult life; we’ll get by. With major meat producers being partly Chinese owned, there’ll be internal pressure in China, at least, to keep barriers low.
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