Moving forward with methane levies

Split-gas breaks the link to charging methane emissions based on contentious carbon dioxide equivalence. It opens the door to a levy based on research, development, extension and education (RDE&E) needs rather than simply a tax

In my last article I asked whether, in seeking a way out of the current policy mess relating to agricultural greenhouse gases, we might agree on two overarching principles.  

The first principle is that pastoral agriculture must remain vibrant and prosperous. This is essential, not because farmers have any right to a protected future, but because New Zealand’s export-led economy is highly dependent on pastoral exports.

Pastoral exports comprise approximately 50% of merchandise exports, with primary industries in total comprising approximately 80% of merchandise exports. It is in the interest of all New Zealanders that pastoral agriculture thrives.

The second principle is that we have international commitments to do whatever we can to reduce greenhouse-gas emissions consistent with maintaining that vibrant pastoral industry.  Underlying that commitment is the evidential science that methane and nitrous oxide are indeed greenhouse gases, and that each additional molecule does lead to a warmer world than if those molecules were not emitted.

I then laid out that if those principles are accepted, then the journey starts with defining the industry needs for research, development, extension and education (RDE&E) that are consistent with those principles, and then setting a farm-based levy in relation to that agreed programme. The key idea here is that in sorting out the mess, defining a focused RDE&E programme comes first.

This contrasts greatly with both HWEN and the Government proposals, where the focus is on a tax that hobbles profitability without a clear focus driven by a problem-solution strategy. 

Among many emails of strong support that I received, particularly notable were unsolicited communications from several Members of Parliament. These people hold leadership roles in both the Government itself and across the parliamentary pit in the Opposition. 

I also received unsolicited communications from influential people in Groundswell, which was no real surprise, as they had told me many months ago they would support such an approach. 

In terms of politics, Groundswell’s recent petition to Parliament containing more than 100,000 signatures, is clearly of relevance. In a political context, the days when Groundswell perspectives could be brushed aside have passed.  

As for the HWEN partners themselves, I heard nothing, but that did not surprise me. I knew that my original submission to HWEN, prepared jointly with Graham Brown and Jane Smith close on six months ago, had been forwarded at that time by the HWEN secretariat both to the steering group and also to the HWEN governance group. Supposedly it was the only one of some hundreds of submissions where the full submission got through to the top level.

The dominant response in private at that time from individual HWEN partners was that they too were in agreement with our submission on this and other key points. But alas, in all the horse trading that subsequently went on within HWEN, these fundamental principles were lost.

If I were an optimist, then consequential to the support I received I would think that the prospects of making good things happen would be strong. However, I have learned that as the old proverb says, there can be many a slip between the cup and the lip. That is particularly the case when tribal groups and parties are more skilled and attuned to fighting rather than finding a consensus pathway.

Nevertheless, still trying to be optimistic, it has struck me as worthwhile to sketch out something as to how such a scheme might work and how the benefits might be achieved. In doing that, it is important to recognise the importance of the split-gas approach which now seems to have been widely accepted by all key decision-makers.

This split-gas approach was flagged in the 2019 Climate Change Response Amendment Act as a potential alternative to the Emission Trading Scheme (ETS) pathway, but dependent on further development within HWEN. My own assessment is that in recent months any substantive opposition in Wellington to a split-gas approach for methane has faded away.

Split-gas means that methane will be charged per kg of methane, not per unit of carbon dioxide equivalence (CO2e).  What happens to the carbon dioxide price within the ETS is no longer relevant to the pricing of methane.

Consistent with this, Rod Carr in his role as Chair of the Climate Change Commission (CCC) has said publicly on multiple occasions that the issue for the CCC in advising on appropriate pricing for a methane levy has nothing to do with carbon dioxide pricing, CO2e, GWP100 or GWP*.   

From here through to 2030, the key ongoing agriculture-related task of the CCC will be to advise on whether agriculture is ‘on-track’ to reduce its 2030 methane emissions by 10%.

That 10% figure is already set down in legislation agreed to on both sides of the parliamentary pit. There is potential for reconsideration to occur in 2024, but changing the figure will be challenging.

Ironically, the key implications of ‘split-gas’ have not been fully understood within the agricultural sector itself.  Instead, many within the sector are still hung-up on CO2e thinking in relation to methane emissions.

So, how can methane be reduced by 10% by 2030 with pastoral agriculture still thriving?

The first reduction can and will come from retirement of steep erosive low-productive backcountry out of sheep and beef. There can be debate about the precise area, but there is certainly more than one million hectares that is not only low producing but is expensive to farm with high costs fighting pests and weeds.

The only reason this land is not already in production forests is that it is too distant from ports and also has high harvest costs. Its future lies in carbon farming of one type or another.

Taking this essentially uneconomic country out of pastoralism should reduce methane emissions by more than five percent.

The second opportunity to cut emissions is through the emerging Lincoln University and Ravensdown ‘ecopond technology’ to stop methane emissions from effluent ponds.  This technology is now at the level of farm-scale testing.  It has potential to reduce total dairy farm emissions by about eight percent if fully implemented, and hence total pastoral emissions by about four percent.

Further reductions will be harder to come by, with none of the hyped technologies such as vaccines, 3-NOP or seaweed extracts having a clear path to success. Breeding for low-emission sheep and cattle shows promise but my own assessment is that caveats are appropriate as to how this might play out.

Progress can also be made with more productive animals. However, this plays out rather differently as less methane per unit of output rather than less total methane. It is all about channelling more of the eaten feed into meat and milk rather than into body maintenance. Improving the ratio of output per unit of methane is key to retaining a social licence for pastoral agriculture.

In dairy this means further increasing the ratio of milk solids to liveweight. Great progress has already been made over the last 30 years but there are known pathways to further improvement, albeit needing reinforcement from RDE&E.

With sheep, the way forward is through higher lambing rates, higher carcass weights, more hogget mating and lower death rates. Of course, all of these are easier said than done.

With beef cattle the path relies on better use of surplus calves from the dairy industry.

 The next big issue is deciding who should determine the focused RDE&E program. This is not a job for the RDE&E organisations themselves. Nor is it a job for industry politicians. Rather, it has to be people who have a strong applied-science understanding of farming systems. It needs a team who can engage in robust discussion to sort the wheat from the chaff.

The reason that RDE&E organisations such as the Crown Research Institutes (CRIs) and universities cannot themselves be given these responsibilities is that these organisations are driven by the need to create and capture the funding honey-pots. The perfect outcome for these organisations is if a project keeps identifying potential at the end of a rainbow needing more and more funding to capture.

As for industry politicians, they typically lack the science underpinnings to take a lead role in determining the focused programme. However, there are individuals within industry who have insight, experience and independence, and who could be shoulder-tapped to play a shaping role within the team.

As for what this might cost, I reckon a ball-park figure for a levy might be 10c per kg of methane. That would work out at about $1.10 per sheep, about $10 per dairy cow, and an in-between figure for beef cattle. Perhaps some of it could come from existing industry R&D levies.  It would create a fund of about $100 million per annum which would go a long way in a properly focused programme as long as overseen by the right team of individuals with in-depth applied-science understandings relating to farming systems.

Well, that is enough for this article. I trust I have given people something to think about.