A couple of quick notables this morning.
The first is the latest GDT auction result. It is a mix of good and bad.
The good is that the weighted average has (finally) reversed its downward trend and lifted by +1.5%. However, on the negative ledger both Whole Milk Powder (WMP) and cheddar cheese have had another fall.
For WMP fortunately, not a lot with on a -0.3% drop. This makes Skim Milk Powder now worth more which hasn’t happened for a long time (US$4,158 for WMP versus US$4,240 for SMP). Cheddars drop was a bit more substantial falling by -3.6%. This perhaps reflects the world fast food economy which is a major user of bulk cheese.
HWEN recommendations released
The other news of note today is the release of the He Waka Eke Noa Partnership recommendations for the future scheme for farm emissions.
With farm feedback already fairly well publicised there were no real surprises. However, one area that I had expected to be included was a transition period to be included where processors collected the farm levy’s first while the mechanics of the scheme got up and running. The Partnership however has chosen to go straight to on farm reporting (and collecting). Not a major issue and presumably those making the decisions have confidence that the ‘scheme’ can be progressed fast enough to meet the governments requirements.
The recommendations also include pricing going forward which takes in account the proposal to operate a ”split gas “ scheme with methane priced differently to CO2.
The HWEN scheme is expected to cost between $114 mln and $144 mln to be set it up.
Legislation will be written that will set the levy rates and prices.
Modelling on a range of price options after removing the $27 mln in annual admin cost and sequestration and incentives show:
- In 2025, at a price of 11c /kg methane and 4.25$/tonne CO2e, total levies would raise $66 mln.
- In 2030, at a price of 17c/kg methane and $13.90/tonne CO2e, total levies would raise $113 mln.
- In 2030, at a price of 35c/kg methane and $13.90/tonne CO2e, total levies would raise $304 mln.
- But the report says that if you add in interest and capital payments for the IT system, the total annual operating cost from 2027 to 2030 will be up $47 mln to administer it, and $37 mln in additional time spent by farmers on data and reporting.
- The group wants a price ceiling set so the levy rate is no more than if agriculture was put into the ETS at the massively discounted (95 percent) rate - with only a 1 percentage point increase in exposure each year.
- It also wants a maximum price for methane of no greater than $0.11/kg for the first three years of pricing (till 2028).
- Essentially, it wants its plan to be no more onerous than the backstop settings.
- A simplified version of a farm-level levy starts in 2025, transitioning to a full farm-level levy in 2027 - with the more basic version not expected to lead to lower emissions reductions.
No doubt as time passes and more analytical focus comes on this, views will emerge as to how will this will be accepted by farmers. But given DairyNZ chairman Jim van der Poel said:
- more than 2600 dairy farmers and sheep and beef farmers attended 71 HWEN events hosted by DairyNZ and Beef + Lamb New Zealand (55 in-person events and 16 online meetings)
- 99% of farmers told us they didn’t want ag priced through the ETS.
- 86% supported farm-level pricing as the final outcome of HWEN
... nay-sayers will have a difficult task convincing the powers that be they have it wrong.
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38 Comments
From what I hear, it is not this reduction and pricing plan that is the problem.
It is the whole concept that animal methane is a problem.
One hears various comments about "it's a closed cycle" and is in steady state (as animal numbers are not increasing) that is not increasing atmospheric methane and hence not causing additional warming.
Or "The methane is produced from the grass which has removed CO2 during its growth and that dung is adding to carbon stored in the soil"
I have yet to read a laymans article that debunks all these various defences and lays out the justification for reducing livestock.
Leaks of fossil methane are obviously adding to methane in the atmosphere and should be reduced.
The closed cycle argument is frankly absurd. We have around 2000 parts per billion of methane in the atmosphere and this is driving about 30% of global warming. Arguing that leaving methane at these levels - i.e. happily adding methane at the same rate as it breaks down - is madness. Reducing methane concentrations in the atmosphere is now by far the quickest route to mitigating climate risk.
Are you serious? There is a stock of methane in the atmosphere. The more methane in the atmosphere the more it insulates the earth and warms it up. The size of this stock of methane depends on how much methane is pumped into the atmosphere, and how quickly that methane breaks down. So, guess what, when you go from a few hundred million low yield cattle in the early 20th century to 1.5 billion high yield (high methane) cattle in the 21st century, you get more methane in the atmosphere and more warming. Much more.
Fossil fuels produce at least as much methane as ruminants, and there's also other significant sources such as large areas of land cultivated for rice and landfills. And while there's more farmed ruminants the huge herds of wild animals that used to roam the grasslands of the world have been decimated.
It certainly suits fossil fuel companies and (aided and abetted by animal rights activists) to blame cattle for climate change, covers up their role.
https://www.abc.net.au/news/2022-06-08/coal-methane-leaks-double-offici…
Who is asking anyone to sequester any historical methane? Methane breaks down by itself in the atmosphere (thank god). We just need to stop putting more methane into the atmosphere so that the total volume reduces. NZ needs to get ahead of this quickly because reducing methane is about the only short-term thing we can do to avoid runaway warming.
Methane breaks down to CO2
Growing grass takes CO2 out of the atmosphere. Hence the "closed loop" comparisons.
The methane that cows belch comes from grass, and by extension from the atmosphere.
If farmers grow grass, but don't feed it to cattle they are effectively sequestering CO2 and carbon negative.
Putting CH4 into the atmosphere, (which breaks down to CO2 in about a decade) while taking CO2 out is not contributing to any additional warming since the initial increase decades ago. The cloud is the same size. The situation is static, otherwise known as net zero.
By comparison, any use of fossil fuels puts additional carbon into that atmosphere that was previously underground, increasing the CO2 cloud.
Asking farmers to reduce the methane cloud is to ask them to make up for fossil emissions. Reducing the size of their methane cloud is effectively sequestering carbon.
NZ stock numbers have barely increased since the 1970s
"is not contributing to any additional warming since the initial increase decades ago. The cloud is the same size. The situation is static, otherwise known as net zero"
Imagine if you were continually poisoning your well - but seepage and rainwater was keeping the level of poison about the same. Would you:
(a) Say to your family and neighbours, 'Don't worry, we are not making the well any more poisonous, the poison I am putting in the well has net zero impact on your health. Or...
(b) Stop poisoning the well?
How to demonstrate zero understanding of climate science in one short comment.
CO2 stays in the atmosphere for thousands of years - there is no going back to 2000 without massive extraction of CO2 from the atmosphere, which will take tens if not hundreds of years, and the scaling of unproven or yet to be developed technology. What we can do to give our grandkids a chance of a liveable planet, is get methane levels down quickly. The short-life span of methane makes it the obvious target - something we can reduce whilst we transition to low carbon economies.
"NZ needs to get ahead of this quickly because reducing methane is about the only short-term thing we can do to avoid runaway warming."
Remember that nothing "we" (in NZ) do will make stuff all difference to the climate. It is all about meeting international treaty obligations and sending signals to our markets.
If by "we" you mean the global population, then yes, we must reduce methane emissions.
I do mean 'we' as in the global population. Do you know that NZ is literally top of the league for historic emissions per capita - globally? Do you think we can just carry on like climate change is not a thing for us and expect other countries to trade with us and buy our stuff?
Transport are paying ETS, by having to buy carbon credits.
But again , it is not productive to argue what happened in the past , and who is the worst polluter.
The fact is, reducing methane emission is the fastest way to reduce global warming.
While its good the farm groups have decided on the method, the amounts and time frames are very disappointing. Its possibly a bargaining starting point , but i don't think the govt is in the mood for it . I see a big stick coming.
This is a stupid scheme and is merely more virtue signaling by this Government. It will make no difference to the climate, but act as another drag on farming in NZ, ultimately reducing the standard of living of all New Zealanders. Methane produced by ruminants is part of a closed cycle which adds no new carbon to the atmosphere. With livestock numbers declining, atmospheric methane levels derived from ruminants here are also declining and so we are already at below net zero. To tax methane in this situation is ridiculous. The analogy of so called biofuels also derive from a closed cycle, and it is hypercritical to tax methane in one situation, and not the CO2 produced by the biofuels.
I have many issues with this scheme. My main gripe is this whole climate change thing has become a big political money go round for the people in Wellington to ride around on and feel pleased with themselves for doing something, But still no reduction is greenhouse gasses being released and no clear plan that will result in a meaningful reduction.
A number alarmists I see trying to screw NZ dairy and beef into the ground. If at all, a maximum of 0.5% methane reduction per year for 50years based on the 2017 methane levels and then re-assess if any further needed. By that time the increase in average temperature will be known rather than some fanciful number arrived at by models now.
Not quite sure why they are even bothering presenting this as an answer to not going into ETS. A middle finger would suffice as the cuts and payments are insignificant. I guess just playing the game.
But then I don't see biological methane as the real problem either, it just appears as lo w hanging fruit to allow it the CO2 from FF to continue to flow.
All along I've thought about the only way to really be effective is to take the hit, make sure of the 2030 reduction then look to the likes of Jfoe and his argument and say balls in your court son.
Then sit back and see the excuses rain.
Front foot opportunity missed.
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