Big decisions are now required, both by rural industry groups and Government, following the Climate Change Commission advice on the He Waka Eke Noa proposals (HWEN). The Climate Change Commission, chaired by Rod Carr, has supported some aspects of the HWEN proposals put forward by industry, but has poured cold reality on other aspects.
Beef+Lamb and DairyNZ have responded by suggesting that it is all or nothing. However, that is not going to wash with Government. Once again, the rural industry groups have challenging decisions to make as to whether they are inside the tent or outside the tent.
First, there is a key area of agreement which needs to be celebrated. The Climate Change Commission supports the split-gas approach, with this being fundamental to keeping methane away from the Emission Trading Scheme. Given this support, the Government can now be expected to align firmly with this. But there is still a lot of hard work to be done on sorting out the pricing mechanism for methane.
The big area of disagreement between the Climate Change Commission and HWEN relates to sequestration credits for vegetation types that currently lie outside the Emission Trading Scheme. Industry wants this to be included within HWEN, whereas the Commission says this is not administratively practical.
The Commission suggests that there are much better ways to acknowledge the ecosystem benefits of some vegetation types that are not ETS-eligible. There are also some improvements for sequestration within the Emission Trading Scheme itself that could be made.
Before proceeding further, it is important to understand the respective roles of the Government, the Climate Change Commission and HWEN in terms of how we got to the present position and who is responsible for the next steps.
The underlying legislation is the 2019 Climate Change Response (Zero Carbon) Amendment Act which was signed up to by all major parties. The exception to unanimity was ACT Leader David Seymour who, at that time the only ACT member of Parliament, somehow missed the vote while otherwise distracted.
This legislation says that agriculture comes into the Emission Trading Scheme by 1 January 2025 unless acceptable alternative mechanisms can be developed by rural industry partners. That is where HWEN then came into the picture, representing 11 industry groups.
The legislation also says that methane emissions must be reduced by 10 percent by 2030.
The role of the Climate Change Commission in regard to these specific issues is not to question the 10 percent figure. Rather, the 10 percent figure is a ‘given’ within existing legislation. That is the framework within which they have to operate. Accordingly, any discussion of the 10 percent target is a discussion for another time. However, the Commission has been required to report to Government as to the readiness of the rural sector to have an HWEN system operative by I January 2025.
It is in that context that the Commission has given a tick to farm-based methane charges as being feasible, with this being assessed at the level of individual farms rather than as a processor charge.
However, the Commission has also said that trying to achieve this for sequestration is not possible within the required timeframe. Also, the HWEN sequestration proposals fail on grounds of logic, consistency, and equity.
The Commission has also said that at this stage it does not believe that the industry can be ready for farm-level assessment of nitrous oxide, and that the way forward, at least in the interim, is a charge on synthetic nitrogen applied at the processor level. I will return to that later in this article.
A key point going forward is that it is the Government that now has to make the decisions. They don’t have to accept the Climate Change Commission’s recommendations, but they are required by the legislation to explain any non-acceptance. As for HWEN, its role going forward is by invitation.
The Government is free to ignore HWEN if it wishes. Of course, that might have political ramifications at the ballot box next year, but with HWEN partners doing plenty of squabbling among themselves, that could be assessed as manageable.
So where does that take the debate?
As indicated above, the immediate response in a combined statement from both Beef+Lamb and DairyNZ was that the HWEN proposals are ‘all or nothing’. This reflects that HWEN struggled hard to get internal agreement for their current proposals. It required lots of internal political horse trading between the groups and the generation of much internal heat. The idea of negotiating something new is not appealing to them.
The ‘all or nothing’ approach is also likely to have been the attitude of the Federation of Māori Authorities (FOMA), for whom the sequestration issues are very important. However, I have not seen a public statement from them.
Alas, if these industry groups now hold to the ‘all or nothing’ position then the risk is that it will be ‘nothing’. Hopefully, a little reflection might lead to a more nuanced position. But at this stage, based on the drum beats I am hearing on the breeze, I am not hopeful.
I am told that at least some of the partners think that HWEN is in danger of self-destructing. I am told that the program office for HWEN remains in place through to the end of September but nothing has been decided beyond that time.
For much of the last six months, I have made my position known, both publicly and privately to some of the HWEN partners, that their sequestration proposals had no chance of being acceptable to the Climate Change Commission. Some of the partners acknowledged this privately but others were not open to that acknowledgement. Oh, what a mess!
I see no chance that the Government will go against the Climate Change Commission on this matter. Essentially, the Climate Change Commission is saying that trying to bring sequestration within HWEN would be shambolic. It would be a very brave Government to act in contravention to that professional advice.
One of the problems is that Beef+Lamb used the promise of sequestration benefits to keep important parts of their own fractious constituency aligned within their own tent. It is now very difficult for them to walk backwards from that. Perhaps they would prefer to go down fighting.
Ironically, the Climate Change Commission has suggested there are much better ways to get acknowledgement of the ecosystem benefits associated with vegetation types that are not currently included in the ETS. But it seems that key industry groups are not hearing.
Key challenges going forward are to make progress on the pricing of the methane levy, and to work hard on farm-level pricing for nitrous oxide. Both of these issues were poorly handled within HWEN, which got distracted from the main game by sequestration issues on which they were never going to win.
In relation to pricing, the starting point has to be acknowledgement that the whole purpose of the levy is to reduce emissions, but that this has to be done in the context of not destroying pastoral agriculture.
The way forward is surely to start by asking the question as to what are the research, development, extension and education needs (RDE&E) to achieve this. And then, what financial resources are required to achieve this? That will determine the necessary levies.
In discussions with individual partners, I received no disagreement with this approach, but with partners distracted by other issues, it did not come through into the final document.
The other vexing issue is nitrous oxide. Unfortunately, the HWEN document did not lay out with any coherency as to how farm-level assessment might occur, and hence the Climate Change Commission was justified in saying that systems could not be in place as required by 1 January 2025. However, my assessment is that the Climate Change Commission has no fundamental objection to farm-level assessment of nitrous oxide. They just need to be given evidence as to how this could be achieved.
Given the lack of coherency within the industry partners, it seems likely that it will be Government working alone that will now have to make the big decisions, with these decisions required to be made by December 2022. Given the looming implementation date in legislation of 1 January 2025 as set down in legislation, this cannot be further delayed.
Alas, I am not convinced that Government has the technical expertise within the relevant departments of Ministry of Primary Industries and Ministry for Environment to come up with the right architecture to make everything happen in an acceptable way. It is a very difficult task that they face.
*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Managing Director at AgriFood Systems Ltd. He can be contacted at kbwoodford@gmail.com Previous articles can be found at https://keithwoodford.wordpress.com.
28 Comments
The Commission suggests that there are much better ways to acknowledge the ecosystem benefits of some vegetation types that are not ETS-eligible.
Thanks for the update. Keith. I'm just wondering what these "much better ways" might be and whether the Commissioner has stated them in his response?
I'm hoping they are some sort of Payment for Ecosystem Services (PES) scheme. Many sheep and beef farmers and Māori land/forest owners do much work with native planting, wetland restoration and permanent native cover - and I can quite understand them wanting recognition and compensation for this restoration and preservation work/initiative.
Great summary, Keith. Thanks.
In simple terms, it is easier to measure an input, than a result or output. This is because of entropy, essentially. Same goes with measuring litres at the pump (clean, easy) or CO2 at the exhaust-pipe (messy, hard). So the Commission are right re nitrogen, and conceptually right generally.
Carr is carrying the load which so many - Hodgson comes to mind, English, a dynasty - dropped. And he's doing well. One of the few looking forward with clear vision. His "don't underestimate" comment to Gareth Vaughan recently, was spot on.
Climate Change Commission needs to be disbanded and let farmers farm without government interference.
CO2 does not change climates. It has a warming effect but is so miniscule, as to have no effect on our warming and cooling of the planet or as the experts like to call, climate change.
Wake up, no matter what we do the climate will warm or possibly cool as it has for millions of years.
Could do away with all "interference", I suppose, if we simply have a user-pays approach to the cost of cleaning up one's pollution - across all of society. Price in reality rather than trying to exclude it and paper over with "interference".
What could be better than user-pays, right?
The complexities of the carbon cycle will never lend themselves to a reductionist, simplistic policy fix.
As a farmer, if we accept GWP* then providing my ruminant numbers do not change (and have not since 1990) their methane does not add to global warming. So why a tax?
If stable methane is neutral, and we do not use artifical N then all that's left then is carbon emissions. Carbon credits for any demonstrable sequestration could just as well sit in an appropriately reformed ETS as HEWN.
If however methane must be priced, and that pricing is to be done without destroying pastoral agriculture, then there has to be some reward for good practice that mitigates the cost of the tax. How will the Commission's suggestion of rewarding ecosystem services - which I do support - be any more practical than HWEN's suggestion of recognising sequestration by the 2025 deadline?
I personally think that what is sacrosanct to the powers that be is our NDC commitment to the International Community. For this to compute we then have to revert back to GWP100 (gets a nice 28*CO2 eq multiple) and chop some heads off or plant more trees (same fate for resulting stock surplus). Bugger our balance of payments and bugger those rural livelihoods that used to be enjoyed.
As a farmer, if we accept GWP* then providing my ruminant numbers do not change (and have not since 1990) their methane does not add to global warming. So why a tax?
As I understand it, where we have intensified the most since 1990 is in land converted to dairy - much of which has had to be irrigated (and heavily fertilised) in order to do so.
Seems to me that it could be that S&B (hill country) activities perhaps need to be differentiated from intensive land-use agricultural activities, particularly if one can provide evidence of ruminant stocking levels on a particular land parcel as being unchanged since 1990. Not sure whether such evidence/records would exist in many locations/properties though.
Seems to me that would complicate the legislation and audit of the scheme to a degree that would make it uneconomic .
Perhaps a better way would be to have the government scheme , where all is equal, then have a voluntary scheme to audit credits outside the Hwen.
Something similar to Carboncrop for trees , (ignoring the jury is out on wether their system is legit), allowing credit for such things as pest control , wetlands, shelterbelt trees, and other activities that are carbon positive , but not recognised by the government . These are traded outside the government scheme , most likely sold overseas.
Tahinz farm in Northland is another example of scientists thinking outside the square,
Then I could say if I use the same amount of petrol / diesel as I did in 1990 , there should be no carbon tax on the fuel I use. But there is, and has been for quite a while now.
1990 is a line in the sand. Its not like things were ok before that . I visited a farm last week that had a mid sized block of cypress trees planted. The owner thought he planted them around 22 years ago . He wasn't aware that he potentially had a sizable amount of carbon credits claimable , if planted less than 23 years ago . (he didnt want to mill them as he now lives beside them, i told him to seek the advice of a consultant , rather than listen to my amateur ramblings).
I agree there need to be carrots for doing the right thing. Bigger sticks and bigger carrots is they way i think it should go .
As i understand it, methane converts to Co2 after around 12 years. but in those 12 years it has a greater warming effect than Co2. i did not mean to imply they were the same, but the point is both contribute to global warming , so both need to be reduced. how much we produced of each before 1990 to me is irrelevant, it is simply a starting point to measure from. Maybe they won't calculate Methane from 1990 , who knows.
To me personally , if i plant a tree today , that is soaking up carbon that would otherwise be added to the atmosphere from my fossil fuel use. ideally reducing my fossil fuel use is a better outcome , which is harder to achieve in the short term . I am not sure how i decide on the number of cows i have, i'm more interested in farming them in as environmentally sustainable way as i can . But there is a mortgage to pay , and a fulltime job and family that are my main time consumers.
The difference is that the methane from ruminants is formed from atmospheric CO2. Carbon dioxide is removed from the atmosphere by plants which are then those fed to ruminants who convert it to methane which breaks down to carbon dioxide. That process provides a one off boost to the level of a methane in the atmosphere but after 35 years most of that methane has reverted back to CO2 that was removed only 30-40 years earlier. In short, the CO2 from ruminant methane has no bearing on climate change, the significant factor is the increased level of methane constantly present from increased ruminant farming.
Interesting... if methane gets priced, and if the historic stocking level has remained static, then there may be money to be 'made' from simply lowering stock levels (thereby reducing methane levels below their historic average.
Unlike forest CO2 sequestration, which eventually hits a point where there is negligible further CO2 sequestration in a mature forest, a destocked farm will continue to have lower than historic methane emissions every year that it remains ruminant free (or ruminant reduced), so an empty paddock could potentially earn methane credits every year in perpetuity, as every year remains better than the 1990 reference years emissions.
Plant that same paddock in trees, and add 30-50 years of carbon credits to the pot as well.
I can see this also being a potential earner for current pine forests on formerly farmed land... they're now ruminant free, so potentially eligible to claim ongoing methane reduction credits.
The uproar from some HWEN partners fails to read what the CCC said. There is a place for vegetation outside the ETS but it needs to be rules based. Many do not realise there are well set rules for voluntary, non ets, sequestration internationally. We have all sorts of other schemes popping up in NZ, most won’t stand up to international scrutiny, and they risk damaging the brands using them. Some well known ag companies are using these and I personally think they could regret what they are doing.
It would be far better to have a rules based, regulated system with integrity that any land owner can apply to use. I won’t say to much but watch this space.
The other advantage is these “credits” can be sold outside the ag sector and BRING money into the sector. It also allows landowners to be rewarded for ETS eligible plus non ETS.
you won’t get everything in but it opens some great opportunities for sequestration on farms, income, branding and helping put more money into the system from outside. Hopefully they see the opportunity and don’t bury their heads in the hay.
I have mentioned this before that the amount of base or starting point biogenic methane from cattle needs scrutiny. The total biogenic methane for cattle would be the number of cattle x the methane produced per cattle head. This may be too simplistic but certainly the methane per cattle head may be half what has been used based on a paper by a University professor in 1991 at the Dr. Wilhelm Windisch of the Technical University of Munich. There may be a conflict of interest in academia and consultancy services in additional local peer reviewing this paper as it is likely to reduce their income from advice given to farmers on the ETS scheme and how to reduce the effects of their methane contribution.
interesting article on rnz national , wednesday night , regarding Methane and microbes that turn it into food for other animals .
https://www.rnz.co.nz/national/programmes/ourchangingworld/audio/201885…
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