Agricultural emissions in ETS firing line – interim climate change report

Agricultural emissions are in the firing line of the Emissions Trading Scheme, after recommendations the Government take action to reduce agricultural greenhouse gases, methane and nitrous oxide.

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The agreement, involving one of the country’s biggest polluters, is being hailed a breakthrough. Source: 1 NEWS

If the recommendation was to go ahead, farmers would still receive a 95 per cent discount on emissions, as outlined in the Labour-NZ First coalition agreement. 

Interim Climate Change Committee Chair David Prentice said it was clear the emissions were damaging the climate. 

"In New Zealand, we're increasingly seeing the impacts of a changing climate, and globally we’re not on track to meet the Paris climate targets," Dr Prentice said. 

"There are farmers making progress on emissions already and we need to see more of this happening across the whole sector."

The report recommended a package that prices emissions for farmers and to help them to change to lower emitting practices or to move towards lower emission land use. 

The two stage process of emissions pricing for methane and nitrous oxide emissions from livestock would price the emissions through the Emissions Trading Scheme (ETS), and then by 2025 have a farm-level emissions price through a levy or rebate scheme integrated with the ETS.  

The second proposal put forward by the sector would see an agreement between the farming sector and the Government to support reductions in farm emissions and progress farm-level pricing, until 2025. 

The Government released a discussion document on the recommendations, with Climate Change Minister James Shaw saying the Government reached an "historic consensus with farming leaders to implement farm-level pricing of climate change emissions from the agriculture sector by 2025". 

"Government and farmers want emissions to be calculated at the farm level where farmers have the most control over how they can manage their own emissions on their property," Mr Shaw said. 

"We are now consulting on the options for what we do in the meantime while we build a fair system to price emissions from 2025."

He said a "significant" amount of infrastructure was needed across thousands of farms for emissions pricing. 

Federated Farmers' Andrew Hoggard said they "agreed that a priority is to find a workable and affordable way that farmers can measure emissions and sinks at the farm level, and to adopt practices and any new technologies that will help drive down methane and nitrous oxide emissions".

"Where we differ is that the Government keeps emphasising pricing as the predominant tool. Federated Farmers does not agree with universal pricing of methane. The ETS has failed to reduce carbon dioxide emissions from transport - in fact, transport emissions have near doubled since 1990. Universal pricing of methane will be similarly unsuccessful."

National’s Climate Change spokesperson Todd Muller said it was a "practical alternative that will actually reduce agricultural emissions in New Zealand".

"It builds off previous initiatives established by National such as the environmental accord that accord that resulted in the planting of hundreds of thousands of trees along kilometres of waterways, and emphasised the management of nutrient runoff from farms."

The current ETS puts price on greenhouse gas emissions, intended to create a financial incentive for businesses that emit greenhouse gases, to invest in technologies and practices that reduce emissions, according to the Ministry for the Environment. 

The committee also recommended funds collected from the emissions pricing should go directly to supporting farmers reduce emissions. 

The committee reported by integrating the emissions through the ETS it would "reduce the cost, risk and complexity for farmers as they wouldn’t have to trade units".

"Pricing agricultural emissions would encourage farmers to factor emissions into their everyday decision-making," the report said. "Farmers and rural communities would be assisted through the transition with 95 per cent free allocation provided in a way that helps manage the social impacts on farmers and rural communities while maintaining incentives to reduce emissions."

It estimated placing a price on methane and nitrous emissions could generate $47 to $95 million per year, in 10 years. 

Greenpeace Executive Director Russel Norman criticised the two options for agricultural emissions as "short-term options for action on agriculture’s climate pollution"

"The first is to leave agriculture out of the ETS altogether, with the industry paying nothing for emissions until 2025. A voluntary agreement between big agriculture and the Government must absolutely be out of the question – voluntary efforts have failed to cut emissions over the past 20 years," he said.

The Interim Climate Change Commission's recommendation "is a step in the right direction, but it's truly astounding that the strongest option put forward by the Government to deal with our biggest emitter is to delay action for another two years, after which agri-business will pay a paltry 5 per cent of their emissions that they will then receive back as incentives".

Prime Minister Jacinda Ardern said today there had been "significant debate around agriculture and its contribution to emissions in New Zealand", when asked why successive Governments had had trouble bringing agriculture emissions under the ETS. 

"With these emissions, they're ones that are very difficult to control. It's part of the natural processes so that's probably why its been contentious. However, they make up a huge part of our emission profile, if we're going to take action on climate change, ultimately we have to find a way to reduce emissions.

Last night, Climate Change Minister James Shaw told TVNZ1's Q+A the recommendations would include "a couple of really important things that we want to make some progress on" prior to the Zero Carbon bill passing in Parliament.

"One of those is how we get to 100 per cent renewable electricity generation and the other is how we manage agricultural emissions."

He said different scenarios would be released in how emissions would be treated.

"New Zealand First, when they negotiated forming the government with the Labour Party, agreed that if agriculture was to come into the Emissions Trading Scheme (ETS) that they would receive a 95 per cent discount on the value of those emissions," he said. 

He said farmers would "not necessarily" be hit with additional costs, if the ETS was to include agriculture.

"The whole point of this is that actually what you do is you reward people who are becoming more efficient, reducing their emissions – that actually they get rewarded under the kinds of schemes that are being proposed."

Also on TVNZ1's Q+A, Regional Economic Minister and NZ First MP Shane Jones said his party "wrestled out of our coalition partner, the Labour Party, to give some level of confidence to the agricultural community" during negotiations of the 95 per cent free allocation.

The committee also made recommendations of the country embracing a 100 per cent renewable electricity by 2035, with Energy Minister Megan Woods said the shift "has been well signalled".

"We can have an ambitious goal while also being pragmatic. We will be conducting five-yearly assessments to ensure the energy trilemma of affordability, sustainability and security is well managed," she said. 

"A simplistic trade-off won’t be needed. We will move our country towards a zero-carbon future while keeping power prices in check for households.

Read the full report here.