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Heavy lifting ahead for emissions partnership

Thursday 24th October 2019

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Farming groups will spend at least $25 million a year to develop tools and technologies for measuring and reducing agricultural emissions while working with government to develop an on-farm emissions pricing system by 2025.

The five-year agreement, heralded as a “world-first” partnership between government and farmers to reduce agricultural emissions, pledges the 11 agricultural groups to have all farmers know their emissions by 2022. An emissions reporting and benchmarking system will be piloted in 2024 and be in place at a farm level the following year.

If progress is not on track, as determined by the Climate Change Commission, the government can bring agriculture into the emissions trading scheme – through processor-based levies – in 2025.

Prime Minister Jacinda Ardern declared the agreement “historic” and an important exercise in consensus building that will simultaneously reduce the country’s agriculture emissions while improving farmers’ international competitive edge.

“This agreement will stick and it means, that instead of debating what we do, we get on with doing it,” she told journalists at a joint event at parliament which also included representatives from DairyNZ, Beef & Lamb, Federated Farmers and other industry bodies.

Today’s agreement really only provides a framework – with deadlines - to bring to a conclusion work that officials and farming groups have had underway for years. Importantly, it should also ensure current research and spending is more focused and that it is also coordinated with other policy initiatives – such as fresh water reform – that can also have emissions implications.

Major questions like the relative treatment of agricultural gases – methane and nitrous oxide against carbon – how to adapt, or build on the forestry ETS rules to account for riparian planting and other on-farm carbon sequestration, and whether fertiliser use can be accounted for at the farm level longer-term, will need to be resolved by the yet-to-be assembled partnership. Redevelopment of the existing Overseer farm management software also remains key.

“There’s a lot of work to be done in the short and longer-term,” DairyNZ chief executive Tim Mackle said in thanking the government for listening to the sector on the need for a split gas approach and a pragmatic focus to encourage on-farm investment that would actually reduce emissions.

Agriculture Minister Damien O’Connor also acknowledged the work ahead for the new partnership.

“We have reached consensus, which is historic – it’s not perfection.”

Agriculture accounts for about 40 percent of the country’s emissions. Farmers will face penalties on only 5 percent of their actual emissions from 2025. Other trade-exposed industries also receive free allocations to cover the bulk of their emissions.

Environmental groups including Greenpeace and Forest & Bird dismissed the partnership plan as a “sellout” and said that more action is needed much faster.

The industry-led initiative has been formally on the government’s table since July 16. The government opted to consider the plan after the Interim Climate Change Committee recommended against including farms in the emissions trading scheme – a Labour Party pledge going into the last election.

The committee had suggested a simpler levy and rebate scheme to encourage actual emission reduction on-farm. But recognising that could not be in place before 2025, it had suggested collecting a levy from processing firms from about 2021 as an interim measure. Those funds raised - $47-95 million annually – would pay for programmes to reduce emissions.

While the processor-levy was not its preferred solution, the committee had been sceptical that voluntary industry agreements would be sufficient.

Mackle, repeating arguments made in July, today said the processor levy proposed by the ICCC would have been a deadweight tax that provided no incentive for farmers to reduce emissions and would take money out of farms just when additional investment would be needed to improve farming practices.

Without being specific, Beef & Lamb chair Andrew Morrison signalled sector investment on the partnership programme would increase beyond the $25 million currently being spent annually.

Fonterra has already committed to providing free farm environment plans for its suppliers. At $3,000-5,000 per plan, that could see more than $100 million invested across the country’s 25,000 farms, Morrison noted.

Despite the obvious weaknesses in the ICCC's earlier processor levy proposal, Ardern was unable to say why it had taken three months for the government to agree the new partnership plan. Today’s announcement coincides with the introduction of proposed legislation to enact the next stage of the government’s reform of the emissions trading scheme.

BusinessDesk understands the milestones in the agreement took long negotiation to ensure they were achievable. Farming groups also resisted to the end any inclusion of agriculture in the emissions trading scheme.

Mackle noted his disappointment that the “threat” of agriculture being added to the ETS remains.

Federated Farmers’ national vice-president Andrew Hoggard observed that his organisation backs emissions reduction, not agriculture’s inclusion in the ETS.

“Federated Farmers does not support agricultural emissions going into the ETS - from 2025 or at any other time - without significant technological and regulatory developments becoming available to farmers,” he said in a statement.

"We need more tools in the toolbox. We are looking forward to exploring all these avenues further with government.”


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