He Waka Eke Noa - Something Done Right?

The anger in the animal farming community about the proposed agricultural emissions levy is understandable.  No business is happy about a new fee that they will have to pay, at least not on this planet.  Add to this weather disasters, new freshwater regulations, high fuel prices; there is a lot on their shoulders at the moment.

So, was the process to develop the levy something the government did right?

Let’s step back and look at how this all happened. 

The 2019 Climate Change Response (Zero Carbon) Amendment Act specifies a 10% reduction in biologic methane emissions by 2030, in order to meet the nation’s 2015 commitment to the Paris Agreement.  The Act passed Parliament unanimously, so it would appear that all major political parties agreed to it.  National signed the 2015 Paris commitment and Labour put forward the Zero Carbon Act.
So, like gravity, agricultural emissions reduction is not just a good idea, it’s actually the law.

Much to the climate activist community’s dismay, rather than add biologic methane to the Emissions Trading Scheme (ETS), the government agreed to form an industry-Māori-government partnership, He Waka Eke Noa, to hash out a program to achieve this emissions reduction, starting in 2025. He Waka Eke Noa includes 11 major farming industry groups, including Federated Farmers, Beef & Lamb, Dairy NZ and Horticulture New Zealand. 

In that democratic governments derive their authority from the consent of the governed (that’s us), this was something the government did right.  Agriculture needed to be part of the plan.

After 3 years of work, the partnership’s recommendations were published in May of this year and the government’s plan, based upon those recommendations, was put out for consultation in October.

So, what were the partnership’s recommendations?

The partnership recommended a farm-level, split-gas levy.  In other words, a levy on individual farm businesses rather than on farm product processor businesses (such as Fonterra) and that farm businesses pay different levies for methane and the long-lived, farm-derived greenhouse gases, such as nitrous oxide and carbon dioxide from fertiliser.  The levies would be calculated and paid annually.

Farm businesses would receive incentive payments for the uptake of approved methods to reduce emissions and receive payment or credit for on-farm carbon dioxide sequestration, such as through riparian planting, which are not presently eligible for ETS emissions credits.

Levy revenue would be invested in research, development and extension services (i.e., technical advice & information) and to a fund dedicated to help Māori landowners.  Industry and Māori oversight boards would be formed to provide recommendations on levy rates & prices and the use of revenue.

So, which of these recommendations made it through to the plan in the government’s consultation document?

Just about all of them. 

The principal point of difference appears to be that the oversight boards would provide advice on the use of plan revenue, but not on levy rates & prices.  The fox doesn’t get to guard the hen house.

While farmer anger is understandable and regrettable, the need to reduce these emissions appears unavoidable.  In most economies, including ours, polluting industries pay some sort of fee or tax for their pollution, in order to encourage a reduction in that pollution. Business sectors of New Zealand’s economy heavily dependent on fossil fuel use, such as process heat and trucking, already pay for their pollution through the ETS.  The farming of ungulate animals (cattle, sheep & deer) produces about half of our country’s greenhouse gas pollution, so it is too large to be ignored.    

While the agricultural emissions levy may be a hard pill for the animal farming industry to swallow, it does have an upside.  As countries in the developed world take steps to limit their greenhouse gas emissions, they recognise that their domestic animal farming industries are at a disadvantage in competing with imports from countries that do not limit emissions.  There has long been talk of “carbon tariffs”, or a special tax on imports to address this.  In the European Union, it is called the Carbon Border Adjustment Mechanism, which if adopted, would take effect in 2026.
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New Zealand’s dairy, meat and wool exports will be ahead of the game when these tariffs arrive.  This also would be something done right.