Robin Grieve: ETS to Slash Farm Incomes by Eleven Percent

According to figures produced by the ETS Review Panel the Emission Trading Scheme will slash NZ farm incomes by between nine and eleven percent in 2015. New Zealand farmers will be the only farmers in the world kneecapped by their own Government in this way. The Review Panel attempted to justify this by saying that Australian farmers, while not included in the Australian carbon tax scheme, would be subject to the Australian Carbon Farming Initiative.

The ETS Review Panel shows either bias or ignorance here because the New Zealand ETS and the Australian Carbon Farming Initiative are not comparable, they are chalk and cheese. Under the ETS New Zealand farmers will pay for livestock emissions of nitrous oxide and methane. Under the CFI Australian farmers do not pay for any of their livestock emissions but they can be paid for reducing them.

This is a sweet deal for them compared to their NZ counterparts. There is a certain amount of environmental integrity lacking in the CFI but then so too with the ETS. Both schemes are more about creative carbon accounting than saving the planet. If however the goal is to reduce emissions the CFI could do it. The ETS will not. This is because the CFI pays farmers to reduce or avoid emissions. They will make money, and if there is money to be made farmers will do it.

Notwithstanding the fact that these emissions of methane in particular are quite harmless and carbon neutral and do not need reducing, the NZ ETS offers farmers no incentive to reduce livestock emissions.  The only way NZ farmers can reduce their liability under the ETS is to reduce their agricultural production. This is not an option either financially for the farmer or for NZ nor is it an option for a world desperate for food.  It will not happen. There are things farmers can do to reduce emissions which do not effect production but there is no incentive to do so. Some farmers can reduce nitrous oxide emissions by spraying their farms with the chemical DCD, but why would they? They will pay the same emission factors per kg product as the farmer who does not spray DCD. This is in contrast to the Australian farmers who do not pay for their nitrous oxide emissions but will be paid if they do something like apply DCD to reduce them.

While I think it is quite dumb and not very ‘Green’ to go around burning fossil fuels to spray a chemical on the ground to try and reduce an emission of nitrous oxide which is quite natural, and is an infinitesimal component of the atmosphere, and is increasing at an infinitesimal rate;, at least the Australian scheme does something to encourage it, unlike the NZ ETS.

Farmers in Australia can also sequester carbon by planting trees or by increasing soil carbon and receive payment for this. Farmers in NZ have the same opportunity with regard to trees but not soil carbon. Australian farmers can also receive credit for any activity which avoids an emission. For example if they have an existing stand of trees they can be paid for not felling them. The stand can be a mature stand that is no longer sequestering carbon; this option is not available to NZ farmers.

Unlike NZ’s ETS, soil carbon is included in the CFI. Australian farmers can receive a credit for not releasing soil carbon. Planting exotic forestry on land under pasture, results in significant losses of soil carbon. Approximately 45 % of soil carbon is lost. This is a huge amount which significantly reduces the net carbon sequestered by trees in this situation.

I don’t know if the Australians have thought this one through but under the CFI an Australian farmer could receive payment for sequestering carbon by planting a forest, or they could receive payment for avoiding an emission of soil carbon by not planting a forest. Both options are saving the planet apparently. Planting a forest sequesters carbon and not planting a forest avoids the emission of carbon from the massive loss of soil carbon that occurs under forestry.  If they take the option to plant trees on farmland they can also receive payment if this activity results in less livestock and therefore reduces livestock emissions.  

It is a win win for the Aussies and as always when someone wins, someone else loses. Well fellow Kiwis it is us. Despite Dr Smith’s stated desire to align our ETS with Australia’s because “there's no point in disadvantaging the New Zealand farmer” that is exactly what he and John Key’s Government are doing.

Under the ETS NZ farmers will have to pay for exactly the same activity an Australian farmer is getting paid to do under the CFI.

Not all the options available for Australian farmers under the CFI can be used for Kyoto recognised units, but many do. So when NZ needs to buy international units they could be buying them from credits generated under the CFI by Australian farmers. The NZ Government will effectively be taking money from the New Zealand farmer and giving it to their Australian counterparts.

Any Government that designs a scheme that allows that to happen is not worthy of even being called a New Zealand Government.

Robin Grieve is an agricultural tutor and consultant.