Questions & Answers
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Agriculture in the New Zealand Emissions Trading Scheme
Who’s in? Who’s out? Where is the point of obligation?
The Government has not reached a final decision on where to place the primary obligations of the emissions trading scheme for agriculture. Its initial preference is for dairy and meat processors and fertiliser companies to be the primary points of obligation, and therefore have responsibility to report emissions and surrender units on behalf of the sector.
Were there any farming interests represented in the process of designing the scheme?
Farming interests made detailed submissions to the policy development process. The Government intends to further engage with agriculture sector representatives to develop the detail of the approach for bringing the sector into the Emissions Trading Scheme (ETS). This will include farming sector representatives.
How does the Government intend to engage with the sector?
In addition to the opportunities to participate in the broader emissions trading stakeholder workshops and one-on-one meetings, a special secretariat, supported by an independent Technical Advisory Group (TAG) will be set up to provide advice on the practicalities of bringing the agriculture sector into the ETS. This will ensure that the knowledge and expertise that resides in the sector is injected into the process.
As information emerges from the group, it will be available to both industry and the Government. A series of agriculture specific workshops with input from the TAG will allow stakeholders further opportunity to provide input.
Will farmers get assistance?
The Government intends to provide the agricultural sector with considerable free allocation, that is, an emissions allowance at no cost. While the Government’s preference is for that free allocation to be provided to farmers, it will consult with the sector on its preference for the delivery of that assistance. The sector will also receive significant other forms of assistance not directly associated with emissions trading, but flowing from initiatives such as the Plan of Action on Sustainable Land Management.
Is the Government breaking its promise to the agriculture sector?
No. The Government entered into a memorandum of understanding with the agriculture sector in 2003. Under that agreement, the Government agreed to meet the cost of non-carbon dioxide emissions from the sector until 2012, on the condition that the sector increased its research effort on cost-effective abatement technologies. The Government’s decision to bring the agriculture sector into the ETS on 1 January 2013 is consistent with that agreement.
The Government expects the sector to start taking steps towards reducing emissions, such as increasing the use of nitrogen or nitrification inhibitors on farms, before 2013. It will also require the sector to monitor and report its emissions for two years before it comes into the scheme.
How can New Zealand reduce agriculture emissions without new technology?
At this stage, the opportunities for farmers to reduce emissions (other than by reducing output) are limited to some extent, but they do exist. There is currently greater opportunity to reduce nitrous oxide emissions, such as through the use of nitrogen inhibitors and more effective fertiliser use. Increased use of these technologies will also reduce impacts on water quality.
Improvements in productivity will also reduce nitrous oxide and methane per unit of production. For example, the level of emissions per unit of milk solids has been decreasing by around 1.2 per cent a year over recent years. The ETS will help encourage the development of emissions-reducing technology.
The ETS will also ensure that the cost of carbon is factored into farmers’ investment decisions, such as the conversion of land to production systems that result in higher emissions.
Why doesn’t the Government just put more money into researching technologies that will reduce methane emissions?
The Government is putting significantly more money into research, in parallel with increased investment from the sector. But more can and must be done, and the ETS will provide greater incentives for the sector to search out ways to reduce emissions.
Are any other countries including agriculture in their domestic climate change policies?
New Zealand is currently the only country that has included agriculture in a domestic emissions trading scheme. This is not surprising – the contribution of agriculture to New Zealand’s emissions profile is unique internationally. Agriculture makes up almost 50 per cent of New Zealand’s total emissions, whereas it makes up about 12 per cent of most developed countries’ emissions. New Zealand has no choice but to promptly tackle emissions from this sector.
Will the entry of agriculture into the ETS increase food prices?
The introduction of agriculture into the ETS from 2013 may well increase the prices of some foods, depending on the ability of producers to pass cost increases on to consumers. If the ETS is working effectively, relative prices of goods and services that create emissions will change, but this is not expected to be significant.
Why isn’t agriculture coming in earlier when it is such a large emitter?
There are several reasons why agriculture is joining the scheme in 2013 and not sooner. Ensuring systems are in place to meaningfully monitor and verify emissions is difficult, and devising the right solutions will take some time. Also relevant is the agreement between the Government and the agricultural sector signed in 2002, and the desire to allow sufficient time for the research effort underway aimed at reducing methane-related emissions to take effect.
The Government expects the sector to start taking steps towards reducing emissions before 2013, and it will require the sector to monitor and report its emissions as early as 2011. The five-year period before agriculture enters the scheme will also provide opportunities for:
- pilot farm level monitoring and reporting of emissions;
- increased contribution from the sector towards research into mitigation and adaptation;
- increased sector contribution to technology transfer; in particular commitments to roll out mitigation technology and energy efficiency on farms.
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
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