By Andrew Morrison, Beef and Lamb chair
There has been debate in the past few weeks about the recommended emissions pricing option sent to the government.
It’s right that farmers are asking questions, and debate is healthy. As an organisation accountable to all levy-payers, our job is to answer those questions and we always encourage farmers to speak up.
This significant policy reform has long-term implications for our sector and it’s important we get it right. It’s also a very difficult time as many farmers are feeling overwhelmed by the volume of flawed policies coming at them.
Of course, we would prefer there was no pricing of agricultural emissions. However, the government is forcing emissions pricing on us so we’ve been focused on trying to get the best outcome for farmers.
While there are still important things to fix, like the methane targets, BLNZ and sector partners have had two major policy wins along the way.
Back in 2019, almost 20,000 submissions supported all of the greenhouse gases going to net zero and the government had legislation written to bring agriculture into the Emissions Trading Scheme in 2020.
We secured separate targets for methane and convinced the government not to bring the sector into the ETS. The government said we must come up with an alternative pricing framework from 2025. If not, the government would put us into the ETS.
It is important we stay out of the ETS because under this system the methane price will be linked to the carbon price and we’ll have lost the split gas approach – effectively facing a net zero target for methane. We would also not have the sequestration outcomes that we’ve proposed in He Waka Eke Noa (HWEN), nor the potential incentive payments to support uptake of new technologies.
While not perfect, we believe the HWEN recommendation is the best one. It carefully balances levy settings to ensure farmers remain productive, profitable and competitive.
We share the concerns of farmers who have limited reduction and offsetting opportunities. As a result, there is specific provision in the proposal where levy relief can be applied on a case-by-case basis. We also argued for a maximum starting price for methane of 11c per kilo, and to have the price held for three years.
We did explore the scope for a land-based approach that favoured extensive farmers during the process, but that would have put a higher price on intensive farmers and did not get consensus.
Some partners argued for an outputs-based approach, which in our view favoured intensive farmers, but this would have created problems for extensive farmers.
Some farmers have asked why BLNZ supports HWEN when our own modelling shows the significant impact on sheep and beef farmers.
Sheep and beef farmers are more impacted by a price on agricultural emissions because of our profitability per unit of methane emitted. That’s why we published modelling when the HWEN proposal was released to demonstrate the impact and reinforce the need to take a cautious approach to pricing.
We’re also fighting for sequestration as a critical part of HWEN. While we didn’t get everything we wanted, HWEN recognises a wider range of vegetation than the ETS. It also recognises native vegetation that is ineligible under the ETS.
Our long-term goal is to get the ETS improved to include this vegetation, but the reality is this will take years. If farmers are to face a price for their emissions, it’s a bottom line they have to be able to get proper recognition for their sequestration from that day.
Price sensitivity is a key reason we need to review methane targets and ensure they reflect the latest science. The higher the reduction targets, the higher the prices on emissions will potentially need to be.
BLNZ doesn’t agree with the reduction targets in the Zero Carbon Bill. Getting this addressed is a separate process to HWEN but is a top priority.
BLNZ is also urging the government to report on warming as well as emissions. We need to take a warming approach in the national methane targets. Key aspects of the HWEN proposal reflect this science (such as having a unique methane price, measuring by weight, and not converting it into a carbon equivalent).
But we must also be mindful of unintended consequences, such as applying a warming approach at farm level.
Applying a warming approach at the farm level is complicated. It requires 20 years of data and fluctuates significantly. If there were a drought one year and you restocked the next, you could face a high bill for the rebuild of stock numbers as emissions would increase.
The sheep and beef sector has made significant gains in reducing emissions. A large part of this was due to a reduction in livestock numbers and dairy conversions. Our analysis, however, indicates the remaining sheep and beef farms have been getting bigger and therefore a warming approach at the farm level may not be the best approach.
Like many farmers, we are concerned and frustrated at the policies coming at us and we will remain in the fight. However, it’s now more important than ever that we remain united.
Informing our approach along the way in developing the proposal has been a split gas approach that takes account of equity, environmental sustainability and on-farm viability.
