New Zealand’s largest primary sector bodies and companies have labelled as unacceptable and unworkable the government’s proposal for pricing greenhouse gases.
Their individual submissions have common concerns: the social and economic impact, establishing a greenhouse gas price, sequestration and food security.
The groups are also signatories to the He Waka Eke Noa (HWEN) submission, apart from Federated Farmers which, while broadly supportive, has doubled down on its opposition to the government’s proposals.
The federation details three principles it says the government must adhere to. It requires a scientific target to be set for methane based on no additional warming by 2050; incentives for the adoption of viable and cost-effective mitigation options; and ensuring that policies do not create emission leakages or reduce food production.
“Federated Farmers opposes all of the government’s options for pricing agricultural emissions as they are inconsistent with our emissions pricing principles,” the submission says.
The government’s pricing proposal equates to a tax on all agricultural emissions without a price discovery mechanism, no marginal pricing and it will create emissions leakage, it says.
Its opposition to the three proposed pricing options is based on the absence of cost-effective mitigation options, questions over the science of methane and the socio-economic cost.
“All three options will harm food production, will harm the wellbeing of rural communities, will disproportionately decrease the net-revenue of farmers, will decrease global food security and will increase global emissions,” it says.
DairyNZ also rejects the government’s pricing proposal, its chair, Jim van der Poel, saying it undermines the balance and equity HWEN tried to achieve.
The producer group engaged with more than 1000 farmers and Van der Poel said they were concerned about price-setting, the prevention of collectives, recognition of sequestration, grower representation in governance and not linking nitrous oxide pricing to the Emissions Trading Scheme (ETS).
DairyNZ and Fonterra both recommend the government adopt the HWEN recommendations and ensure any pricing is fair and equitable for farmers.
“We believe the government’s proposed response has created an imbalance and some of the changes undermine the credibility and workability of an agricultural emissions pricing system,” Fonterra’s submission says.
The government’s proposed pricing process relies on production decreases to achieve emission reductions, whereas the HWEN proposal was balanced, practical and delivered the required emission reductions, it says.
Price setting needs to take account of more than just achieving a target.
“The proposals will have negative impacts on the wider primary sector and the health of our rural communities and these impacts need to be carefully factored in when finalising the system design.”
Fonterra is in the process of establishing emission targets for suppliers and its manufacturing suites, but it disputes government claims that producers of low-carbon dairy may achieve premiums of 20%.
“There is evidence that some customers are increasingly willing to pay a modest premium, but this remains limited and only applies to particular markets such as North America and Europe, which Fonterra does not have meaningful access to transact in at the scale required for these premiums to be realised.”
Beef + Lamb NZ’s submission follows meetings with 1200 farmers. It wants seven classes of vegetation recognised as carbon sequestering and a low methane price set for five years to allow a transition followed by a review. It opposes linking the nitrous oxide price to the ETS and wants emission pricing to not be solely driven by targets.
“The impact of this is that it diminishes the agriculture industry from being a partner with government in reducing emissions to being little more than a bystander directed by government,” the BLNZ submission says.
It also calls for limits on the use of forestry for offsetting emissions
The Alliance Group’s submission says it is “extremely disappointed” with the government’s proposal, and the “disproportionate and inequitable impact on the sheep, beef and deer sectors [and] our meat processing operations”. It says the government proposal risks inflicting damage on rural communities across the country and increasing the price of food for all New Zealanders”.
By reducing on-farm sequestration, the government has diminished the value of the one tool many farmers can use to mitigate the effect of emissions pricing, it says.
Alliance also opposes the interim step of a processor levy as it would not incentivise and reward farm-level changes.
“Reducing sheep and beef farming by as much as 20% is a losing strategy for the world’s most efficient farmers and NZ,” it says.
Silver Fern Farms wants sheep and deer farmers to be given a transitional discount on methane pricing and seeks cross-party agreement on farm-level emission pricing to give the sector confidence. Beef cattle are excluded from its proposal due to complexity caused from the crossover with dairy cattle.
“We have considered whether to include beef cattle in the transitional discount, and we will be urging the government to look at this, but it does present a complex challenge given the species crossover with the dairy industry and the processing of dairy cattle as beef,” the SFF submission says.
The submission states that aside from further destocking, reducing emissions from hill and high-country farms is difficult, so a transitional discount, already in use in the ETS, would provide some assistance.
“Over time, once mitigations become available, the transitional discount of the methane price would be phased out,” it says.
SFF does not support a processor levy as an interim measure and is also calling for a unified strategy for sequestration including recognition of nature-based sequestration.
