The recent recommendation from Rod Carr and the Climate Commission, if we are to adopt it, has a major discrepancy on the sequestration side.
A game of two halves
The emissions side is easy to account for and is pretty hard to argue with. Each stock class will have a methane number, as will our tractor hours and any nitrous oxide emissions will be added.
It's simple math. It's the sequestration side where the vagueness and inconsistencies lie.
The recent recommendation states that sequestration shouldn't be recognised under He Waka Eke Noa if it doesn't comply with the Emissions Trading Scheme (ETS) definitions. This is the problem.
The ETS definitions for sequestration are far too narrow. In most cases, they won't recognise riparian planting, wetland conservation, some plantings under Queen Elizabeth II National Trust (QEII) land covenants, shelterbelts, native regeneration from retired land, and more.
Real trees on real land with recent sequestration should be rewarded
Unfortunately, much of our current farm vegetation in New Zealand is likely not to be recognised under the ETS.
Climate change action is urgently required by all.
If New Zealand farming can be at the forefront of these actions, then we stand to gain a competitive advantage internationally and command premiums over our competitors, breaking out of the commodity cycle.
Whilst it is often the case in emerging sectors and new markets that the science lags behind the opportunity – some accounting fundamentals need to be applied right now.
There are only two options if we are to balance the books and correctly recognise the sequestration side of the ledger:
1. He Waka Eke Noa does recognise all on-farm additional sequestration, or
2. The ETS is modified to include all positive management changes in vegetation on farms like riparian planting. Alongside this, New Zealand supports a voluntary carbon credit market that will pick up more forms of sequestration, like most other countries are doing.
I favour the latter. It would bring farming into the same system as other businesses – the businesses we sell to – giving us a common currency.
Listen to Jamie Mackay interview Geoff Ross on The Country below:
The right market incentivises the right behaviours
If we don't recognise positive on-farm changes in vegetation, the wrong behaviours will emerge. That won't contribute to our country's climate change commitments or our biodiversity, water, and cultural goals.
Let me paint a scenario.
A farm has planted its waterways in native trees and retired some regenerating gullies in the backcountry that are seeing native bush emerge.
The farm wishes to meet a net carbon zero position. However, this planting and positive management doesn't count under the ETS and there is no He Waka Eke Noa payment, therefore the farm must import carbon credits as offshore offsets from cookstove projects with low traceability.
We know this scenario is emerging under the status quo.
New Zealand is currently a large net importer of voluntary carbon credits, some of which are questionable. But current recommendations encourage this behaviour while not incentivising the farm to sequester carbon and improve biodiversity and water quality.
Instead, New Zealand should be paying farmers for their sequestration via the ETS and voluntary market, not projects around the world.
The ETS not only needs a broader definition of what counts as vegetation, but we also need to support a market for voluntary carbon offsets.
He Waka Eke Noa sequestration payments wouldn't be needed if we made these changes.
Farmers would be rewarded with the highest price for sequestration through land use change and using good management practices with changes to the ETS and an emerging voluntary carbon market.
Here's another scenario.
A farm chooses to increase its cattle numbers and pays a higher levy. The same farmer then decides to fence off some regenerating bush along a creek to protect the habitat of native fish.
This was done primarily for habitat restoration and would have been done regardless of carbon credits.
Current rules make it unclear if this should be counted for sequestration payments.
A book balance is overdue
An increase or decrease in emissions or an increase or decrease in sequestration – no matter the motivation – deserves to be counted under the same accounting principles. Because, sure as hell, the emissions will be counted.
I can't believe I'm saying this, but for the first time in my life "let's hear from the accountants" and balance the carbon books.
Disclosure: Geoff Ross's son is a PhD candidate in carbon sequestration and is the founder of a carbon trading company, Carbonz.
