Bowing to demands from the agricultural sector to be excluded from the Emissions Trading Scheme could have dire consequences.
The rural vote is a contested vote, and a contested vote is a powerful vote. Since the National Party’s formation in the 1930s, it has been fused with the farming sector, like two cow carcasses flash-frozen together in loving embrace. Now Act and New Zealand First are trying to tear them asunder.
Act boasts former Federated Farmers president Andrew Hoggard in its caucus, and New Zealand First’s Shane Jones styles himself the Champion of the Provinces. All three parties campaigned on keeping the agricultural sector out of the Emissions Trading Scheme, the government’s primary mechanism for greenhouse gas reduction. This month, they delivered – with an announcement at Fieldays that the methane-rich belches of sheep and cows will not be covered by the ETS.
Here’s how the system is supposed to work: New Zealand has the fifth-highest per-capita emissions in the world. The Climate Change Response (Zero Carbon) Amendment Act, which the current government has committed to, has a target of net zero greenhouse gas emissions by 2050 except for methane, which must fall by 24-47% of 2017 levels.
The ETS puts a price on carbon and other greenhouse gases. If you’re a company generating emissions – selling petrol, burning coal to run your steel furnace – you need to buy carbon credits, auctioned off by the government several times a year and then traded on a secondary market. In the grand tradition of free market capitalism, it creates a financial incentive to reduce emissions, and it seems to work.
The latest greenhouse gas inventory, published in late April, had the nation back at 1999 emissions levels. But agriculture is the single-largest source of those gases, and it’s hard to imagine us getting to net zero without putting a price on them.
It still isn’t clear whether former prime minister Jacinda Ardern actually cared about climate change or merely regarded it as an issue with great marketing synergy for her personal brand. In 2019, she accepted a proposal from the agricultural sector to exempt it from the ETS for five years while the industry developed its own separate pricing mechanisms. This was the hilariously named He Waka Eke Noa (We Are All in This Together) project. No one thought this would work.
Academics, climate activists, economists and political commentators all labelled it an obvious stalling tactic to kick the can down the road until a right-wing government was back in power, at which point the whole thing would be scrapped. This is exactly what has happened.
Talking heads
Ag-sector lobby groups have a number of talking points to justify their industry’s free ride. These are frequently repeated across the new government all the way up to the Prime Minister. The first is that New Zealand farmers are, allegedly, already the most sustainable in the world. If you force them to pay for their emissions, they’ll go bankrupt and less efficient farmers in other nations will fill the gap in the market, creating a net loss for global emissions.
But in terms of greenhouse gases, our ag sector’s profile is about the same as Australia’s – worse when you add in food miles, the emissions generated by shipping our produce to market from the remote South Pacific.
The other key argument is technology. The ETS creates a price incentive to switch to cleaner technologies – but what’s the point if there are no cleaner technologies? You can reduce transport emissions by switching to electric vehicles, but there’s no low-methane cow. Yet.
In the early 2000s, the Green Party stirred up a moral panic about gene editing and genetic modification, imposing a ban on the technologies that has held back our biotechnology sector for decades. National announced its climate policy alongside a commitment to overturn the ban, and it sees the latter as a solution to the former. Genetically engineered grasses and methane vaccines are hailed as potential technological saviours of the industry.
It might happen. But breakthroughs tend to happen in nations with robust research and technology sectors: our investment in science is about half the OECD average relative to GDP. Development of these Hail Mary solutions is occurring at small-scale and glacial pace – partly because of low funding, partly due to lack of business demand – because the sector is exempt from emissions pricing.
Transitioning to a low-emissions economy is tough, so our politicians have given themselves until 2050 to achieve it. The problem with such a distant target is that each successive government can commit to it in theory but defer any tough decisions until someone else is in power.
International calls
The risk for New Zealand is that many big international buyers of our produce – Nestlé, McDonald’s, Danone, Mars, Unilever – are branding themselves as sustainable, pro-climate companies. They’re telling the likes of Fonterra and Silver Fern Farms they want to see a reduction in emissions from their suppliers. These distributors pass this back to the farmers, some of whom reply that they have no intention of reducing emissions: climate change isn’t real; besides, they’re already the best in the world.
Because the distributors are co-ops owned by the farmers, they have to purchase their products. But we’re selling something the customers are loudly and repeatedly telling us they’d prefer not to buy. Sooner or later, someone else will seize the opportunity and develop low-emission beef and dairy products at scale. They’ll become the market leaders and New Zealand will be decades behind.
There’s an opportunity for us to take the future of our own key export industries seriously, to try to be first to market, charge a premium for our farm products and get rich exporting clean agricultural technologies overseas. It would require political leadership: serious investment in technology and telling the industry what it needs to hear rather than what it wants to hear.
What we’re likely to see is more pandering from the parties courting the sector, and more kicking the can down the road until the crisis hits.
