Government welcomes Climate Change Commission advice on agricultural pricing system

The Government has welcomed advice from the Climate Change Commission assessing readiness in the agricultural sector for an emissions pricing system while the Science Media Centre has been collecting expert advice on the commission’s report.

This is the second piece of advice from the Climate Change Commission on agricultural emissions pricing, following its report in May on potential assistance to farmers and growers participating in a pricing scheme.

The report released today contains the commission’s advice on the He Waka Eke Noa (HWEN) plan put forward by a farm-sector partnership on how agricultural emissions should be priced instead of using the Emissions Trading Scheme.

It says farmers are on track to start paying for their greenhouse gas emissions through a farm-level pricing system by 2025.

But some critical tweaks are needed for the He Waka Eke Noa  proposals, which were put to Parliament last month after years of work.

Under that plan, farmers would pay different rates for methane and carbon dioxide emissions into the government’s Emergency Response Fund, to be spent on initiatives set out in the Emissions Reductions Plans.

The Climate Change Commission has recommended some changes to make the plan work.

Commission chair Rod Carr said farmers should not be paid for carbon absorption by on-farm vegetation, which was largely already covered by the Emissions Trading Scheme (ETS).

Moreover, the government is urged to include synthetic nitrogen fertiliser in the ETS as soon as possible, rather than in farm-level pricing as suggested by HWEN.

The Climate Change Commission is legislated to provide advice to the Government under the Climate Change Response Act (CCRA).

Ministers are required to provide a public report on what an alternative pricing mechanism for agriculture could look like by the end of 2022.

“Developing an effective system to price agricultural emissions is a key part of the Government’s Emissions Reduction Plan. Budget 2022 included significant investment to establish a new Centre for Climate Action on Agricultural Emissions, which is a partnership with business to accelerate product development of tools to help lower agricultural emissions,” Agriculture Minister Damien O’Connor said.   

The Science Media Centre asked experts to comment on the commission’s report.  Here are the responses:

  • Bill Kaye-Blake, Principal Economist, New Zealand Institute of Economic Research:

“The advice shows the difficulty of rolling out interventions and regulations for agriculture, which has such a wide range of participants. The best farmers can make three times per hectare what other farmers are making, or more. Some farmers are well prepared for making changes and have the resources to do it, while others are not. Getting 25% of the sector on board is relatively easy. Getting to 100% participation or compliance will be difficult.

“The CCC advice also shows the trade-off between certainty and equity. He Waka Eke Noa has suggested a farm-level approach, and CCC has agreed with it. They agree that a farm-level approach is fairer: farmers get credit for improvements they make. However, the CCC is uncertain that the farm-level approach will be ready in time to meet 2025 and 2030 goals.

“The advice seems to be affected by common biases in decision-making. One is ‘identifiable victim effect’ and the other is ‘precision bias’. CCC recognises that there are wide equity issues that are intergenerational and international. In terms of size, the impacts on billions of other people now and in the future is a bigger question than whether a few thousand farmers are given exactly enough credit for mitigation activities. However, those farmers are ‘identifiable victims’ and so received the bulk of the attention in the advice. In addition, the CCC recognises the importance of equity ‘internationally, intergenerationally, socially, environmentally, and economically’. We know very little about the value of impacts on other countries and future generations, or social and environmental impacts. There is large uncertainty or wide error bands around those values. We don’t know whether being a good ancestor means getting rid of 5% of livestock or 50% of livestock. The focus on a farm-level approach and creating reporting and IT systems is about precision, but that could be misplaced effort.”

No conflict of interest declared.

  • Honorary Professor Troy Baisden, Te Pūnaha Matatini Principal Investigator, Motu Affiliate, and University of Auckland School of Environment:

“The greatest urgency around agricultural emissions is the requirement to implement something by 2025 that sends sensible signals to farmers and the agricultural industry that point toward 2030 goals. Farm systems take at least three to five years to get significant changes underway so this goal is less about immediate reductions and more about building understanding and systems that will meet 2030 commitments. Over time, the systems used will be best if they evolve to allow realistic projections for future reductions to be developed in forms that work and are politically stable.

“The Climate Change Commission (CCC) sensibly suggests that implementing simple systems for accounting at the farm scale looks like the most useful option available, and this can roughly match the He Waka Eke Noa proposal. The CCC advice reflects that getting farm-level accounting in place will allow the vast majority of farmers to begin to understand their emissions. In contrast to what some have said, this isn’t just about farmers knowing their number – it’s also about beginning to understand how they can reduce their emissions while maintaining or increasing the value of what they produce.

“The danger is that the tools set in place by 2025 may lock in simple tools that represent today’s farming industry well but fail to capture innovative opportunities. Many questions remain about how tools can be developed that are equitable in their pricing, availability, and applicability to farms – which have different historic choices to develop or intensify, a diversity of land-ownership structures, as well as varied access to ideas and support to develop new value opportunities. A big challenge is posed by Māori farming enterprises that tend to be bigger, more visionary and more diverse than the average.

“Today’s CCC report seems to embrace the phrase: “the perfect is the enemy of the good.” We’ll need a range of good tools that work and can be applied soon where they’re needed and will continue to innovate. The CCC offers the useful suggestion that while making farms responsible for their own emissions is good, having a direct levy on industrial fertiliser may be simplest. Similarly, having a separate system to consider carbon sequestration in vegetation (or wetlands) on farms looks may be more desirable than requiring it to be part of a tool that certifies the entire farm’s emissions.

“The greatest value in today’s report is a careful evaluation of the likelihood that historic and future goals have been or will be achieved. The bottom line is that historic performance toward involving the agricultural sector in their own emissions reductions has been good but not perfect. Getting emissions tracking in place on farms by 2025 is possible, but represents a big challenge where delivery is far from assured. One possibility appears to be worth ruling out: putting farms directly in the Emissions Trading Scheme.”

No conflict of interest declared.

Sources:  Minister of Agriculture and the Science Media Centre


Author: Bob Edlin

Editor of AgScience Magazine and Editor of the AgScience Blog