By Andrew Hoggard, Federated Farmers President and climate change spokesperson
In discussions on He Waka Eke Noa proposals with farmers I’m often asked “how does this all square with the Paris Agreement, and the multiple mentions the text of the Agreement makes on needing to make emissions reductions but not at the cost of food production?”.
It’s a valid question. The Paris Agreement is crystal clear on this point, with the preamble “Recognizing the fundamental priority of safeguarding food security and ending hunger…” and article 2 committing signatories to climate adaptation and emissions mitigation “… In a manner that does not threaten food production”.
As we know, New Zealand agriculture has world-leading greenhouse gas footprints. If we reduce our production to meet emissions targets, supply in the world market will initially decrease but demand will not. The United Nations (UN) Food and Agriculture Organisation (FAO) has estimated the world’s farmers will need to increase food production by 70% by 2050 if we are to adequately feed growing populations. Global consumers are not going to stop wanting what New Zealand farmers are producing.
The price will therefore likely rise in response to a decrease in New Zealand output, encouraging other countries to supply more as it will now be profitable for them to do so. If they have a higher emissions footprint per kilo of product, then world emissions will go up not down. This is a poor outcome for all, global consumers, the New Zealand economy and the atmosphere.
The goal we want to achieve is to reduce our emissions but while maintaining production. This also means we retain and improve our footprint, because that’s the other point worth making. There is a lot of fear-mongering that “we have to do this otherwise our customers won’t want to buy our products”. Really??
So why are customers who supposedly are purchasing based on climate change concerns going to stop buying the products with the lowest footprint in the world? Because we don’t implement an emissions pricing mechanism that no one else in the world does? I doubt it.
Our customers are interested in what we are doing about climate change (which is great because we are doing a lot). But surely if they have an ounce of logic they would be looking at the footprint, especially if they are using our products as ingredients in their products, then they will be able to say with confidence ‘we have a product with this low emissions footprint’ or ‘that our products have lowered its footprint by x amount’.
So, we do need to be able to maintain that footprint, and this is where an appropriate pricing mechanism could be a useful tool in ensuring the right actions occur that keep our eyes focused on what is essential.
If done poorly, a pricing mechanism could also do more harm than good, prioritising top down and illogical domestic targets over what is best for our emissions footprint and the global atmosphere. I think in this debate it is vital for us to ensure we don’t go for options that could potentially harm our status in having a world-leading footprint. Therefore, both the emissions leakage report and the Pan Sector Report (which models what the production losses could well be) are really important. These reports were commissioned by He Waka Eke Noa and are vital to ensuring those in the agricultural industry know what we are signing up for with the proposed pricing mechanism.
So, what do these reports show? The emissions leakage report shows , “With partial (50%) offsetting of emissions, there could be a 15% increase in global emissions for every tonne of emissions reduced in New Zealand from lower output of beef, so if emissions reduced by one tonne in New Zealand, they might increase by 1.15 tonnes in another country. The equivalent estimates for sheep and dairy production are emissions increases of 7% and 30% respectively.”
Pan sector modelling found, using dairy as the example, if the current placeholder prices are used for the processor hybrid pricing option ($.35/kg for methane and $13.80/t CO2e for nitrous oxide) there will be a 5.6% reduction in milk production by 2030 for a 3.2% reduction in methane.
For the farm level pricing option, if the same place holder prices are used ($.35/kg for methane and $13.80/t CO2e for nitrous oxide) there is expected to be a 1.2% reduction in milk production for the 0.7% reduction in methane.
Like all modelling, this needs to be taken with a grain of salt, but is not pretty reading for those who hope a simple price would fix all problems. Troublingly, we see that both these options will increase global emissions, which is the opposite of the objective.
At a pay-out of $9.20, 5.5% less milk would be close to a billion dollars ($985m) being removed from rural communities. Even with a $6 pay-out it’s a reduction of $640 million. With dairy farmers being major purchasers of goods and services from many other industries this will have flow-on impacts that deserve careful considerations.
Using figures from the latest MPI published SOPI report, it’s an economic impact equivalent to wiping out our current exports of both apple and peers and venison. Or more than halving the wine sector. Is this what we are wanting to do for no global emissions reduction and while harming global food security?
It is critical that before decisions are made around price settings and price mechanism design, farmers and industry groups truly understand the impacts that getting such decisions wrong could have.
This is why I favour ensuring that any pricing approach is one which, at the very least causes no harm to our world leading emission footprint. Ideally any pricing mechanism would go further and enhance our emissions footprint.
If the world’s farmers need to produce 70% more food by 2050 to feed a growing global population, producing this food without clearing more rainforest will require all farmers to farm better, and not New Zealand farmers to simply farm less. This same point has been made many times by a wide range of international organisations. One such option that has the emissions footprint at the core of its design, is the output rebate which has unfortunately been parked by He Waka Eke Noa at present. I will cover this in another column.
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