NZ needs a balanced and realistic ETS

The phasing in of sectors, such as agriculture, into the Emissions Trading Scheme is a realistic and necessary way to minimise the disruption to the economy and give people and their business time to adjust says Agriculture Minister Jim Anderton.

Jim Anderton was responding to a call by the Sustainability Council that agriculture should enter the ETS immediately and pay full liabilities for emissions over 1990 levels.

“We need to remember that New Zealand is the first country in the world to consider bringing the agriculture sector into an emissions trading scheme. This is not a small matter and there are significant challenges to overcome,” said Jim Anderton.

“The agriculture sector is the most important source of export income for New Zealand - representing around 65% of New Zealand’s total merchandise exports. It is too important to all New Zealanders’ standard of living to expose the sector to carbon costs at a pace that significantly disadvantages it relative to international competitors.”

“By phasing agriculture into the ETS over time and in a measured way the taxpayer is actually investing in a transition that benefits the economy as a whole. It is true that the costs are being shared about and managed in a pragmatic way but the alternative would create too violent a shock for businesses.”

The Sustainability Council has correctly identified there are promising mitigation opportunities available for agriculture, but none have been accepted internationally as yet and therefore do not qualify for carbon reductions in New Zealand’s carbon accounts. “We cannot make important decisions based on the assumption that they will qualify at a later date, although we are doing our best to make the case for these technologies in every appropriate international fora.”

At present the European Union considers that bringing the agriculture sector into their emissions trading scheme would be impractical. The New Zealand Government made a promise to the sector back in 2003 not to introduce a price measure on the sector in the first commitment period as long as the sector invests in research, which the sector is doing. “For investor confidence, it is important that governments keep their word.”

The government has undertaken to work with the agriculture sector to explore whether a farm level point of obligation would be feasible or cost-effective – which would represent a whole new order of magnitude of complexity with over 30,000 possible participants.

“Monitoring and reporting of agriculture emissions presents a whole range of new challenges and I don’t believe the economists from the Sustainability Council have given these practical matters sufficient thought, rather they appear to have focussed on the pure economics of the issues involved.”

“Farmers are not getting let off the hook here as they are also large energy and fuel users and will be paying the carbon costs associated with these in 2009/10 like every other business and household in the New Zealand. Meat and dairy processors will also face increased costs from 2009/10 and these are likely to be passed on to farmers.”

“Furthermore, the sector will be responsible for all of the growth in methane and nitrous oxide above 90% of 2005 emissions when it comes into the scheme in 2013, so the clock has already begun ticking. It is for this reason the Government is already working closely with the sector on developing and implementing technologies to reduce emissions.”

The New Zealand Institute for Economic Research has also published a report today that is critical of the NZETS because of potential negative impacts on agriculture. However, like the Sustainability Council Report, NZIER support an ETS in-principle.

“On one hand the Sustainability Council is saying that the agriculture sector is getting off too lightly, on the other NZIER is saying that the impacts on agriculture are too great. The Government is attempting to find a balanced and pragmatic approach between the two, which minimises disruption to the engine room of the economy while ensuring a comprehensive response to climate change is developed. That is the real world in which government decision-making lives.”