17 November 2022
Ministry for the Environment
PO Box 10362,
Wellington 6143
[email address]
SUBMISSION ON
Pricing Agricultural Emissions
Consultation Document October 2022
Submitter:
New Zealand Farm Forestry Association Incorporated
Address:
New Zealand Farm Forestry Association
9th Floor, 93 The Terrace, Wellington
PO Box 10 349,
The Terrace
Wellington 6143
Submitted by:
Graham West, President
About this
The Association represents people who own small-scale private
organization.
forests and/or are interested in the many values of trees. Currently we
have over 1200 members representing a good cross-section of the
approximately 15,000 entities owning private forests in New Zealand.
Small forest owners are managing about 25% of the national exotic
forests and also own generally sizable areas of indigenous forests,
with some managed under the sustainable forest management
provisions of the Forest Act.
Contact:
To discuss this submission you are welcome to contact:
9(2)(a)
Ph 9(2)(a)
9(2)(a)
Email 9(2)(a)
1
Contents
BACKGROUND AND SUMMARY .............................................................................. 2
Sequestration on farms ........................................................................................... 3
Land use change .................................................................................................... 3
Public awareness.................................................................................................... 3
ANSWERS TO THE QUESTIONS ............................................................................. 4
1.
Are modifications required?........................................................................... 4
2.
Are tradable methane quotas an option? ...................................................... 4
3.
Which option do you prefer for pricing emissions? ........................................ 4
4.
Do you support the proposed reporting approach? ....................................... 4
5.
Do you support the proposed setting of levy prices? ..................................... 5
6.
Do you support the proposed revenue recycling? ......................................... 5
7.
Do you support the proposed incentive payments? ...................................... 5
8.
Do you support on-farm sequestration? ........................................................ 6
9.
Do you support an interim levy in 2025? ....................................................... 6
10.
Do you think the proposed system is equitable? ........................................... 6
11.
Do you think the sector should pay for shortfalls? ......................................... 7
12.
What impacts or implications do you foresee? .............................................. 7
13.
How should the Crown protect Maori interests? ............................................ 7
14.
Do you support the proposed verification approach? .................................... 8
15.
Do you have any other priority issues? ......................................................... 8
BACKGROUND AND SUMMARY
The Ministry for the Environment has issued a consultation document on Pricing Agricultural
Emissions in response to recommendations by the He Waka Eke Noa partnership. This is
welcome progress as the Agricultural sector has long contested its need to contribute to the
successful reduction of greenhouse gases.
The NZ Farm Forestry Association is aware that some farmers in the sheep and beef
industry are strongly pushing back against the proposals. They and their supporters believe
that they wil go out of business if the Government’s approach is adopted. We accept that
this may be true and certainly, implementation of this plan will affect many of our members.
However we broadly accept the proposals as written, understand the mitigation options that
are currently available, and trust that more will become available in the future.
2
This submission follows the form of the on-line response and deals with the 15 questions in
turn. Our particular concerns are summarised below.
Sequestration on farms
Many farmers are angered that there will be no recognition of carbon sequestration on farms
outside the Emissions Trading Scheme. What they fail to understand, or perhaps fail to
accept, is that at prevailing carbon prices the cost of the proposed levies can be offset by
establishing a few hectares of production exotic forest once every 16 years. That area will
have no material impact on land use, stock numbers or local communities.
In contrast, carbon sequestration in riparian strips and managed indigenous forest will be
both minimal and expensive. However it might be encouraged as riparian planting and
indigenous forest management will reduce erosion and improve freshwater quality and
biodiversity, reversing some of the damage that farming has caused.
Since pest control is a huge issue for both riparian planting and indigenous forests, a
Government programme to shoot or poison deer, goats, pigs, rabbits and hares might help
enormously and could be very popular.
Land use change
The financial impact of pricing agricultural emissions will be to accelerate land use change,
particularly in hill country. There will be some whole-farm sales and conversion into
production forestry, some mixed land-use change though establishing woodlots, and some
reversion of less accessible land into native forest. We are familiar with all three and each
offers benefits.
While whole farm sales for forestry are big news, in fact they are mostly opportunistic. As
noted above a farmer might earn enough carbon revenue to offset his levies by planting a
few hectares of exotic trees and registering them with the Emissions Trading Scheme.
Public awareness
We recommend that you show the pricing of agricultural emissions as part of the big picture
rather than as a controversial alternative to a largely unloved Emissions Trading Scheme.
Promote the story of what the Government is doing, why, and how it will positively benefit all
taxpayers. Don't be defensive about imposing levies on farmers. Instead be optimistic and
enthusiastic about your vision of this country with our emissions under control, our integrated
and productive land-uses, our pests and predators eliminated, and our high value industries
lifting the well-being of all New Zealanders.
The outline of the story is simply "We have to get to here. These are the steps and we’ve
started on the journey. Cutting agricultural emissions is the next step. After that we are going
to... “ (rebuild the transport sector, or whatever). In that context the public and probably most
farmers will accept the necessary changes.
3
ANSWERS TO THE QUESTIONS
1. Are modifications required?
Do you think modifications are required to the proposed farm-level levy system to ensure it
delivers sufficient reductions in gross emissions from the agriculture sector? Please explain.
Yes, the proposals are adequate. The Government will largely control both the methane
levy and the carbon price to which the nitrous oxide price is tied. Given that level of
control it is unlikely it will allow the process to fail. It can raise prices to ensure that
emissions reductions targets are met, and use the levy revenue for incentives to change
behaviour if prices alone are insufficient.
2. Are tradable methane quotas an option?
Are tradable methane quotas an option the Government should consider further in the
future? Why? Please explain.
No. The carbon market has not delivered the expected outcomes and there is no reason
to expect a methane trading scheme would be any more successful. Despite being in
use since 2008 the Emissions Trading Scheme has failed at reducing gross emissions.
3. Which option do you prefer for pricing emissions?
Which option do you prefer for pricing agricultural emissions by 2025 and why?
a. A farm-level levy system including fertiliser?
b. A farm-level levy system and fertiliser in the New Zealand Emissions Trading
Scheme?
c. A processor-level NZ ETS?
It’s not clear from the consultation document whether this question relates to all
agricultural emissions or just those from synthetic fertiliser.
Assuming it relates to all emissions we prefer (b), a farm-level levy system for methane
and carbon dioxide, and fertiliser in the Emissions Trading Scheme. This captures the
emissions impact of synthetic fertiliser used by everyone, not just farmers, and it is
simple and easy to control (similar to sales of petrol and diesel). Since the price of this
fertiliser will rise with a processor levy, farmers will become more careful in how much
they use and where, which should achieve the necessary behaviour change.
Assuming the question relates to synthetic fertiliser only we prefer (c), fertiliser in the
ETS at processor level for the reasons above.
4. Do you support the proposed reporting approach?
Do you support the proposed approach for reporting of emissions? Why, and what
improvements should be considered?
Yes, we support the approach. An improvement would be for the approach to be able to
deal with claims from farmers that they are (perhaps) running a genetic line of animals
4
that produces less methane than the average and that this should be recognised. A
suggestion for how that might be included is given in Table 3, page 40 of the consultation
document.
5. Do you support the proposed setting of levy prices?
Do you support the proposed approach to setting levy prices? Why, and what improvements
should be considered?
Yes. Farmers have resisted paying for agricultural emissions for years and cannot be
trusted to set a reasonable levy that will achieve the necessary outcomes. This has to be
done independently, despite their protests. They have not earned the right to be self-
regulating.
An improvement would be cross-party support for the approach so that it is not undone
through a change of government.
6. Do you support the proposed revenue recycling?
Do you support the proposed approach to revenue recycling? Why, and what improvements
should be considered?
Yes, we support the proposed approach, although the consultation document does not
spell out the revenue recycling strategy, it only suggests that you will develop one. That
could be good or bad. It suggests that if Agriculture remains a high priority then the levy
funds will go back into that sector; but if it achieves its targets then the levy funds could
be used for other purposes. Farmers will see that as a possible cross subsidy at their
expense. While that might be both fair and effective it could be unpopular.
As an improvement there should be real transparency in how the levy money is raised,
and how it is spent on administration, incentives, and research and development to
reduce emissions in Agriculture. It should clearly show how income is matched to
expenditure, identify the diversion of any surplus, and justify the spending of that surplus
elsewhere.
7. Do you support the proposed incentive payments?
Do you support the proposed approach for incentive payments to encourage additional
emissions reductions? Why, and what improvements should be considered?
Yes, we support the proposed approach as incentives get attention, and that is useful.
In terms of improvements, it is reassuring that the consultation document says (on page
28) that "the Government will work to ensure the science that underpins the agriculture
emissions method reflects the science underpinning Aotearoa New Zealand’s
Greenhouse Gas Inventory." It is also reassuring that it says "any proposed changes that
affect these (incentives) will go out for public consultation and may be amended because
of submissions received." Information transparency is really important. If we are "all in
this together" then the public will want to know what and why incentives or changes are
being considered.
5
8. Do you support on-farm sequestration?
Do you support the proposed approach for recognising carbon sequestration from riparian
plantings and management of indigenous vegetation, both in the short and long term? Why,
and what improvements should be considered?
Yes, we support the approach both in the short and long term. Although administering
rewards for carbon sequestration in riparian strips and managed indigenous forest will be
difficult and expensive, incentives in those areas will achieve far more than just carbon
sequestration. Encouraging riparian planting and indigenous forest management will
reduce erosion and improve freshwater quality and biodiversity, reversing some of the
damage that farming has caused. An incentive based on carbon price will help famers
meet their environmental targets and will be much simpler and cheaper to manage than
separate incentives based on measuring freshwater quality and levels of biodiversity.
In terms of improvements, pest control is a huge issue for both riparian planting and
indigenous forests. A Government programme to shoot or poison deer, goats, pigs,
rabbits and hares would help enormously and could be very popular. The ambition of
"Predator free by 2050" might be accelerated to "Pest free by 2040".
9. Do you support an interim levy in 2025?
Do you support the introduction of an interim processor-level levy in 2025 if the farm-level
system is not ready? If not, what alternative would you propose to ensure agricultural
emissions pricing starts in 2025?
Yes, we support an interim processor-level levy in 2025. Pricing agricultural emissions
was proposed in 2003 but never implemented and is now well overdue. If the farm-level
system is not ready for 2025, and this option is more effective and politically acceptable
than moving Agriculture into the ETS, then this is the obvious choice.
10. Do you think the proposed system is equitable?
Do you think the proposed system for pricing agricultural emissions is equitable, both within
the agriculture sector and across other sectors, and across New Zealand generally? Why,
and what changes to the system would be required to make it equitable?
Yes, although any system for pricing agricultural emissions will have impacts and side-
effects. It is a matter of choosing one that promises to be effective, broadly equitable
across sectors and politically acceptable to the wider public, not all of whom are
sympathetic towards farmers. While the proposed system will cause some pain it should
be effective and largely accepted. Use it until there is good evidence that it is
inadequate.
In terms of changes, equity is in the mind of the beholder. If the scheme is criticised as
being inequitable, rather than changing it we recommend you put some serious effort
into promoting the 'equity' that you want the sector and the public to see. Convince them
that this is fair, effective and overdue. Government efforts to date at promoting the
message to reduce Agricultural emissions have been somewhat wishy-washy.
6
11. Do you think the sector should pay for shortfalls?
In principle, do you think the agricultural sector should pay for any shortfall in its emissions
reductions? If so, do you think using levy revenue would be an appropriate mechanism for
this?
Certainly. The agricultural sector has avoided paying for its emissions to date by pushing
back hard against the idea. Because of those delays, adjustments now have to be much
shorter and sharper than they would have been had they started earlier. Farmers have
made money by delaying, and it's only fair that they should now be the ones to pay for
any catch up. The levy seems the most appropriate mechanism, as it will by nature
penalise those least willing to change.
12. What impacts or implications do you foresee?
What impacts or implications do you foresee as a result of each of the Government’s
proposals in the short and the long term?
It's hard to sort out the likely effects of He Waka Eke Noa from the effects of the
Emissions Trading Scheme, freshwater reform, changes to the Resource Management
Act and other environmental legislation affecting farmers. However given the financial
impact of He Waka Eke Noa we believe that in the short term it will accelerate land use
change, particularly in hill country.
Some hill country farmers may sell up, take the capital gain from their inflated land
values and retire. Forestry investors will buy their land and take the blame for the land-
use change, even though they are not the ones who chose to shut down the farm with its
flow-on effects on local communities and processing facilities.
Some hill country farmers may retire blocks of their more difficult country into native
bush. This could reduce their costs, and possibly earn sufficient carbon credits to offset
their levies and maintain income.
Others might plant a few hectares of exotic trees and register them with the ETS in order
to earn enough carbon revenue to offset their levies. A few hectares of trees every 16
years would be enough, and would not have any significant impact on land use. In their
areas, communities and processing works would be unaffected.
In the long term this should lead to greater afforestation of New Zealand’s hil country,
with reduced erosion, improved biodiversity and cleaner water. We trust this evolution
would somehow be integrated into the Agritech Industry Transformation Plan and the
Forest Industry Transformation Plan, so as to give efficient operating catchments for
materials to allow processing without long haul distances, and with high levels of value-
add to support our balance of trade and local communities.
13. How should the Crown protect Maori interests?
What steps should the Crown be taking to protect relevant iwi and Māori interests, in line
with Te Tiriti o Waitangi? How should the Crown support Māori landowners, farmers and
growers in a pricing system?
7
In broad terms, we recommend you treat Maori with respect, listen to their concerns,
understand their decision-making processes, quietly ignore their extremists and try to
agree on solutions that have dignity, integrity and durability.
While we believe everyone should be levied the same, we also believe the Government
should encourage Maori to develop collectives, large enough to implement changes to
farming practices and land-use but not so large as to create internal divisions. When
each collective had established an appropriate level of governance, the Government
might fund each one according to the cost of establishing sensible, durable and
profitable land-use. It would not necessarily have to be 100% funding, nor would it
necessarily have to be by way of grants, nor would it have to be equal across collectives.
14. Do you support the proposed verification approach?
Do you support the proposed approach for verification, compliance and enforcement? Why,
and what improvements should be considered?
Yes, we support the proposed approach. However because (i) there is no tradition of
farmers calculating their emissions and paying for them; (ii) the system has not been
embedded for decades like income taxes and GST; and (iii) a number of farmers seem
to deeply resent the idea of being levied, it is likely there will be both deliberate and
accidental non-compliance for several years.
Furthermore, environmental legislation seems to be very lightly enforced at present with
few farmers prosecuted for breaches. They will be expecting the same soft approach to
enforcing emissions levies. If this country is to improve its environmental performance
their attitude has to change. We recommend that the process of verification, compliance
and enforcement has some teeth.
In terms of improvements, we suggest you look to the NZ income tax system for ideas on
communication, monitoring, audit and penalties. IRD has been running it successfully for
years. The Emissions Trading Scheme is less of a useful model as it is clunky and
unfriendly, and officials seem to treat every participant as a suspect.
15. Do you have any other priority issues?
Do you have any other priority issues that you would like to share on the Government’s
proposals for addressing agricultural emissions?
We recommend that rather than offering He Waka Eke Noa as a controversial alternative
to a largely unloved and ineffective Emissions Trading Scheme, you paint it into the big
picture.
Put some real effort into telling the story of what the Government is doing, why, and how
it will positively benefit all taxpayers. Don't be defensive about imposing levies on
farmers; be optimistically enthusiastic about a vision of this country with our emissions
under control, our integrated and productive land-uses, our pests and predators
eliminated, and our high value industries lifting the well-being of all New Zealanders.
8
The outline of the story is plain: "We have to get to here. These are the steps. We have
already started on the journey. Cutting agricultural emissions is the next step. After that
we are going to (rebuild the transport sector, or whatever)." In that context the public and
probably most farmers will accept the necessary changes.
Thank you for the opportunity to make this submission. We look forward to the next steps in
implementing the levy system, and helping answer any further questions you may have
along the way.
Graham West
President, NZ Farm Forestry Assn.
17 November 2022
9
