Response ID ANON-SYE4-4PJP-3
Submitted to Pricing agricultural emissions
Submitted on 2022-11-18 14:10:29
Submitter details
1 Submitter name
Individual or organisation name:
FarmRight Ltd
2 Are you submitting as an individual or on behalf of an organisation?
Organisation
3 What is your contact email address?
Email:
9(2)(a)
4 Which region are you in?
Select your region:
Not applicable – national organisation
5 Please choose any you are associated with:
Rural professional or farm advisor
Other: please specify here:
Section 1: About this consultation
Section 3: The Government’s proposed policy designs
Read section three - HTML format
1 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?
Yes
Please explain your answer here:
Established in 2000, FarmRight Ltd provides investment and farm management to 59 properties in New Zealand which includes predominantly dairy
farms, two beef farms, three apple orchards, five vineyards and two hop gardens. This provides jobs to over 400 people.
While FarmRight acknowledges that climate change is the biggest threat to society and world food production, the proposed price levy system will have
an unprecedented impact in investments in agriculture in New Zealand and therefore the viability of the New Zealand economy. This will likely lead to any
decrease in food production by New Zealand farms being substituted globally with production for less carbon efficient farming systems, resulting in a
negative global impact on climate change. On behalf of our clients, FarmRight Ltd. therefore does not support all of the government’s proposal to price
agricultural emissions. We believe that New Zealand and the agriculture industry can play an important part in feeding an ever-growing world in a
financially sustainable manner. By 2050, the human population will require about 70% more food than in 2010. With another financial burden, as
currently proposed, more farmers will exit the industry which will result in job losses, loss of innovations as well as professional support to rural New
Zealand. We as FarmRight have taken our role seriously to become an industry leader with well advanced safe and well policies, adapted lean
management, defining sustainability strategy and enabling development throughout the industry. This will potentially be lost with driving farmers out of
the agriculture industry.
FarmRight does support the governments and He Waka Eke Noas farm-level split gas levy approach. However, FarmRight does not support the
government’s proposal of nitrous oxide being linked to the NZ ETS carbon price as it would not reflect progress made in the agriculture sector but setting
a levy rate for methane and long-lived gases based on emission target trajectory, availability and cost of on-farm mitigations, social, cultural and
economic impacts on farmers and communities and emission leakage and food security.
2 Are tradeable methane quotas an option the Government should consider further in the future?
No
Why? Please explain your answer here:
FarmRight agrees with the dairy industry body DairyNZ and does not support tradeable methane quotas as an option. This option would lead to poor
outcomes and create inequalities between different parts of the sector. This option would also create an additional administrative burden at the farm
level. Farmers would have to spend a significant amount of time trading in a carbon system or rely on carbon advisors. This would result in additional
costs for farm businesses.
3 Which option do you prefer for pricing agricultural emissions by 2025?
A farm-level levy system including fertiliser
Why? Please explain your answer here:
FarmRight supports farmers being able to influence the price they face, have ownership over the problem and the solutions and can determine the most
efficient and cost effective mitigation strategies depending on their farm or business profile. FarmRight therefore supports a pricing at farm-level as it
gives farmers control to manage their farm business and emissions profile, by giving them the ability to be recognised and incentivised for actions on
farm.
We also support He Waka Eke Noa’s proposal to include fertiliser in the farm-level calculation, so that farmers can consider all on-farm actions and levers
to reduce greenhouse gas emissions in one place.
Read section three continued - HTML format
4 Do you support the proposed approach for reporting of emissions?
No
Why? Please explain your answer here:
FarmRight supports the proposal for a farm-level calculator – one that transitions from a simple to more detailed tool over time. It is critical that the
proposed reporting approach enables farmers to receive recognition for their actions on-farm.
FarmRight does not support the government’s proposal to shift the start date from 1st June to 1st January 2025. This does not align with the farming
season (i.e. farm’s annual tax accounts) and will create extra work to gather farm data and information.
FarmRight believes that a clear timeline for when a detailed calculator will be implemented needs to implemented in the legislation. A pathway with
timebound milestones for transitioning to a more detailed calculator that accurately reflects farmers efforts on-farm is necessary. Some of the actions
FarmRight managed farms currently take on-farm to reduce emissions are the use of coated nitrogen fertiliser, reduction of nitrogen fertiliser while
improving clover and plantain levels to reduce nitrous oxide loss, reducing supplements as well as using low methane emission feed types (plantain,
fodder beet). Detailed reporting will allow to be rewarded for all these mitigation strategies as well as using farm specific livestock data (weight, number
of replacements, deaths) will enable farmers to accurately calculate their emissions. It is important that a potential calculator is able to recognise these
mitigation strategies as the recognition of these actions drives behaviour change and will positively contribute to reduce on-farm greenhouse gas
emissions.
What improvements should be considered? :
5 Do you support the proposed approach to setting levy prices?
No
Why? Please explain your answer here:
FarmRight does support the governments split gas approach.
FarmRight strongly believes that the agricultural industry needs a seat at the table when making decisions on levy price. FarmRight does not support the
Climate Change Commission being the only source of advice for the minister when setting the levy price, and the criteria for price setting being solely
based on the sector’s progress towards emissions targets. The combination of these factors fails to account for sector circumstance (agriculture represent
half of New Zealand’s emissions), and what price is needed to drive change whilst maintaining a profitable sector and vibrant rural communities.
FarmRight does not support nitrous oxide being linked to the NZ ETS carbon price as it would not reflect progress made in the agriculture sector. The
price setting process for nitrous oxide should be set in conjunction with incentives and sequestration offsets. FarmRight supports the dairy industry body
DairyNZ’s view and believes that Ministers should set levy prices in accordance with the principle of only collecting enough levy to deliver on the scheme’s
intended purpose and outcomes rather than the government’s proposed model which would create surplus revenue.
FarmRight supports the primary sector climate action partnership group He Waka Eke Noa proposal of updating the levy prices very three years. Setting
the prices will likely be a complex process (and requires financial resources) and setting the prices for three years will give farmers certainty.
What improvements should be considered? :
Read section three continued - HTML format
6 Do you support the proposed approach to revenue recycling?
No
Why? Please explain your answer here:
FarmRight believes that revenue only should be spent on helping the sector transition through incentives, sequestration, research & development, and
administration of the pricing system.
FarmRight believes that in particular the research of potential methane reduction through feed additives, vaccinations and animal genetics (beef) should
be in the focus of revenue recycling to help the industry meeting the zero carbon act targets while not compromising food production in New Zealand.
FarmRight managed dairy farms are pasture-based farms and the availability of mitigation technology is currently limited. While we believe it is important
to make changes and adjustments to farming now to be able to reduce emissions, some trials FarmRight has taken succeeded, and others didn’t. While
we trialled reducing stocking rate as a tool to reduce on-farm emissions it caused pasture management challenges. Further incentives and research is
needed to help the sector improve farming efficiency and animal performance to be able to reduce stock numbers and with this methane emissions. This
includes research projects into youngstock management and youngstock health.
We also believe it is very important to upskill and educate the work force on-farm to be able to implement the challenges and changes ahead of us and
therefore believe financial support is needed in the industry to do that.
What improvements should be considered? :
7 Do you support the proposed approach for incentive payments to encourage additional emissions reductions?
No
Why? Please explain your answer here:
FarmRight does not support incentives paid out as a rebate. This adds complexity and cost for the farmer and creates uncertainty on how and when they
will receive the incentive payments. Incentive payments should be focused on enabling farmers to uptake new technologies on-farm or drive
best-practice farming.
What improvements should be considered? :
Read section three continued - HTML format
8 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?
No, none of the above
Why? Please explain your answer here:
It is important farmers are recognised for their use of mitigation technology as well as all their on-farm vegetation. FarmRight strongly believes that all
original vegetation categories proposed by the He Waka Eke Noa Partnership (shelterbelts, riparian, active management of indigenous vegetation,
indigenous vegetation, scattered exotics, perennial cropland) should be included in the scheme.
FarmRight does not agree with the government proposal and the significant reduction of the scope of vegetation recognised and quantity of
sequestration rewarded. This limits farmers ability to offset their emissions price and manage their farm businesses.
FarmRight managed farms have taken a pro-active approach and financially invested over the past years with planting shelterbelts, wetlands, riparian
strips to reduce the environmental impact of farming and nutrient leaching. These are no longer eligible for recognition under the government’s proposal.
While we understand that monitoring and verifying comes with challenges and compliance and administrative costs, we believe it is important all on-farm
sequestration is rewarded as each individual plant sequesters carbon and therefore contributes to our zero carbon act goals.
In principle, having on-farm vegetation shifting to the NZETS could work. However, the government needs to provide certainty and commitment on the
pathway to shift sequestration (from all HWEN proposed categories) into the NZETS.
What improvements should be considered? :
Read section three continued - HTML format
9 Do you support the introduction of an interim processor-level levy in 2025 if the farm-level system is not ready?
No
Please explain your answer here. If you selected no, what alternative would you propose to ensure agricultural emissions pricing starts in 2025?:
He Waka Eke Noa highlighted that the creation and implementation of an interim processor levy would increase the compliance, cost, and complexity for
farmers. The agriculture industry has voted for a farm-level levy. If the Government cannot deliver a farm level levy by 2025, then an extended start date
or an alternative staged approach might be required.
Section 4: Impacts
Read section four - HTML format
10 Do you think the proposed system for pricing agricultural emissions is equitable, both within the agriculture sector and across other
sectors, and across Aotearoa New Zealand generally?
None of the above
Why? Please explain your answer here:
FarmRight believes this will have a significant impact on rural communities, with job losses and decreased economic activity in the rural areas.
With another financial burden, as currently proposed, more farmers will exit the industry which will result in job losses, loss of innovations as well as
professional support to rural New Zealand. We as FarmRight have taken our role seriously to become an industry leader with well advanced safe and well
policies, adapted lean management, defining sustainability strategy and enabling development throughout the industry. This will potentially be lost with
driving farmers out of the agriculture industry.
What changes to the system would be required to make it equitable?:
11 In principle, do you think the agricultural sector should pay for any shortfall in its emissions reductions?
No
Please explain your answer here. If you selected yes, do you think using levy revenue would be an appropriate mechanism for this?:
All revenue should be used for the sector to achieve environmental outcomes. Using levy fund to pay for a shortfall will reduce the amount of funding
available for emissions reductions programs, leaving the sector worse off in the long term and making it harder to achieve targets.
A potential shortfall will increase the levy price that will solve the deficit in the medium term.
12 What impacts or implications do you foresee as a result of each of the Government’s proposals in the short and the long term?
Write your answer here :
FarmRight manages several investment portfolios (i.e same owner with multiple farms). Forming collectives will significantly reduce the compliance costs
as all farms can be linked and a single emission amount can be submitted. Furthermore, we believe off-setting emissions through sequestration should
be rewarded on a collective basis to potentially reduce emissions and payments.
FarmRight believes that all farmers and growers should be able to report and pay for emissions collectively in 2025.
13 What steps should the Crown be taking to protect relevant iwi and Māori interests, in line with Te Tiriti o Waitangi?
Write your answer here:
The crown should support all landowners, farmers and grower equally regardless of ethnicity.
How should the Crown support Māori landowners, farmers and growers in a pricing system?:
The crown should support all landowners, farmers and grower equally regardless of ethnicity.
Section 6: Audit, verification and compliance
Read section six - HTML format
14 Do you support the proposed approach for verification, compliance and enforcement?
Yes
Why? Please explain your answer here:
FarmRight believes that the proposed approach for verification, compliance and enforcement needs to be done to some practical sense to avoid
unnecessary financial burden for the industry. Overheads have to be kept in proportion to the need.
FarmRight agrees that the audit and compliance function needs to be based on principles of cost-effectiveness, and ensuring that the administrative
burden is minimised for reporting entities. To this end, the auditing approach should be applied on a Risk Based Framework, to ensure that the burden of
compliance for an entity is proportionate to the risk that entity poses.
A focus should be on ensuring that there is an efficient and streamlined process for completing desktop-based audits, whilst ensuring that this is a robust
enough process to reduce the need for on-site audits. Where possible, audits and compliance obligations should be leveraged off existing industry audit
systems to further reduce the administrative burden on reporting entities.
What improvements should be considered? :
Provide general feedback
15 Do you have any other priority issues that you would like to share on the Government’s proposals for addressing agricultural emissions?
Add your comments, ideas, and feedback here.:
The primary sector climate action partnership He Waka Eke Noa worked intensively over the last three years together with farmers and grower to develop
an alternative pricing mechanism for the agriculture industry so the sector can be excluded from the Emissions Trading Scheme. FarmRight believes that
the government has made fundamental changes to the He Waka Eke Noa emission pricing proposal although being part of the development over the
past years in form of Ministry of Primary Industry and Ministry of the Environment. We are in good faith that the partnership’s recommendations will be
adapted in the legislation next year.
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