Carbon emission price increase signals tough times on the horizon for agriculture

The release of the Productivity Commission's Low Emissions Economy draft report has shown the government's intentions to crack down on New Zealand's biggest carbon emitting-industries. 

The 508 page draft discussion document says New Zealand’s emissions price will need to rise to levels of the order of $75 a tonne of CO2 equivalent (CO2e) and possibly over $200 a tonne over the next few decades to achieve the domestic emissions reductions needed to meet New Zealand’s international commitments.

The agriculture industry, which according to the Ministry for the Environment's Greenhouse Gas Inventory contributed 49.2% of New Zealand's gross emissions in 2016, is unsurprisingly one of the key targets of the report, which states:

"Opportunities to reduce agricultural emissions, particularly from dairying, will also be important... An emissions price that covers all land use, including agriculture, should be the main driver of land-use change. A well-designed and stable NZ ETS will incentivise land-use change, including more afforestation, as well as a search for, and adoption of, low-emissions practices and technologies in agriculture. To reflect the trade-exposed nature of the sector and current technological limits, the entry of agriculture into the NZ ETS should be supported with free allocation of NZUs for a transitional period."

Speaking with Radio NZ this morning, Productivity Commission Chairman Murray Sherwin said the proposed changes will be difficult, but are well overdue:

"Challenging but achievable, and we need to start now. The last 10 years has really gone nowhere since the ETS was introduced. We've only just begun to flatten off the growth in emissions; if we're going to start to turn that slope down it's going to need quite vigorous effort."

Sherwin projected a twelve-fold increase in emission prices, which along with stinging the agriculture industry, will likely bring about a dramatic spike in petrol prices. 

In regards to the commission's recommendation to include agriculture in the Emissions Trading Scheme, Andrew Hoggard of Federated Farmers says that will only make it harder for farmers to compete:

"We're already world-leading in terms of our footprint per kilo of production across all of agriculture, so I struggle to see how bringing agriculture into the ETS would actually change anything for the better or improve things."

Submissions on the draft report are open until June 8 and a final report will be submitted to the Government in August.