It’s about cutting emissions, not hiking taxes: Hoggard on ETS agriculture cull

Thursday, 13 June 2024

James Shaw on working with business, Jacinda Ardern and what his climate anxiety looks like.

ANALYSIS: Its scrapping was long promised by National and ACT and now it is happening. Agriculture will not be going into the emission trading scheme (ETS). Instead, the Government will start up a new ‘pastoral sector group“ to try to reduce biogenic methane.

“The focus is really a clean science question of what is the reductions in methane that need to be made to achieve no additional warming. It's very, very science focused,” Associate Agriculture Minister Andrew Hoggard told The Post.

“It's not about considering any economic impact or considering what's available or anything like that. We just want a straight science question answered, and then we'll take that answer and mix and mingle that with economic analysis and what's available to make any final decisions.”

When plans to charge agriculture for emissions was unveiled by the previous Government in 2019, it set aside five years to get agriculture into the ETS through a consultation process called He Waka Eke Noa. Over five years Government and industry would work together to work out a way to measure on-farm emissions.

He Waka Eke Noa is now dead.

Andrew Hoggard speaks at the ACT party conference in Auckland.

Then in 2022 the Ardern Government announced that New Zealand would be the first country to make agriculture pay for emissions - but it wasn’t going to be in an emissions trading scheme, instead there would be an effective methane tax charged on methane emissions at a processor level, but it still reserved the right to just stick farming in the ETS if it didn’t work out.

Associate Minister of Agriculture Andrew Hoggard - former Federated Farmers’ president - told The Post that while there was a world in which the scheme could have worked, in the end Labour became fixated with taxing farmers rather than reducing emissions.

“I would have thought a better way, in my mind, is, really that was sort of a negative approach to it, that we're going to have to tax farmers to do better,” says Hoggard.

Happier times: the day that Prime Minister Jacinda Ardern, Ministers James Shaw, Damien O’Connor, and Kieran McAnulty visit a farm in the Wairarapa to announce that agriculture would now pay for emissions

“How I'd approach this is, and how I've said it to other farmers, is effectively… we want to maintain being the best in the world. So we want to look at systems, processes, whatever that enables us to stay number one.”

Even within the Government at the time there was dissension. James Shaw, then Climate Change Minister, favoured a separate cap and trade scheme for methane emissions, concerned that the methane levy would be set too low and that there was no emissions cap.

For Jacinda Ardern, taking a transition in which agriculture paid for emissions was a central goal and was to have formed a big part of her Government’s legacy. Now it is dead.

One of the key matters - and one that Labour consistently argues - is that international markets will punish New Zealand over time for not having sufficient climate bona fides and that over time protectionist markets such as in Europe will use it as a way to throw up non-tariff barriers.

There was also the widely-held view in both Labour and the Greens that the agricultural sector would try to drag its heels and just wait the Government out until a National-ACT-NZ First Government scotched the plan.

Labour has been eager to point this out.

“We were doing the right thing by working alongside the sector to come up with a long-term plan to reduce emissions from agriculture. It’s disappointing we couldn’t get something across the line but remain committed to a long-term solution,” Labour’s agriculture spokesperson Jo Luxton said.

The rejoinder from National and ACT is that the scheme never got off the ground because it was never workable, penalised New Zealand farmers compared to trading partners and would be done better differently.

Hoggardsays the market is doing it any way and that farmers and firms doing the right thing in emission reduction should be rewarded with a price premium.

“Everyone's been telling us we need a tax to meet the market well. And that's not how markets work.

“You know, the customer tells the producer what they want and you either tell the customer you're dreaming, you're expecting too much, man, I can't afford that. Or you go, oh, I can't afford to lose this customer. So, yes, I can probably push things a little bit more here. And you, you have a negotiation, and you meet and you make the market.”

Essentially the play here is to identify ways to innovate to bring down emissions rather than charging for the externalities of emissions. It is a fundamentally different approach and one that will be viewed with significant suspicion or derision from the political left and some of the climate concerned.

It will be an area of significant and heated political debate over the coming three years.