Federated Farmers Advisory regarding ETS Review

18 March 2011

Emissions Trading Scheme Review

All members

A review is underway

The government have established a panel to review the emissions trading scheme (ETS), and the panel have released an issues statement with technical questions they would like to receive public submissions.

The deadline for submissions on the Issues Statement is Friday 6 April 2011.

Federated Farmers is currently working on its response to the panel’s issues statement.

Federated Farmers policy position on the ETS

Federated Farmers strongly opposes biological agricultural emissions from food production remaining in the Kyoto Protocol and subsequent international agreements. Federated Farmers further considers the inclusion of biological agricultural emissions in the ETS should be postponed far beyond the entry date of 2015 currently set in the legislation.

Our preference as an organisation remains that there should be no ETS in New Zealand. If New Zealand must have an ETS, then it must not include biological agricultural emissions. If New Zealand must have an ETS and include biological agricultural emissions, then there are a number of requirements the legislation and regulations would need to satisfy before that could occur.

The review

The Climate Change Response Act 2004 requires the government to establish a panel to review the operations of the ETS and that each review must be completed 12 months before the end of a commitment period. The current commitment period under the Kyoto Protocol finishes at the end of 2012, so the current review must be completed before the end of this year.

The review differs from the 2009 review of the ETS, as this one focuses exclusively on how the ETS should be improved, rather than the broader issue of whether an ETS is the right approach for New Zealand to honour its international obligations.

The panel will consider a range of issues and submit a report to government for their consideration. Any amendments to the ETS and/or the legislation would be made by the government following receipt of the panel’s report.

Issues statement

A copy of the panel’s issues statement can be obtained here. Key aspects of the issues statement identified by the Federation include:

• The review will not consider whether the ETS is appropriate, whether New Zealand should be taking action on climate change, or the role of any measures outside the ETS itself.
• The review is a technical review and so the panel’s line of questioning is focussed on how the ETS is actually performing and whether they’ve adequately identified future risks to the operation of the scheme.
• Agriculture’s delayed entry to the scheme appears to be treated as a lesser issue against the entry of synthetic greenhouse gases and more fundamental technical aspects to the ETS.
• The questions around agriculture’s entry to the ETS are helpfully built around whether there should be conditions to a sector’s entry to the scheme.
• The issues statement refers to unreleased figures from the Ministry of Agriculture and Forestry (MAF) that put expected annual costs at 2015 to dairy farmers at $10,000 and sheep and beef farmers at $5500. These figures are mischievously compared against modelled annual working expenses, instead of against more appropriate annual profit estimates.

Key aspects to the current ETS the Federation considers the agriculture sector would benefit from seeing retained, include:

• Agriculture’s delayed entry to the ETS.
• Transitional measures like the half-obligation, the $25/tonne cap on the price of carbon, and the ability for cash to be paid to the government instead of emissions units to cover emissions liabilities.
• The promise of units being allocated to agriculture if it is brought into the ETS.

Key aspects to the current ETS the Federation considers the agriculture sector would benefit from seeing improved, include:

• Strong criteria in the Act that the government would need to satisfy before bringing in biological agricultural emissions, namely:
  • Other countries must have similar schemes or impose similar emissions costs on their own food producers;
  • New Zealand farmers must have cost-effective technologies they can use; and
  • International rules must recognise on-farm use of such technologies.

Otherwise, agriculture must remain outside the ETS.

• Removing 2015 from the legislation as the entry date and replacing it with a looser intention to bring us in should the above criteria ever be satisfied.
• Extending the transitional measures beyond 2012.

Further background

A booklet has been produced by Business New Zealand comparing trends in emissions levels in New Zealand with those of other countries. A copy of the booklet can be obtained here.

A brochure has been produced by the Greenhouse Policy Coalition that describes how emissions units work in the ETS. A copy of the brochure can be obtained here.

For more information, please contact

Jacob Haronga

Senior Policy Advisor

Email: jharonga@fedfarm.org.nz