Fertile ground for change

Nitrous oxide plan, but critics argue the inhibitors need cool, dry soil to work.

Maybe the dairy industry is waking up at last to a concept crucial to its continuing success good practices on climate change are good business.

Its more enlightened leaders are beginning to realise dairying could make the first quick and significant reductions in New Zealand's greenhouse gas emissions. Even better, farmers would gain business benefits along the way.

Here's the rough maths: agriculture is the source of almost 50% of New Zealand's emissions compared with the OECD average of 12%. Of our total, two-thirds is methane from ruminant animals and one-third nitrous oxide from fertilisers. Cows and the fertiliser boosting their feed are the overwhelming source for those nitrous emissions, with sheep, beef cattle and deer minor contributors.

A solution for methane could be a decade away. But one for nitrous oxide is here and starting to enjoy rapid take-up among dairy farmers. A compound developed by Lincoln University scientists, it is sprayed on pastures before fertiliser is applied.

The compound inhibits the breakdown of the fertiliser into nitrous oxide that pollutes the air and into nitrates that pollute rivers. By helping to retain nitrates in the soil, the inhibitor improves pasture growth, thus giving farmers an economic payback.

Ravensdown, the Canterbury-based fertiliser company, has invested $4 million in commercialising Lincoln's science, launching it under the econ-n brand in 2004. Some 25% of dairy farmers in Canterbury and north Otago are now using it. Having proved its effectiveness in a variety of soils and climates across the country, Ravensdown is now promoting it nationally.

The company believes inhibitors have the potential to reduce nitrous oxide emissions to 1990 levels, the base year for New Zealand's commitment to reductions under the Kyoto Protocol. It also believes they can reduce nitrate run-off into watercourses by between 30% and 60%. And farmers benefit from a 15% or so increase in pasture growth.

Inhibitors have an even more enthusiastic champion in Simon Terry of the Sustainability Council. His paper A Convenient Truth, published in June, reckoned they could cut nitrous oxide emissions by 57%. This would amount to a 9.3% reduction in New Zealand's total greenhouse gas emissions during the 2008-12 Kyoto period. It would be equivalent to half the emission reductions electricity generators need to achieve.

These claims meet varying degrees of scepticism, however. Critics argue that the inhibitors need cool, dry soil to work. Thus the further north or west you go in the country, the less effective they are.

This is one line of attack by Ballance, Ravensdown's competitor that is lagging in the inhibitor technology race. But the strongest critic is Federated Farmers. Frank Brenmuhl, leader of its dairy section, offers a long list of doubts about inhibitors. Fed Farmers went as far in its March submission to government to say: "There are few steps farmers can take to reduce the methane and nitrous oxide emissions of their farm operations without severely limiting their financial viability. New technologies are a long way off yet. Although recent technologies like nitrification inhibitors have emerged, it is clear their impact on reducing emissions is minimal at best and their uptake reliant on financial support."

Thankfully, there is more enlightened leadership elsewhere in farming. Fonterra, the fertiliser companies, the Pastoral Greenhouse Gas Research Consortium (an industry-government initiative), Maf, and other parties have been working hard this year to verify inhibitors' effectiveness.

Tellingly, the promising economics of inhibitors encouraged the government to leave out any suggestions of financial incentives from its recently announced emissions trading framework. Its discussion paper last December had asked the industry if there was a case for a fertiliser tax to encourage the take-up of inhibitors.

Deploying inhibitors widely across the country will take four steps. First is confirmation of their effectiveness across diverse soils and climate. Fonterra hopes work under way by the research consortium and others will enable the co-op to give its farmers clear guidance on inhibitors' environmental and economic benefits by late this year.

Second, the dairy sector must develop good management and compliance tools to ensure inhibitors are used well. A crucial step should be in place by the end of this year the addition of inhibitors to Overseer the software farmers use for nutrient budgeting to ensure they don't pollute air and water by over-fertilising their pastures.

Handily, the government's emissions trading framework includes $41m of funds over eight years to help disseminate cleaner technology through the agricultural sector. It could be used to develop and spread best practice on inhibitors.

Third is commitment by the dairy industry and government to bring national deployment of inhibitors into the emissions trading scheme announced 10 days ago. As it stands, the scheme won't involve agricultural emissions until 2013.

But the economic and environmental benefits of inhibitors are powerful arguments to bring them in as soon as possible.

Fourth, the government has to persuade the United Nations that inhibitors are helping to reduce greenhouse gases and therefore New Zealand's Kyoto account should be credited for that. Such a step, a first for agriculture within the Kyoto Protocol, would be a clear sign that this country's farming technology was world leading.

Cynics will argue that farmers are growing keen about inhibitors only because they can see money in them. That's true, but misses two bigger forces at work.

First, the government is waving a stick at agriculture. When the sector fully joins the emissions trading scheme in 2013, it will get an allocation of Kyoto credits equal to only 90% of the sector's 2005 emissions.

Farmers will have to pay for any emissions beyond that. Given that expansion of dairying is driving up agricultural emissions by about 1% a year, the cost will be meaningful. Moreover, the government will reduce the allocation of credits to zero by 2025. At that point, the sector will bear the full cost of its emissions. Even today's level of emissions would cost the sector about $1 billion a year if carbon were priced at $25 a tonne.

Second, consumer markets are offering a carrot. The likes of famous global brands of infant formula are increasingly turning to Fonterra to make their products. These customers and the mothers they sell to are adding environmental standards to their already high demands on nutrition and safety.

Fonterra knows it has to respond. Four years ago the co-op struggled to persuade farmers to keep cows away from watercourses. Now it is starting to talk in far more sophisticated terms about its environmental performance.

For example, it is beginning to think about measuring the total carbon emissions of its products from farm, through processing and all the way to transport to supermarket shelves. It also says it will stay in business only if it can increase not just its output and productivity but reduce its environmental impact in tandem.

This is a dynamic well understood by global business leaders on climate change such as Du Pont, BP, and General Electric. Once they committed to developing cleaner technologies, they started building more profitable, robust businesses.

The dairy sector is still a long way from achieving such a virtuous cycle. But hopefully now it is starting to see the benefits of nitrification inhibitors, it will throw its efforts behind a far bigger challenge the reduction of methane emissions.