Why the ETS is a lose-lose and needs to be scrapped

03:49, Jun 18 2014

There has been a lot of talk in this newspaper about the Green Party's climate tax cut, and our proposal to bring dairy farming in under a carbon pricing scheme.

So I thought it would pay to dispel some of the myths, set out our rationale and go over our position on costs.

But first, and I doubt I need to say this - farmers know it more than most - we have a genuine situation here.

Climate change is no longer being talked about as the biggest issue of our time; it's now being referred to as the biggest issue of all time.

How we respond to it will define us. The longer we wait, the more it will cost. New Zealand (ie, agriculture's) unique challenges can't be used as an excuse.

Every country faces a different and difficult set of circumstances. We cannot continue to use ours as a reason to opt out.


Precisely because we have distinct challenges, we need to get on with it.

New Zealand's net emissions are projected to increase by 50 per cent in the next decade, just as every country in the world is being urged to reduce their emissions with some urgency. We are heading in the wrong direction, and fast.

Dairy emissions have more than doubled since 1990, and the lack of a proper price signal means tens of thousands of hectares of land continue to be converted to dairy.

Our policy is designed not to damage farmers, but to drive efficiencies, cleaner technologies, environmental integrity and future investment decisions.

We're proposing a $12.50/tonne charge on dairy emissions.

The impact would be about 8 cents per kg of milksolids (equal to a 2 per cent increase in on-farm costs).

To put this in perspective, if the exchange rate fell or rose 2 per cent and stayed that way over a year, it would have the same impact. Similarly, the cost is the same as a 2 per cent shift in the international price of whole milk powder.

On any given day, the baseline milk price can fluctuate by many more times than that. It's now 26 per cent below its February peak.

On average, New Zealand dairy farmers spend 47 cents per kg of milk solids on fertiliser alone.

Eight cents is not a stick. It's a signal, and an important one. The levy collection would be at a producer level, so it will be up to companies like Fonterra how it's passed on.

I'm meeting with Fonterra this week and will raise options for rewarding less intensive, lower-emission farming. It may opt to differentially reward farmers in order to help it achieve its own sustainability targets.

In the meantime, the Green Party plan already includes financial incentives for "good" farmers - largely ignored by commentators in this paper.

We'll reward emission mitigation and associated environmental improvements via an on-farm certification scheme.

This will enable farmers to claw back costs arising from the carbon charge.

The many kilometres of riparian planting farmers are undertaking will qualify for carbon credits (at $12.50/t CO 2-e).

There will be other indirect costs resulting from fuel and electricity under a carbon tax.

That's why we've cut the corporate tax rate by 1 percentage point to 27 per cent. The Greens are going into the election with the lowest company tax rate of any political party.

It's also important to point out that at the moment, every New Zealander is shouldering costs under the failed emissions trading scheme.

Every time we fill up our cars at the pump, or pay for power, there's an ETS cost factored in.

Yet we get nothing back, and our emissions continue to climb.

The ETS is a lose-lose and needs to go.

There is a balance to be struck between farmers' ability to pay for pollution, and the urgency of the problem at hand. We have been careful to try to achieve that balance.

The carbon tax will give a fair and transparent price signal. It's not designed to drive farmers out of business.

To suggest that farmers won't adapt to it, or that it will drive production offshore, shows a lack of faith in our farmers.

If farmers treat it as an opportunity, it becomes a huge competitive advantage. We sell our products to world off the back of a reputation for being clean, green and safe. The levy would become part of that brand.

Every industry and business in the world will in time be brought in under a carbon scheme.

This includes agriculture.

There is an argument to be made for getting a head start.

100% Pure has done well for Kiwi farmers.

Imagine what being the world's first carbon neutral producers by 2050 could do.

Russel Norman is the Green Party co-leader.