Agriculture off the hook for the ETS – for now
September 21st, 2009
Farmers have won some valuable breathing space with the Govt’s decision to hold off on their inclusion in the Emissions Trading Scheme until 2015. The dairy industry looks to be the biggest winner as under the Govt’s scheme, major emitting industries will face little in the way of price signals to change to lower-carbon technologies over time. This is because the scheme will allocate an uncapped number of free emissions credits to industries which grow and increase their emissions.
Carbon pricing has the potential to stunt dairy’s growth trajectory, curbing returns from the nation’s biggest export industry. Taxpayers are likely to feel the effects as NZ will still have to pay the bill to buy carbon credits on the open market to comply with whatever global standard is agreed in the post-Copenhagen climate change pact. Federated Farmers is now lobbying for NZ’s negotiators to push for agriculture to be left out of any accord reached in Copenhagen in December and allow for more flexible rules around land use and the harvest of wood. Federated Farmers president Don Nicolson says the risk is farmers will be forced to de-stock to mitigate their emissions. He likens this to the impact of a drought lasting several years. “The battle is not over by a long shot.”
The political battle over the ETS is likely to re-emerge after National turned to the Maori Party to garner enough support for its scheme. The fast-growing dairy industry is an intensive greenhouse gas-emitting sector and the risk is the Govt gets sent a huge bill for all the additional carbon credits it will have to buy as an offset for this growth. The cost of additional credit purchases in the transition to 2013 announced this week is estimated at $400m, at carbon prices of around $25 a tonne.
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