Agriculture Regulations Consultation
Climate Change Policy
Ministry of Agriculture and Forestry
PO Box 2526
By email to: firstname.lastname@example.org
Submission by the Dairy Companies Association of New Zealand on the New Zealand Emissions Trading Scheme: Regulations for exemptions and thresholds, and methodologies for calculating agricultural emissions
Thank you for the opportunity to comment on the Regulations for exemptions and thresholds and methodologies for calculating agricultural emissions for the New Zealand Emissions Trading Scheme.
The Dairy Companies Association of New Zealand (DCANZ) was formed in July 2003 to co-ordinate and represent the collective public policy interests of its member dairy companies. Its members comprise Fonterra Co-operative Group Ltd, Tatua Co-operative Dairy Company Ltd, Westland Milk Products, Fonterra Brands (NZ) Ltd, Goodman Fielder Ltd, Synlait Ltd, New Zealand Dairies Ltd and Open Country Dairies.
- DCANZ understands that the scope of the current subject under consultation is limited to establishing regulations as required by the Climate Change Response Act 2002 and does not include more fundamental matters such as the inclusion of agriculture under the Emissions Trading Scheme (ETS), or the question of the appropriate point of obligation for emissions charges. On this understanding DCANZ welcomes the opportunity to engage with MAF on the draft regulations, but stipulates that so doing in no way detracts from DCANZ’s positions that:
- The ETS if applied to agriculture will have a serious negative impact on the New Zealand dairy industry’s international competitiveness, given that no other major dairy producing country is likely to include agriculture in its emission system in the foreseeable future. For this reason we do not believe the dairy sector should be included under the ETS until other major dairy producing countries have similar prices on their ruminant animal emissions;
- In order for an ETS to drive behaviour change, it should have an on-farm point of obligation that will reward adoption of mitigation technology and practice.
- DCANZ notes that it is aware of a submission on this subject made by DairyNZ, and would like to endorse the contents of this submission and its recommendations, particularly noting the material submitted by DairyNZ on concerns with the approach of incentivising increased per-animal production of meat and milk solids as a means of reducing overall greenhouse gas emissions from agriculture.
- Individual DCANZ member companies may also be submitting to this process and this submission should be read in conjunction with these.
Comments on Specific Questions in the Consultation Document
Exemptions and Thresholds
Q1: Are the proposed species-level exemptions reasonable?
- DCANZ disagrees in principle to the exclusion of horse emissions, both for equity and efficiency reasons. For example, aggregate goat emissions are smaller in size to those of aggregate horse emissions. Goat farmers can therefore feel aggrieved that they will be included in the scheme while horses will not face obligations. Secondly, by including some land-uses but not others the efficiency of the scheme is undermined.
- The principle to evaluate the possibility for consumer substitution ignores the far more important issue of land substitution. DCANZ submits that placing emissions charges on one industry that competes for land use (e.g. dairy) while exempting a land-use competitor (e.g. horses) creates an inequitable distortion and must be avoided.
- DCANZ disagrees with the inclusion of the principle asking, “Is there a single governing body?” Industry bodies cannot currently be the point of obligation under the Act, so the existence of one is currently irrelevant for exemption considerations.
- While DCANZ understands that it is not practical to capture horse emissions through a meat processor point of obligation, it disagrees with the statement in the consultation document that the reason for the exemption is that “The structure of the industry is complex and would therefore be difficult to administer”. DCANZ suggests that there is a range of ways whereby the horse industry could be charged for its emissions, including through a farm-level point of obligation, if the Climate Change Response Act was amended to allow alternative points of obligation other than meat processors. We would therefore request that a clear message be sent to the Emissions Trading Scheme Review committee that there is a need to amend this section of the Climate Change Response Act. Such an amendment would allow the removal the exemption for horses which in light of the above discussion is desirable.
- Finally DCANZ notes that a farm-level point of obligation would mitigate the need for the other exemptions proposed in these draft regulations.
Dairy Q 7: Movement of Dairy Emissions to the Meat Sector – Is the proposed methodology suitable to prevent double counting in the dairy sector? / Q10 ? Is there a better solution to any of the outlined issues for dairy? / Q11: Is the proposed methodology suitable for the dairy industry?
DCANZ is concerned that the subjects raised in the draft regulations are highly complex and may have long-term consequences for the future of the New Zealand dairy sector. The 20 working day period provided for consultation on these regulations simply does not allow sufficient time for DCANZ and other members of the dairy industry to consider these regulations and their impacts fully, and have a reasonable opportunity to develop considered alternatives.
There are, for example, a number of issues on which DCANZ would appreciate further clarity, and an explanation as to why they do not form part of the methodology:
If farmers reported their stock numbers each year a per-cow emissions charge could be calculated. This would create the strongest incentive to reduce emissions, and could be adjusted to ensure equity between breeds.
It would appear that the double-counting issue arises under the proposed methodology because the primary driver for the approach is avoiding a situation where meat processors have to determine whether an animal originated from the dairy or beef industry. Is it appropriate for this to be the over-riding consideration in designing these regulations when the key focus should be bringing-about behaviour change on farm? The National Pest Management Strategy requires a split between the dairy and beef industries to be determined at the point of slaughter and we wonder whether a similar split could be adopted for the ETS?
Q8: Bobby Calves ? Is option (ii) for the bobby calf issue the best solution?
DCANZ does not support placing any of the emissions from pregnancy or dairy cow maintenance on bobby calves. The primary reason for maintaining and impregnating a dairy cow is to produce milk, not to produce a calf. Placing the costs of the emissions on the calf will create perverse and undesirable incentives to not send this calf to a meat processor.
Therefore if limited to choosing between the two options presented by MAF in the discussion document, DCANZ supports option (ii) of placing the emissions passed on to bobby calves on the milk produced by the entire sector.
Q18: Are there any other comments?
The emissions factors included in the draft regulations are based on complex models that include a high number of assumptions and factors that are likely to change over time. It is therefore important that assumptions and factors built into regulations concerning agriculture in the ETS are able to be updated using a rapid and transparent process. It would seem sensible, for example, to include a process that would allow these factors to be revised via gazette rather than by a more cumbersome regulatory or legislative process.
DCANZ appreciates the opportunity to comment on the regulations for exemptions and thresholds, and methodologies for calculating agricultural emissions (May 2010). We look forward to further discussions with MAF on this matter as the various issues are considered further.