Farmers get time, PM gets support

Jacinda Ardern has come to what looks like an elegant solution to the festering decade-long problem of agriculture’s free ride in the policy fight against climate change. Ardern will later this morning give farmers exactly what they asked for: Time. They won’t have to pay any emissions levies or other climate change taxes until 2025, by which time the industry has said it can develop a more sophisticated approach to penalising pollution than the Emissions Trading Scheme (ETS), which they despise.

And yet Ardern is keeping that big stick in the cupboard. In fact she is passing a law that says agriculture will enter the ETS by 2025. It’s on the sector to work out something ahead of that. And if they don’t look like they are doing enough by 2022 the Government is giving the Cabinet at that time the ability to bring agriculture into the ETS by administrative fiat.

No select committee, no lobbying – just a swift rap across the knuckles in the form of a $0.01c tax on every kilogram of milk solids.

This is a complicated announcement that both sides of this debate will find plenty to pick at. This is not the Green Party (or Labour) policy of taxing agricultural emissions almost immediately. Nor is it quite the can-kicking favoured by the National Party and the louder parts of the farm lobby. It’s time, but with strings attached.

The expected announcement also appears to be genuinely cognisant of the real-world challenge farmers face in trying to reduce their emissions. At its best it gives the agricultural sector the ability to shape its own destiny. Crucially, the plan aims to use the five years for Government and industry to figure out some way to measure and account for farmgate emissions. Unlike the ETS, which is a blunt tool, this will give incentives for farmers to review their practices, rather than just whacking food processors with a charge.

If it all works, it will help give the agricultural sector both time to adjust, and policy certainty to aid farm investment decisions. We won’t really know if it has been effective until 2025 – or 2030, when the Government wants methane emissions down by 10 per cent.

The cost of not having some sort of price mechanism on big emitting sectors can be seen only too clearly in Australia. Across the Tasman a lack of a pricing mechanism has left the electricity system – some 75 per cent of which is coal-fired – with uncertainty leading to an effective investment freeze in reliable forms of power. Energy-rich Australia now has skyhigh electricity prices. Melbourne faces the spectre of blackouts this summer.

In New Zealand, the fact that this is not everything both sides wanted will be key to keeping the Greens and NZ First onboard with the proposal.

This proposal lays down an interesting gauntlet for National. Leader Simon Bridges has indicated a keenness to be bipartisan on climate change and his party voted for the first reading of the Zero Carbon Bill, despite deep misgivings about the methane target – agricultural emissions really are the third rail of New Zealand politics, right beside the superannuation age.

But his party has also been making hay of every attempt to regulate the primary sector by this Government as an attack on the regions. It also features MPs like Judith Collins, who has made clear she will be voting against the Zero Carbon Act. Collins is an urban MP with no responsibility for climate change in the party, but she’s fashioned herself into something of a champion against the ‘‘woke’’ politics of climate change, writing a huge Facebook post in recent weeks essentially asking why Kiwis should bother trying to reduce emissions.

While the sector has agreed to the goal of getting the new system in place by 2025 they are naturally uneasy about the backstop. This will give National some ammunition to carefully disagree with the Government – you say the 2025 goal is laudable but the punishment mechanism for not getting there is draconian.

Some will criticise Winston Peters for acceding to any type of taxation on agricultural emissions. But in truth Peters already won this fight way back in coalition negotiations when he got a guarantee that agriculture could only enter the ETS with a 95 per cent discount. That deal stands – even if the ETS isn’t used only 5 per cent of emissions will be covered. Ardern may be very good at elegant coalition management. But Peters is something else entirely.

And yet Ardern is keeping that big stick in the cupboard.