Leading economist says Ireland’s competitiveness could be impacted if New Zealand proposal adopted in this country
If Ireland followed New Zealand’s proposal to tax agricultural emissions at farm-level it could impact on the country’s international competitiveness, a leading agricultural economist has warned.
In June, New Zealand farmers proposed to government that an agricultural emissions pricing system be imposed on the sector as the industry faced huge political pressure to tackle its disproportionate contribution to national greenhouse gases.
Under the draft plan — a first-of-its-kind, put together by government and farm organisations, and which includes incentives for farmers to reduce emissions through feed additives and forestry — farmers would pay for their farm emissions from 2025 with short and long-lived gases to be price separately.
Although the New Zealand government has until December to decide whether to accept the industry proposal, it comes at a time when the Irish Government continues to grapple with practical solutions to reduce agricultural emissions quickly and drastically from 37.5pc by 2030.
Asked if the New Zealand recommendation could potentially work in Ireland Michael Wallace, Professor of Agriculture and Food Economics at UCD, told the Farming Independent: “I think many governments (including Ireland) will be closely observing the proposed plan by New Zealand to tax greenhouse gas emissions from agriculture.
“Some will probably adopt a wait-and-see approach to first learn from the New Zealand experience.
“The New Zealand farming industry strongly opposed the proposal of taxing emissions when it was initially mooted a few years ago, but they seem to have softened their position more recently.
“I suspect that the industry sees the tax as less damaging than the alternatives, such as imposed reductions in livestock numbers.
“The measure has been made more palatable for the New Zealand industry by proposed ring-fencing of the revenue for reinvestment in agricultural research and development and the potential for farmers to gain relief through adopting practices to reduce emissions and sequester carbon.
“However, the devil will be in the detail concerning measurement and monitoring to allow fair and effective implementation.
“From an Irish perspective, a significant concern with such a measure would be the impact on international competitiveness since it would raise the cost of production. Irish farmers would be at a cost disadvantage to producers in other countries that did not implement a similar tax on emissions.
“I don’t see an emissions tax imminently on the horizon for Irish farmers, especially given the current pressures on costs and food security. However, it could be something we might see in the longer term, especially if proven effective in New Zealand.”
Alan Matthews, Professor Emeritus of European Agricultural Policy, Trinity College Dublin described the New Zealand move as “very positive”.
“New Zealand was the first country in the world to propose pricing agricultural emissions. Initially it had proposed to include agricultural emissions within its Emissions Trading Scheme (ETS) but this led to push back from farmer organisations.
“Instead, they offered to devise themselves a pricing scheme for agricultural emissions which they would then put to government.
“Their main objection to the Government scheme was that it would be operated at the processor level (or distributors of fertiliser) and thus would not credit the individual farmer for efforts that he or she might make to reduce emissions — all farmers would be equally taxed, regardless of how they were managing their farm.
“So, they wanted a system of farm-level emissions accounts under which each farm’s net emissions (after any removals) would be measured and would be the base for any levy imposed.
“This proposal was made to the New Zealand government earlier this year, the New Zealand Climate Change Commission has now given its views on the proposal earlier this month, and the government now has until December to decide whether to accept the industry proposal or to revert to the ‘backstop’ in the legislation, which is to include agriculture in the ETS.
“In my view, it is very positive that the New Zealand industry has opted for a farm-level system. This means that individual farmers receive a price signal indicating they should try to produce less of the environmental ‘bad’ (emissions) and more of the environment ‘good’ (removals).
“The European Commission is proposing a system of carbon farming later this year which would introduce half of this system, i.e. it will pay individual farmers for removals, but we also need to apply a price signal to emissions as well.
“Simply offering subsidies for mitigation efforts under the CAP and hoping that the voluntary efforts of farmers will be enough to reduce emissions by the scale needed will not be enough.
“Of course, to limit adverse competitiveness effects, any net revenue raised under an emissions pricing system should be returned to farmers, either as a flat rate payment per hectare or to subsidise further mitigation efforts.
“The importance of the New Zealand proposal is that they believe they can implement a farm-level emissions budgeting system and that it can work as a climate policy instrument.”