A major report yesterday into how New Zealand might manage its response to climate change makes it clear the New Zealand landscape is about to undergo its most dramatic transformation in 75 years.

Steep green hills dotted with sheep will become forests.

Large areas of flat country now carrying dairy cows will go into horticulture.

And even dairy farms themselves will contain more pockets of trees.

The Productivity Commission’s report into a low emissions economy was originally commissioned last year by the National Government but now has added urgency because of the Labour-led Government’s intention to make New Zealand’s net greenhouse gas emissions zero by 2050.

The report, with its dramatic outline of the future, particularly for farming, has been cautiously welcomed by both the National Party and Federated Farmers.

Federated Farmers climate change spokesperson, Andrew Hoggard, said the Feds saw positives, but also some recommendations that would cause considerable agricultural sector disquiet in the report.

National’s climate change spokesperson Todd Muller said the report was “another useful contribution to the development of climate change policy.”

The politics of land use change

What is now clear is that the coming political debate on how to achieve net zero emissions is going to focus very much on land use.

Climate Change Minister, James Shaw, who has been conducting meetings across the country on how to manage the response is aware of the concern among farmers as to what they might be in for.

“I know that there is a fear out there that farmers are going to be walking off their land and it is all going to revert to bush, I don’t hold with that,” he said.

But the figures in the Commission’s report are stark; half of all greenhouse gas emissions come from biological sources.

And the report says it is the increase in dairying that has been largely responsible in the increase of agricultural emissions.

“Between 1990 and 2015, agricultural emissions rose by about 16%, largely driven by the intensification and growing overall volume of dairying as well as by the increasing use of synthetic fertilisers.

“With a larger number of dairy cows and more intensive production, emissions from dairying rose by 130% over this period.

“This increase was partially offset by lower beef and sheep emissions, mainly due to herd numbers dropping.”

As a result, methane emissions rose by only four per cent, but a fivefold increase in the use of nitrogen-containing fertilisers helped contribute to a 28% rise in Nitrous Oxide emissions.

“Due to these trends, dairy farming’s share of total agricultural emissions more than doubled from 23% to 50% between 1990 and 2016,” the report said.

However the report proposes  — and Shaw agrees — that the short-lived biological gas, methane, should be treated differently from the long-lived biological gas, nitrous oxide.

The report has proposed that methane could be dealt with separately to the two long-lived gases (nitrous oxide and carbon dioxide) either with a separate Emissions Trading Scheme unit price for methane or with a cap on methane emissions.

How trees might make farmers rich

But Shaw said there was also the prospect of farmers being able to plant trees on their properties to offset their emissions.

 “One of the strongest messages we have received from the farming community over the past few months is that farmers want to be able to do that and that the tools are available to help them.

“They are not satisfied at the moment that those tools exist or if they are they are too difficult to use.”

However small pockets of trees on a farm to offset its emissions may be a solution for some farmers; for many, the only response will be drastic.

They will either have to convert large areas of their farms to what will effectively be forest or stop running livestock altogether and convert to horticultural crops.

In the words of the report: “Land use will need to change substantially if New Zealand is to transition to a low-emissions economy by 2050.

“In particular, land planted in forests will need to increase by between 1.3 million and 2.8 million hectares, mostly converted from marginally profitable beef and sheep land.

“Rapid growth in horticulture (from a relatively small base) could also play a significant role in reducing agricultural emissions.

“The needed rate of change is comparable to the rate at which beef and sheep farming converted to forestry, dairying and other uses, over the last 30 years. Yet the transition requires a sustained rate of forestry far higher than in the past.”

Shaw, however, is optimistic that the substantial land use changes this implies could turn out to be positive.

“At the moment there are already a number of sheep and beef farmers who are apportioning their most inaccessible, most erosion-prone, most unproductive land to forestry and they are getting the revenue from that but retaining the most productive land for sheep and beef.”

A central argument in the report is that the ETS unit price should rise from its present (around $25) to at least $75, possibly by 2050 to $200.

Given that a Pinus Radiata plantation is worth about 715 carbon credits over 25 years, an increase to $200 could make that plantation worth over $5000 per hectare a year — way more than the $400 – $500 a hill country farmer might net from running sheep on his property.

“I think that what this does is create a secondary revenue stream for a portion of people’s land,” said Shaw.

He said that Beef and Lamb New Zealand has said they could make their industry carbon neutral by 2050.

“I think the future of farming is where it will be highly productive and more profitable than it is today,” he said.

Electric cars

But the money for the carbon credits has to come from somewhere and that is likely to be the transport industry.

Currently, according to the Automobile Association, about five cents per litre of the fuel price in Auckland goes to pay for ETS units.

If the ETS price were to triple or even go up by a factor of ten that will impact into petrol prices at the pump. That, of course, is what the scheme is intended to do so that people are persuaded to move to electric cars. (or public transport).

However, the report identifies a number of obstacles towards increasing the number of electric vehicles:

  • the upfront price premium compared to petrol and diesel vehicles
  • limited travel range, and associated range anxiety
  • the lack of public awareness and understanding of EVs; and
  • constraints on supply and lack of model options.

It says a large uptake of EVs would add significant load to the electricity grid.

“Without cost reflective pricing of electricity, electricity emissions could rise significantly due to increasing peak demand (with EVs being charged at peak periods).

“The additional electricity load could also put significant pressure on the existing network and require large investments to provide additional capacity.”

There is no such thing as a free lunch!

But to encourage electric vehicle uptake, it proposes what it calls a “feebate” scheme whereby cars would effectively be taxed according to their emissions potential.

This could be a hard sell politically if fuel is already carrying an increased ETS charge because it would, in effect, be double taxation.

And perhaps ominously Shaw said it was paradoxical that while the Government was looking at ways to reduce emissions and encourage electric vehicle uptake, Kiwirail was converting its engines from electrci5tiy to diesel.

“I think there is a fairly widely held view that it would be better if that could be avoided,” he said.

But what was clear from the report and from Shaw’s response was that the process of achieving net zero emissions along with the costs and the challenges has now begun.