Whether you believe in climate change or not, our present government does and any new government later this year will too.
Politicans have committed to reducing New Zealand's greenhouse gas emissions to 1990 levels. As people respond best when their pockets are hit, achieving this reduction will be by making carbon emissions costly (where previously they were, essentially, free - earlier this month in Europe, a tonne of carbon emissions cost NZ$50.)
People are money wise and therefore will emit less carbon - whether because they will do less, or because the cost of new technologies (or doing things differently), will be less than the cost of emitting carbon. Change is going to happen, prices are going to go up and we will have yet another compliance regime. It's just the how, when, who and how much that contain uncertainties.
The Government has gone for the big bang approach: Cover the six major greenhouse gases and all major sectors of our economy. Late last year the Government introduced the Climate Change (Emissions Trading and Renewable Preference) Bill to amend the Climate Change Response Act 2002. The Bill has just come out of select committee with 1000 amendments and with many of the hard things still to be dealt with by regulation. Other than Labour, political parties across the spectrum are unhappy with the Bill in its present form, so expect intensive horse-trading and pork-barrelling. The Bill may not become law before this year's election.
Right now though for non-forestry agriculture it looks like:
- in 2011, agriculture may report emissions.
- in 2012, agriculture must report emissions.
- in 2013, emissions trading scheme starts for agriculture (with some free emission units sometimes called carbon credits; penalties for incorrect reporting; and need to purchase emission units if emissions exceed the specified levels).
- from 2013 to 2025, free emission units are progressively eliminated.
- in 2025, agriculture is expected (hoped) to be carbon neutral.
All scheme participants will need to calculate their level of emissions, retain records for verification, report, allow their records to be verified and, of course, surrender emission units to match their emissions in each annual compliance period.
It seems that a decision has still to be made about whether an agricultural participant is at the farmer level, the processor level or both.
To manage this changed environment, farmers are likely to convert less land requiring irrigation, process stock earlier in their emissions life cycle, reduce or change fertiliser, reduce fossil-fuel use, use nitrification inhibitors, switch to high-sugar grasses, plant more trees and increase multiple land use. While the nature of the changes are different from those of the 1980's, the extent and implications of this new regime may be similar.
The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.
If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.