Across the Tasman, New Zealand farmers are the mostly unwilling guinea pigs in an experiment that will be watched closely by Australian policymakers.
On July 1, New Zealand introduced its ETS - or “ETS-lite”, as some have dubbed it - which includes the energy and transport sectors, but not agriculture, source of half the country’s emissions.
Agriculture will not be brought into the ETS until 2015, but just penalising emissions on energy and transport has been enough to push up the cost of lamb production by 12 per cent, New Zealand Federated Farmers president and South Island farmer Don Nicolson claims.
Farmers will also be carrying other new indirect costs, Mr Nicolson said, because everything with an energy component has the new ETS costs built in.
At the same time, New Zealand rural weekly Straight Furrow last week reported that nearly 109,000 hectares of forest have been registered under the NZ ETS scheme, which is currently is paying $18-$20 a tonne in carbon credits from forests planted after 1989.
About threequarters of the ETS registrants are landholders with forests of less than 100ha.
John Dermer, president of the New Zealand Farm Forestry Association (NZFFA), suspects that the movement into farm forestry is driven more by farmers trying to balance their books in the short term than any long-term strategic thinking.
“There are some fishhooks in the scheme, and I am a little scared that people are rushing into it out of desperation,” he said.
“On the other hand there are others going into with their eyes wide open.
“I know a very good farmer on Class 6-7 land (only suited to grazing or forestry) who is planting about 350 hectares of forest himself this year. He’s done the figures: sheep and beef are bringing him about $150 a hectare, and he reckons the carbon will bring him nearer $600/ha.
“That’s why there’s a bit of interest. But it can turn around very quickly if the price of carbon drops.”
He believes that any forestry planting must be chosen and managed with the aim of earning a return independent of the ETS, which could be turned on its head as early as 2012, when the Kyoto Protocol expires.
Nevertheless, Mr Dermer welcomes the renewed interest in farm forestry. There is about one million hectares of erosion zones in New Zealand that need stabilising, and probably less than 100,000ha of farm forests in total across the country.
Don Nicolson is unequivocally against the ETS as a mechanism for moving toward a low-carbon economy.
“I know that in time we’ll move away from a carbon based transport system,” Mr Nicolson said.
“We already have electric quad bikes; eventually we’ll have electric tractors. The market doesn’t need legislation to change things.”
When in 1985, New Zealand embarked on subsidy-free farming, Mr Nicolson said the farm sector radically overhauled its efficiency, an achievement “completely unrecognised by society”.
“In 2010, we’ve got what is now an efficiency trading scheme, where in the subsidy-free environment we like to pride ourselves on, we’ve created our own competition. We’re less competive now than we were six months ago.
“The Prime Minister would have us believe that by having an ETS we have a gold-plated chance to get a market advantage. I think that’s absolute bollocks.”
Its proponents say that the ETS should only cost the average New Zealand household $165 a year.
After just two months, it’s too early to assess the effects New Zealand’s farm sector, although a clearer picture will emerge over coming weeks as farm businesses pay their quarterly power bills.
“The Australian farming and processing sector should be looking at New Zealand and have a good hard think about that model,” said Australian Farm Institute executive director Mick Keogh.
“It’s not hard to imagine an Australian government saying, it’s working over there, let’s do a similar thing here.”
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