ETS To Cost Dairy Farmers Millions
John Boscawen MP, ACT New Zealand
Speech on Third Reading, Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill, Wednesday, March 31 2010

Mr Speaker,
It is a privilege to take a call on the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill, and as I do so at six minutes to midnight, I wonder how many people are listening into this debate? How many New Zealanders are following a debate on the pricing of raw milk at six minutes to midnight?

The reason that I am taking this opportunity is, as we have heard this evening, the dairy industry is a very, very important part of New Zealand’s economy.
The Hon Dr Nick Smith told the House that over a quarter of New Zealand’s export earnings come from the dairy industry. It is the single biggest contributor to our export earnings – no other New Zealand industry is as important.

Well Mr Speaker, I would like to raise a very important issue to the dairy industry – the price of inputs, and one input in particular – the cost of the new ETS tax to dairy farmers.

The Emissions Trading Tax will affect all New Zealanders and dairy farmers in particular from 1 July this year.

Treasury forecast the ETS will raise the price of electricity by 5% and petrol by 4 cents a litre and double this again in 2013. These increases are those solely due to the ETS tax, and over and above price increases from any other source, including the likely 2½ % GST increase.

However, of even bigger concern to dairy farmers is the $40 million p.a. ETS tax bill Fonterra and other dairy producers will pay from 1 July this year. This doubles to more than $80 million p.a. in 2013. This cost will be met directly by dairy farmers and along with electricity and petrol increases will cost dairy farmers 7 cents per kg of milk solids.

When the ETS Tax Bill was passing through Parliament late last year National told us time and time again that Australia would have an ETS and our ETS would be based on the proposed Australian one.

The problems with that are many – firstly Australia never passed an ETS Tax and doesn’t look likely to, and secondly Australia has a far heavier and more carbon intensive industry than New Zealand.

As such Fonterra and other dairy processes don’t meet the requirements for free emissions allowances that would otherwise provide them with some credit for their level of pre-1990 level of carbon emissions.

So Fonterra, one of the most efficient milk processors in the world, if not the most efficient, is landed with a bill of some $40 million for its emissions which it will pass directly on to farmers – a bill that will double to $80 million in 2013.
Just last November Prime Minister, John Key told the Federated Farmers Executive that National was delaying the introduction of agriculture into the ETS.

What he didn’t explain though, was that the charges for animal methane and nitrous oxide only make up less than a quarter of the total cost for a dairy farmer - $2,400 of a total cost of $10,200 p.a.

By far the biggest portion, $7,800 p.a. for the average dairy herd, is due to electricity, petrol and the dairy factory emissions.

ACT believes that New Zealand shouldn’t be leading the world with the ETS tax. We shouldn’t be the first country to introduce an all sectors, all gasses ETS tax. National promised we wouldn’t be world leaders, but fast followers. The time has come for John Key and National to realise the world has changed in the last six months and to delay the implementation of the ETS Tax.

ACT campaigned on abolishing the tax. If the Government fails to do that ACT believes as a minimum, the ETS needs to be delayed from its 1 July start date.
We also believe that dairy farmers shouldn’t be facing a $80 million p.a. bill for dairy processing emissions.

If the ETS is only to be delayed, it also urgently needs to be re-worked so that our dairy and other food processing plants are given a fair share of free emission allowances.

If New Zealand doesn’t face reality and back off now we will be going where no other country has gone, or is planning to go.

To illustrate just this point, earlier today I attended a breakfast with European Parliamentarians to discuss climate change. They painted a very dismal picture on a united world wide agreement. Mr Charles Chauvel who is in the House at the moment was there and I am sure he will back me up.

One of the key points made by the delegation leader, European MP Richard Ashworth, was that President Obama, had used up a huge amount of political capital passing his healthcare reforms. So much so, that there is absolutely no prospect of him passing a comprehensive cap and trade bill as he had originally proposed.

With no ETS in the US, no agreement with China, and little immediate prospect of an ETS in Australia it is more important than ever to ensure that our farmers and exporters are not penalised. Ideally, the ETS should be delayed, if not scrapped. If this doesn’t occur, then at the every least farmer’s should be allocated their fair share of credits.

Finally Mr Speaker, earlier this evening Mr Damien O’Connor referred to Shane Ardern fighting “tooth and nail” to protest farmers’ interests.

Well Mr Speaker the time has come, in fact its long since passed for Mr Ardern and his National colleagues to do just that – to fight tooth and nail to protect these interests – because right now there is only five MPs, ACT MPs, in this whole Parliament who are prepared to do so.

ENDS

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