On Newshub Nation: Simon Shepherd Interviews Damien O'Connor

This week, the Coalition unveiled what it called a "world first".

Farmers will help design the way they measure and pay for greenhouse gas emissions at farm level.

And they have until 2025 to do so.

That's despite Labour's election promise to bring agriculture into the Emission Trading Scheme in its first term.

It's been labelled a joke by Greenpeace.

Simon Shepherd began by asking Agriculture Minister Damien O'Connor what he thought of that.

Damien O’Connor: We are bringing agriculture into emissions-trading initiatives or into climate-change initiatives, and I think they should be, you know, celebrating this. This a huge step forward –that agriculture will now have to account for its emissions. We’ll work to manage them and reduce them and hopefully be able to show the world how this can be done. And that’s the real progress that we can make.

Simon Shepherd: But it’s been more than a decade since ETS was, you know, proposed to include agriculture. Are you really sort of lacking urgency here?

This started in 1997 when the National Government signed up to include agriculture and global emissions.

Right. So even longer, then.

Absolutely. And so we’ve come in, and we’ve now got to the point of agreement, and the real effort will be made on farm, and so it’s really important that the farm sector bought into this. If we were going to fight it every step of the way, that’s going to make it really difficult, and so they buy into the reason for this, and they buy into the ways that we can do it, and then understand the real value internationally that this can mean for our country.

All right. What about your 2011 election promise, which was to bring agriculture into the ETS at a 90% discount? So is this another failure to deliver those promises?

No, look, we… You know, things can’t happen overnight, and we’re in coalition government, we negotiated a fair deal, and we’re making progress on it. I think it is something to celebrate.

Critics say that there isn’t this urgency that’s needed, so what would you say to the 170,000 people that were marching on the streets with the school climate strike recently?

This is real urgency. You know, we’ve got biological systems in the farming sector, and remember, this is about methane primarily, obviously through the cost of fuel and other parts of the farming agri-business sector, then they are effectively paying emissions pricing. So it’s around the biological process that can’t be switched off or on overnight. And so we’re developing tools for farmers, we’re assisting with farm systems that will improve the way they operate and, ultimately, the reduction in emissions.

What about the environmentalists who are saying, ‘Okay, this just is really, once again, the coalition handbrake,’ — New Zealand First dragging you back from being really progressive?

Look, this is the first country in the world to do this. We’ve had talk by other countries, like the UK are bringing agriculture in — haven’t made much progress. We are making real progress. It might be slower than some people want, but the real gains here are in us being able to show the rest of the world how agriculture and emissions reduction can work hand in hand.

How are they going to measure those, though? Because the tools aren’t there right now.

There are currently tools through Overseer; Fonterra farm plans currently do an assessment of emissions from a farm. But what we’ve committed to do, and we put $229 million in last year’s budget, is to work on the best ways of helping farmers, firstly, measure accurately, or as best they can, the emissions from their farming operation. Then I know that they’ll look at the ways of reducing that, particularly if there’s a financial incentive to do it.

The financial incentive won’t be there till 2025, so does that mean, for the moment, cow numbers stay the same and farmers can just offset by planting trees?

There’s been a whole lot of work done on farms, and some of the farmers at the forefront of their farm systems have been reducing their emissions and measuring that already. So there’s work going on on farms, and some of the farms will be looking to claim the credits for that progress.

Well, let’s talk about the price. How much will they actually be paying in 2025?

Look, there are estimates that on an average farming operation, there might be $1500 at a 95% discount. You might say that’s not much, but, you know, when you’re looking at the profit and the bottom line for farming operation, farmers are very, very astute. Even that, and that’s for an average farm, so some of them will be significantly more than that. They’ll work on ways to reduce the cost of that, I know.

So it doesn’t sound very much. I’ve seen some figures that say that it’s, like, $3.50 a cow when a cow is usually profitable about $400 a year. That doesn’t seem much of an incentive to make them change when they are eventually paying.

Look, if you sat down with a lot of farmers, every dollar they spend, they look at very, very carefully. And if the direction of travel, and if there are incentives from their processing companies, such as Fonterra, such as the meat companies, where if you can show you’ve got a good farm system, if you can show you’re reducing your emissions, there might be a premium in your product, then I think they’ll move faster.

You just mentioned the processes like Fonterra. The plan from the interim climate change committee was to tax them, or make them pay, from early as next year, and yet you’ve dumped that. Why did you dump that?

No, their preference was to have a farm-based incentive system.

But the interim measure was to have the process—

Because they believed that getting a voluntary arrangement that would work effectively was not possible, and so they opted for the next best option, which was a processor levy. The fact that we’ve been able to sit down with the farming leaders and agree to put something in place at the farm level, with a backstop measure, if that fails, I think is real progress.

Is it fair that other industries are in the emissions trading scheme and agriculture gets another five years?

Look, what we’ve got is high-emitting industries that have always had concessions to come into ETS. They’ll be phased down over time. I think we’ve made concessions in the design of ETS for industries that will struggle to overnight reduce emissions. They’ve got to work through technology.

And they have free allocations, like the ones they’re proposing for the farmers as well.

Correct.

And yet the tinkering that you’re doing with the ETS right now, you’re going to reduce the allocations for other industries, and yet farming, or agriculture itself, gets five years more.

Look, they’ve been on a pathway. They’ve had a period to get used to what we’re trying to do here. The fact that, you know, the previous government didn’t bring agriculture or didn’t even work on bringing agriculture in was misleading for both the farmers and for the rest of the economy. If they’d got on to this earlier, there would have been perhaps a lesser impact over time. And so what we have said is that by 2030, we’d like to see a 10% reduction. And clearly, the longer we leave it to make progress on this, the harder it will be to do that, and so we’re allowing a reasonable timeframe for what is an achievable target.

Do you believe that this plan will achieve that 10% reduction in methane by 2030?

Yes, I do, and most of the farming leaders have always accepted that, but we’ve got to get on and do that.

Do you believe that what you’ve done today is sort of heading off this urban-rural divide issue that seems to be germinating ahead of election?

Look, unfortunately, the farmers have been used as political pawns — certainly not by us, but by people who have talked up the rural divide.

Who is using them?

The National Party have used it, you know, trying to accuse us of ignoring the reality of farming. Look, we understand that we’ve been listening — we’re listening on water, and we’ve listened here, and we want to work with the farming sector, understanding that they have the challenges on the ground to keep their operations viable, but to move with us to reduce emissions over time and to improve water. But, of course, cheat politics and posturing by National, trying to claim that we don’t understand was going to be inevitable, and, unfortunately, a lot of farmers, they’re sucked into that.

Well, are you saying that the farmers that are planning to protest at parliament in November are being sucked into the political machine?

Look, I think if they sit down and talk to, you know, the farming leaders, talk to many of the farmers I’ve met today at Hawke’s Bay, they will understand that actually, there’s a huge advantage in doing what we are doing here, and that gives us, you know, a premium spot for hopefully premium returns in the marketplace.

Yeah, at the same time, you are encouraging the planting of trees, and there seems to be a real concern out there that pastoral land, useful farming land, is being turned into forestry.

Look, a genuine concern, and I spoke to farmers today, again, who knew of a property, a good property that could go into trees. Now, there are some Kiwis, some speculators, some land traders who are going around, selling to anyone, and some of that might go into trees. We’ve got to look at the criteria. There’s no direct government support for those farms to be planted. We’ve got to make sure that the speculation that these people are buying those farms on, you know, is not unreasonable, is not exaggerated and that we keep some of that good farmland for farm production.

And also for the rural communities as well, because there’s concern that rural communities will disappear if everything goes to forestry.

Look, that’s true in some areas. We’ve had land use change across New Zealand for many, many years. In some areas, there are genuine concerns about this where there have been a number of farms brought up. We are looking into that. I’ve had discussions with Forestry Minister Shane Jones, and we’ll have to tweak things. We’ll look to intervene where we’ve got large-scale speculation by just a bunch of land traders.

So, how would you be able to clamp down on these speculators that are looking to benefit from an increase in the carbon price in the future by planting trees?

It’s the topic of a number of discussions we’re having in Wellington on a regular basis.

Okay. Just finally, you’re trusting farmers to develop a pricing mechanism for their emissions on farm, but if they don’t, you’ve got this stick — you’ll bring them into your emissions trading scheme. Can you guarantee that you would use that stick if farmers don’t do as they’ve promised to do?

Absolutely. Absolutely. We have to have that, and, in fact, when you talk about water or you talk about climate change, the one thing that most farmers want is what they will call the laggards to be brought into line. And, clearly, if there’s a huge effort across the farming sector to buy into this, to reduce our emissions and get a premium in the marketplace, they don’t want laggards dragging back down the image, the reputation and all the good effort that we’re doing.

Minister, thanks very much for your time.

Thank you.

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