Climate change and agriculture

I accept there is anthropogenic climate change, and there is going to be an ongoing process of reductions in emissions due to improvements in efficiency and technology.  Because New Zealand has such a low population relative to its production of agricultural commodities, emissions from agriculture are high per capita, compared to virtually all of its trading partners.

As a result, the agricultural sector will have to be a part of that, and New Zealand should be expected to cut emissions along with the rest of the world. 

However, most of New Zealand's agricultural production is exported, and export markets for agricultural commodities are heavily distorted by a mix of high subsidies, tariffs and other import barriers from major economies, specifically the European Union and the United States (Japan as well, but that affects the rice market).  As New Zealand's market is both open to imports and there are few subsidies, New Zealand exports effectively because it is an efficient producer, which also happens to have some of the lowest emissions per tonne of production in the world.  One study indicated that for lamb, New Zealand emitted 688kg of CO2 per tonne produced and imported to the UK, compared to 2849kg of CO2 for UK produced lamb. 

So let's paint the picture. New Zealand farmers, located further away from most markets than any other producers, compete on a global market, a market heavily distorted by import quotas (restricting how much New Zealand farmers can sell), tariffs (taxing their products but not taxing domestic producers) and subsidies (undercutting the higher cost of production). If there were largely a free market for agriculture, similar to many manufactured goods, then inefficient producers (that use more energy and emit more CO2) would be out of business or would need to improve efficiency.  

However there is not. There were some tender attempts by the Bush Administration to get rid of export subsidies for agriculture, if the EU also agreed, but this all faltered, and since the Obama Administration there has been little to no interest from the US in multilateral trade liberalisation (and the EU has never been keen on liberalising agricultural trade). 

For New Zealand farmers to face payments for emissions on a scale or in a manner that undermines their export competitiveness is likely to have several effects:

• Reducing the scale of New Zealand agricultural production 
• Increasing the price of commodities New Zealand exports
• Increasing the production of LESS efficient and HIGHER emitting producers that are heavily protected and not required to pay for emissions.

In short it risks exporting emissions, by shifting production to other economies.

The most generous view of this is it is futile. It buys virtue signalling from unproductive multi-national lobbyists like Greenpeace and enables Jacinda Ardern and James Shaw to claim they are "world leading", but the savings in emissions get replaced by higher emissions from elsewhere. When New Zealand reduces production, others will sell to those markets instead, at a slightly higher price, but with higher emissions and less economic efficiency.  The least generous view of it is that it is economic treachery.  It harms a local industry to ineffectively achieve a policy objective.

It would be quite different if Ardern and Shaw went to Brussels, Washington, Canberra et al and argued that New Zealand will charge for methane emissions if THEY will, and if THEY will introduce measures to reduce emissions in agriculture that at the very least do not distort international trade in agricultural commodities any more than their existing protectionist arrangements.  It presents options that show New Zealand is willing to move if they are as well.

Sure, whatever New Zealand does on emissions will make ~0 impact on climate change, but if there is going to be action on emissions New Zealand has to join in, or it faces the likelihood of sanctions from several major economies. What matters though is this small economy does not kneecap its most productive and competitive sectors in order to virtue signal.  

Of course there are plenty who hate the farming sector, either because of what they produce and who they vote for, and the Green Party thinks agriculture should go all organic, produce LESS at HIGHER prices, and you can imagine the impact of this on the poor (but the Greens think they can tax the rich to pay for everyone).  They are very happy to spend the tax revenue collected, but treat it as a sunset industry.

So sure, agriculture needs to be included, but there needs to be a Government that doesn't want to shrink the sector in which New Zealand has the greatest comparative advantage.