Chris Mole - Associate Editor

• Report shows drop in farm incomes.
• $100/t carbon “would kill farming.”
• Anderton - farm exports “not at risk.”

The Govt has been caught off guard by a new MAF report, which shows the proposed Emissions Trading Scheme could have a massive impact on farmers’ profits. Farming leaders who have studied the report are warning the ETS could effectively end all NZ’s food exports. But Agriculture Minister Jim Anderton has moved to allay farmers’ fears by giving an assurance the Govt will not put them out of business with unmanageable climate change liabilities.

The MAF report, Projected Impacts of the NZ Emissions Trading Scheme at the Farm Level, looks at a range of different carbon prices and the corresponding financial impact the scheme would have on different farming sectors, such as sheep, beef, dairy, horticulture and deer. The figures analyse the impact the ETS would have had if introduced in mid-2006. The relative impact would be worse for sheep, beef and deer farms than for dairying. And greenhouse tomato production would worst hit of all. MAF says based on a carbon price of $50/tonne, the average decrease in sheep farmers’ profit would be 160%.

But Federated Farmers president Charlie Pedersen says if the price of carbon turns out to be $100/t, as some are predicting, farming will disappear from the landscape. Pedersen predicts, “at that price, there will be no export of food from NZ and there will be virtually no viable farms.” The MAF report concludes the potential impact of the ETS at the farm level “should not be under-stated.” But it also notes farmers’ capacity to innovate, adapt their businesses to manage new cost structures, and adopt new technology where it exists.

The report stresses the results assume farmers do nothing to adapt to the cost of emissions trading, noting the ETS will provide a 17-year period in which free allocations will be phased out. It also makes no allowance for potential advances in emissions abatement technology, or other factors such as the exchange rate. The study shows the potential benefits of nitrification inhibitors on dairy farms could potentially ameliorate the impact of carbon costs to a large degree. But it adds this assumes farmers will be able to receive credit for inhibitors under the ETS.

The report also shows conversion of land away from sheep and beef towards forestry would have a positive impact on farm profits, particularly as the price of carbon increases. Anderton says while agricultural emissions can’t be ignored, as they make up half NZ’s greenhouse gases, the Govt will not allow the ETS to jeopardise food exports. He adds no one in their right mind is saying the most important driver of the NZ economy should be put at risk.

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