New Zealand Pastoral Farmers and the Mitigation of Greenhouse Gases in the Agricultural Sector

Abstract

The implementation of an emissions trading scheme (ETS) as a policy instrument is intended to contribute to the efficient reduction of greenhouse gas (GHG) emissions in New Zealand within the limits agreed to in the Kyoto Protocol. The ETS provides the mechanism through which ‘emissions units’ equal to the committed level of carbon dioxide equivalents (CO2e) can be allocated among the sectors of the New Zealand economy. By establishing emission units as tradable items, the ETS would create what is essentially a new commodity that demands inclusion in the financial planning strategies of producers of goods and services. In this manner, the ETS is expected to incentivise the incorporation of GHGs within production strategies. The transition to a carbon economy may, however, prove more difficult than the mere extension of accounting procedures to expenditures of GHG emissions and sequestration of carbon. The conceptual process of envisioning carbon equivalents (both emitted and sequestered forms) has been hampered by at least two factors. First, because the New Zealand economy has experienced an intensification of emissions-generating economic production since agreeing to the Kyoto Protocol, compliance with limits on GHG emissions has largely been represented as an additional cost as producers struggle to compensate for liabilities. In addition, commonly recognised alternatives to the purchase of emissions units (including tree planting) often involve a reduction in production intensity that does not conform to existing understandings of good business practice. Such complicating factors operate with similar impact on industrial and agricultural production.