Should agriculture be in the Emissions Trading Scheme?

New Zealand’s strategy to reduce our emissions is almost entirely driven by the Emissions Trading Scheme (ETS). Agriculture is responsible for 48 percent of our national emissions, yet it is exempt from the ETS, and the Government is currently ensuring this will remain the case. 

Understandably this is a controversial issue with strong feelings on both sides. We consider these views from the perspective of our Catholic social teaching principles – which informed Caritas’ recent submission on the issue. 

How does the ETS work? 

The core point of the ETS is to treat emissions like a resource and create a market for them. Each year the government releases a limited amount of ETS credits (the right to emit one tonne of carbon dioxide) for businesses to buy, which they can trade and sell among themselves. At the end of the year, a business must surrender enough credits to match its emissions that year or face steep fines. The point of the scheme is to attach a price to emissions, so businesses are incentivised to reduce their emissions to cut costs, while also limiting our total national emissions to a certain limit. 

It is extremely challenging applying the ETS to agriculture – it is very difficult to measure emissions from individual livestock. Some agricultural land even absorbs carbon from the atmosphere, which could generate credits for farmers. Also, agricultural emissions are overwhelmingly methane, and it is controversial how this should be measured against carbon dioxide (methane causes more warming but carbon dioxide lasts much longer). 

Keeping agriculture out of the ETS: Stewardship and the common good 

Because of the challenges outlined above, it could be quite costly to farmers to include them in the ETS, and make monitoring very difficult. These added costs and difficulties could drive some farmers out of business, or make them reduce their production. People will need to eat the same amount of food, so this would drive agricultural production overseas. New Zealand’s farmers are the most carbon-efficient in the world, so if we shift agricultural production from efficient local farmers to inefficient overseas farms, total global emissions would increase even though our national emissions would decrease. 

This means the argument to keep agriculture out of the ETS is grounded in stewardship – kaitiakitanga, and the need to prioritise conserving our planet’s resources by keeping global emissions as low as possible. Although many in New Zealand want to focus on lowering our national emissions, we must prioritise the common good of all – he painga mā te katoa, and it would be unjust to lower our national emissions at the expense of the world (and our farmers). 

The argument to regulate agricultural emissions: Distributive justice 

New Zealand's emissions by sector (from Ministry for the Environment)

Although we should prioritise global emissions over national emissions, New Zealand still has a legally binding national emissions reduction target, and the ETS is our main policy to achieve it. If we do not reduce agricultural emissions, all of the emissions reduction burden will be shifted onto the rest of the economy – especially transport and energy. This will mean higher fuel prices and electricity costs for all New Zealanders. 

Driving up the cost of living for all New Zealanders to avoid putting costs onto one of our most profitable industries is not a fair distribution of our emissions reduction burden. The principle of distributive justice – te tika ka tohaina – calls for us to distribute resources fairly where they are needed. Exempting agriculture from the ETS without finding another way to reduce agricultural emissions could violate our basic principles of fairness and justice. 

So what should we do? 

Both stewardship and distributive justice are important principles, and we do not have to trade them off against each other. If the ETS is ill-designed for agriculture, we should explore other ways to regulate agricultural emissions. Our farmers are innovators, and if we rewarded the most efficient this would incentivise further improvements so we can continue leading the world, and fairly distributing the cost of emissions reduction across all New Zealanders.