Member Advisory

The government's take on He Waka Eke Noa

Andrew Hoggard, National President, Federated Farmers

Federated Farmers has been actively involved in the He Waka Eke Noa policy development process for over two years since being among the organisations which proposed the co-design work plan as a historic partnership process about three years ago.

Feds have prioritised seeking the views of our members on He Waka Eke Noa, and a big thanks to those of you who filled out surveys, tuned in to webinars and sent emails and phone calls to us. The impacts of this policy will be long-lasting and I want to make sure that myself and Feds are accurately reflecting the views of you, New Zealand’s farmers.

Alongside about a dozen industry and Māori organisation partners, Feds entered into He Waka Eke Noa in good faith. After working with Government on He Waka Eke Noa for over two years the partnership released a report containing recommendations on pricing agricultural emissions. This report can be found here and was the result of many compromises.

Feds had to swallow quite a few dead rats to get changes included in the report, and my member advisory on this report broke down issues into ‘The Good, the Bad and the Ugly'. This member advisory can be found here.

Despite being involved in the He Waka Eke Noa policy development process for years Government partners (MfE and MPI) did not end up putting their name to this June report, worried that doing so would compromise their ability to provide independent advice.

But, today the Government has released its response to this report. This response is either a modification or a rejection of He Waka Eke Noa, depending on who you ask. The Government have kept some parts of what was recommended and have made major changes to other parts.

Here is a link to the Government's discussion document.

In this Member Advisory, we lay out the changes the Government wants to make to the HWEN proposal and our initial take on them.

A simple table that compares the He Waka Eke Noa Pricing Recommendations report and the Government’s response to Feds’ emissions pricing policies can be found here.

As the table shows, the He Waka Eke Noa pricing report contained many recommendations that were plausibly consistent with Feds’ policy. This is simply not the case with what the Government is proposing today.

The Government's document is now open for feedback and there is a six week submission window. We will be seeking your views and your responses will drive what we say. So please respond to our survey. It’s our active membership that makes Feds special.

After that, legislation will be introduced to Parliament in the New Year, and it will go through the normal Parliamentary process, where it will be open to discussion again. In this process Feds effectively go from being a partner, to a regular stakeholder.

Here's my initial take

So what are my thoughts? As you may have gathered I was less than excited by the 'Original' proposal. To say I continue to be less than excited would be a mild understatement after going through the full document. Whilst there are a number of changes that give cause for concern, the greatest concern is of course the modelled impacts, which show a reduction in 'Net Revenue' of between 18 and 24% for sheep and beef, and 6 to 7% for dairy.

In terms of output it shows a reduction of between 16 and 20% in sheep meat, beef potentially may go up initially by 8% under a low-cost scenario (we still need to unpick the modelling assumptions), but then also falls by 16% under high cost, and milk solids reduce by around 5% as well. What the consultation document hasn't gone and looked at are what are the impacts on rural and provincial communities and I dread to think of these.

You can't take out 20% of the output from a sector, and not expect major impacts on various communities, not only will processing jobs be gone at meatworks, there will be all sorts of flow-on effects in rural servicing sectors. Towns like Wairoa are likely to become ghost towns, communities will be ripped asunder and for what? Those emissions to be shipped offshore and increased.

The main thing in the 'original' May He Waka Eke Noa Recomendations Report that gave me the tiniest thread of optimism were the ‘Levy Setting Factors’. These factors were to be balanced by a price setting committee and were:

Trajectory of emissions reductions towards emissions targets.
Availability and cost of (current and future) on- farm mitigations,
Social, cultural, and economic impacts on farmers, regional communities, and Māori agribusiness.
Best available scientific, mātauranga Māori and economic information, and
Emissions leakage from production moving offshore, and impact on food sec.

He Waka Eke Noa recommended considering the ‘Trajectory’ towards targets and was not a blank cheque to set a price high enough to meet them at all costs. This is no longer the case in the Government’s proposal. Now the Government has reduced all this down to just meeting the targets. This would perhaps be okay if we had targets that were scientifically set and fair for methane, but we do not.

This means that without all those other kinds of considerations being factored in, the price will just be used to drive land use change away from pastoral farming, most likely to blanket pine forestry. This will likely make the current global food security crisis worse and likely increase global emissions.

The Government's own modelling predicts that much of the emissions reductions will be undone as international competitors increase less emissions-efficient food production to make up for New Zealand cuts. This doesn’t make sense to me. The global food system is well… Global… and a system. I don’t think that New Zealand's climate change policy should pretend that New Zealand farmers operate in a vacuum, particularly given that the Earth has one atmosphere.

The Feds National Council met last night to discuss this all, and the clear view was that the Government changes were unacceptable, and there's a growing opinion that even the original version of He Waka Eke Noa was just not going to work for farmers. At the recent Meat and Wool Council meeting significant concerns were raised around Feds' continued support of the original version of He Waka Eke Noa, and the impacts it would have on their sector and communities.

Today’s changes by the Government to He Waka Eke Noa do not put these concerns at ease, with the Government’s own modelling predicting devastating financial impacts for farmers, including:

Reducing the net profits of dairy farmers by 6% (medium) or 7% (high)
Reducing the net profits of sheep farmers by 21% (medium) or 24% (high).

This is a big concern and is the result of the Government setting unscientific heavy handed methane reduction targets and putting in policy that meets these targets at all costs. Climate policies are supposed to be a ‘Just Transition’ and ‘Rural Proofed’ and I can’t see how this is the case for what is being proposed.

Kicking the can on collectives

He Waka Eke Noa recommended giving all farmers the ability to form collectives. This would have enabled a catchment group; industry or supplier group to club together if those farmers did not want to deal with the complexities of farm-level pricing. Feds support farm-level pricing but also support farmers ability to choose to club together if they want to. The Government has decided to restrict this ability to club together to only Māori agribusiness, saying that collective reporting for all farmers is not considered feasible but will be explored as a future addition.

Not allowing all farmers to form collectives will make the already difficult task of being the only country in the world trying to roll out farm-level emissions pricing even more difficult. If a farmer wants to prioritize simplicity over having to work out there on farm emissions, even if it ends up costing them more, they won’t be able to in the Government’s proposal.

Sequestration

Another key area of concern are the changes to recognition of sequestration, they have reduced down what's eligible and increased the complexity around claiming it. There is no recognition for farmers who have historically done the right thing and not cleared vegetation.

There were issues with how sequestration worked in He Waka Eke Noa, it’s overlap with the ETS was clunky and it’s promises to transition credit into the ETS lacked details. However, sequestration served to make up for the very large impact emissions pricing has on sheep and beef farmers, and this has not been replaced with anything.

Reporting data nightmare

Having the start date shift from 1st of June to the 1st of January, may not seem like a big deal, but in terms of recording farm data, it's going to be tricky, to say the least. Most of us will work on farm data recording systems that run 1st June to 31st May, thus we are likely to see major issues in linking existing systems to government systems for the emissions reporting. This also means that if the Government manages to pass this legislation early next year, farmers will have less than 18 months to get ready. Given the recent debacles with the Nitrogen reporting and Winter Grazing Farm Plans, I have little faith that the Government could make any of this work in the next couple of years.

If Government can’t get their house in order to meet the deadlines they themselves imposed purely because of politics, it will be farmers who will be left dealing with the consequences.

Next Steps

My initial reaction is clearly one of concern, and I want to hear from you, both if you share this concern and also if you support the Government's proposal.

We are a grassroots organisation and we need to represent your views. Our next step will be to consult as widely as we can with members about our response to the Government's alterations to He Waka Eke Noa.

We plan to send out a very short survey later this week after everyone has a day or two to digest this, this will ask:

What are your opinions on the pricing recommendations made by He Waka Eke Noa earlier in the year,
What are your opinions on the Government's changes announced today, and
Do you have an appetite for something else that meets the original stated aims of an appropriate pricing principle in He Waka Eke Noa?

This original He Waka Eke Noa text that was proposed by industry and agreed to by the Government stated “The sector will work with government to design a pricing mechanism where any price is part of a broader framework to support on- farm practice change, set at the margin and only to the extent necessary to incentivise the uptake of economically viable opportunities that contribute to lower global emissions. The primary sector’s proposed 5-year programme of action is aimed at ensuring farmers and growers are equipped with the knowledge and tools they need to deliver emissions reductions while maintaining profitability.”

That statement was always my litmus test as this thing got developed, and I would always reflect back on each step as to whether it still held true, fair to say it got more and more tenuous at each step, but now nothing in that statement holds true anymore.

If none of this is making much sense to you, check out some of our earlier podcasts here on FEDTalks.

Keep watching your email inbox for more from us on this.

Andrew Hoggard
Federated Farmers National president and climate change spokesperson.
027 230 7363