Greenhouse gases and growing pains

Economic productivity and population growth have impacted New Zealand's greenhouse gas emissions

Greenhouse gas (GHG) emissions and carbon trading are an odd construct. Mark Schapiro, writing in Harper’s Magazine (February 2010) pointed out that ‘carbon exists as a commodity only through the decisions of politicians and bureaucrats, who determine both the demand, by setting emissions limits, and the supply, by establishing criteria for offsets. It was the United States that sculpted the cap-and-trade system during the Kyoto negotiations, before pulling out of the accord and leaving the rest of the world to implement the scheme. Since then, most of the world’s major political, financial, and environmental interests have aligned themselves with the idea, because of its potential to generate profits out of adversity and to avoid the difficult economic decisions posed by climate change.’

Although not a major player in the world’s markets, except through dairy products, New Zealand bought in to the concept whole heartedly. Not, perhaps, because of generating profits, but to underpin the ‘clean green’ and ‘leadership’ notion. In signing the agreement in 2002, Prime Minister Helen Clark said “New Zealand joins almost all developed nations in accepting responsibility for tackling a critical global problem. In total, 97 countries have now ratified. We are taking full advantage of the time available to adjust before the beginning of the Protocol's first commitment period in 2008. We are embarking on a measured transition to a sustainable energy economy”.

It does appear that the adjustment has occurred. Updated on the 1st of April, the Ministry for the Environment’s (MfE) ‘Latest Net Position’ announces that ‘It is likely that New Zealand will meet its greenhouse gas emissions reduction target for commitment period 1 (2008-2012) under the Kyoto Protocol with a surplus of 128.2 million Kyoto units.’

However, New Zealand’s emissions target overall is to reduce GHG to 5% below 1990 levels by 2020. There is a further conditional target range of 10-20% below 1990 levels if there is a comprehensive global agreement.

Since 1990, New Zealand emissions have increased over 25% (excluding Land Use Change). The energy sector increased by over 36% and agriculture by almost 15%; these two sectors contribute approximately 42 and 46%, respectively, to New Zealand’s emissions. Industrial processes increased 61.8% but contribute only 6.9% overall.

The problem will be in achieving greater savings in the future, particularly given the sensitivity of the energy sector to increasing population. In 1990 New Zealand had a population of 3.3 million; by 2012 it was 4.3 million, and it has now reached 4.6 million.

Energy use also reflects an increase in lifestyle expectations where holiday travel is the norm. Streams of traffic backed up over Christmas, Easter and long weekends make the point.

During the economic downturn of 2008 and 2009, MfE noted ‘a decrease in road transport emissions’. People weren’t using their cars or buying as much.

Energy use between 2008 and 2011 also decreased because of the Christchurch earthquake, sealing of the Pike River Mine and suspension of coal production at Spring Creek mine, and a reduction in coal-fired and gas-fired electricity generation together with an increase in renewable electricity generation (hydro, geothermal and wind).

Between 2011 and 2012, emission from the energy sector increased again, primarily due to an increase in coal-fired electricity generation ‘because unfavourable hydrological conditions reduced hydro-power generation’.

In the same time frame, animal emissions decreased due to drought (and consequent destocking) and then increased again, particularly in the dairy sector.

Of considerable importance in the GHG emission debate, however, is that agriculturally-related productivity has increased. More income has been brought in to the country from agriculturally-related exports, and this supports incomes and hence taxes.

Ironically, it is the dairy boom that has allowed the economy to rise and people to be able to afford to go away in their cars (noting that one dairy cow produces the same GHG emissions as a family car doing only two thirds of the average distance travelled per year according to the AA).

The suggestion that New Zealand would be better off with fewer cows hasn’t considered the economic implications. In the mid-80s dairy exports were worth approximately NZ$1.5 billion, which in today’s money is just over $4 billion…. insufficient to support New Zealanders in the lifestyles to which they have become accustomed. Dairy exports brought in over $15 billion last year, and whereas in the mid 80s per capita income of New Zealand was approximately 40% of that of an American; now it is almost 66%. In addition, the government has been able to pay down the national debt whilst supporting increased education participation, plus infrastructure development and health - and everything else that goes with a developed country (despite reliance on primary production)

New Zealand contributes less than 0.2% of global GHG emissions. Farmers are part of the emissions trading scheme just as people and businesses are part of it through fuel and power taxes; animals are not part of the scheme.

In 2002 the Rt Hon Helen Clark alluded to the fact that the government has announced policies necessary to meet New Zealand's emissions target under the Protocol, and that these policies had been tailored to ensure the continuing international competitiveness of our industries. “Agriculture, the engine of our economy, has been exempted from charges on its emissions and we will tackle those emissions through research.”

That research is being done by the New Zealand Agricultural Greenhouse Gas Research Centre headquartered in Palmerston North and working with partners across New Zealand and the Globe. New Zealand leads the Global Research Alliance for research on ruminant methane reduction, and is making strides in identifying ways of enabling milk and meat to be produced with even fewer emissions than at present – noting that New Zealand is already at best practice.

Another point for consideration in the GHG debate is Japan’s discovery of how to extract ‘ice gas’ (methane hydrates), announced last month. The discovery ‘could open a super-resource for that country’ and as New Zealand’s potential methane hydrate deposits are similar to those in Japan, the discovery has raised hopes New Zealand will benefit from a potentially huge source of energy here, too. The new revenue could allow infrastructure development in New Zealand, plus increased employment and therefore wealth and taxes… but will also have implications for GHG emissions.

The International Panel on Climate Change acknowledges the difficulty of decoupling greenhouse gas emissions from the growth of economies and population. More people use more energy, particularly as they move up the lifestyle curve. New Zealand is in a remarkable position for energy from wind, water and geothermal sources. More investment will be required in development and infrastructure, and will be possible only if the economy continues to grow.

Some clever economic calculations should now be done to check whether New Zealand will be in a better or worse position from exploring ice gas, or putting in more wind, water and geothermal energy sources. The cows have already proven their worth.