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Rod Oram: Farming’s bankrupt, time for natural capital

Rod Oram argues it's time for farmers to stop squandering their natural capital and avoid an environmental bankruptcy, in the same way farmers dug themselves out of financial bankruptcy in the late 1980s.

In 2003 farmers gave Myrtle, a rusty old Ferguson tractor, pride of place in their protest outside Parliament against the Labour government’s climate change policies.

On Monday, farmers again honoured Myrtle, older and rustier, when they protested in Morrinsville against opposition parties’ environmental policies. In the intervening 14 years, the number of milking cows has increased by 35 percent to 5 million.

If angry farmers roll out an even more decrepit Myrtle 14 years from now they, we, our environment, economy and international reputation will be in very deep trouble indeed.

We will have comprehensively failed to make the transition to a low emissions economy; and we will have utterly failed to meet our Paris climate commitment to cut our emissions by 30 percent from 2005 levels by 2030.

As the Productivity Commission says:



“…the shift from the old economy to a new, low-emissions economy will be profound and widespread, transforming land use, the energy system, production methods and technology, regulatory frameworks and institutions, and business and political culture.”

These are mighty challenges for everyone. Urban New Zealanders have to make rapid shifts from fossil fuels for transport and industry to electric power. Rural New Zealanders have to make a rapid shift from intensive livestock farming to more diversified farming, including low emissions livestock, and more forestry.

We’re all in this together. If cockies change and townies don’t, we will fail. If townies change and cockies don’t, we will fail. If we work together we will succeed. But we have to move very fast. We have less than 14 years to massively improve our practices.

The pathways by which we can achieve our 2030 target on the way to reaching the global target of net zero emissions by 2050 are laid out in a report commissioned by GLOBE-NZ, an all-party grouping of our backbench MPs. The analysis by Vivid Economics of the UK was published in March. The report and slides are compelling.

Currently our emissions are rising. To meet our goals, we have to cut them by 4 percent a year to 2050. Doing so requires us to take bold action “exploiting abundant opportunities to pursue emission reductions that are either competitive with, or almost competitive with, more emissions-intensive alternatives,” Vivid says. Along the way we will gain productivity and other economic benefits.

“Off Track New Zealand” is the first of Vivid’s three scenarios. In this we exploit our low emissions opportunities such as electric vehicles but we make no changes in land use. As a result, we only reduce our total emissions by 10 to 20 percent from 2014 levels by 2050.

“Resourceful New Zealand” sees us cutting our emissions by 65 to 75 percent to just meet our 2050 target, but at a high cost. We would need to plant 1.6m hectares of trees to make up for inadequate progress on urban and rural emissions. Changed land uses “may require a difficult transition for rural economies, as well as represent a lost opportunity to reintroduce native habitat,” Vivid concludes.

If cockies change and townies don’t, we will fail. If townies change and cockies don’t, we will fail. If we work together we will succeed.

“Innovative New Zealand” enables us to cut our emissions by 70 to 80 percent to meet our 2050 target (and our 2030 one along the way) in far more beneficial ways, Vivid says. We would reduce “the emissions intensity of its economic activity through technological advances such as cost reductions in electric vehicles for freight; electric heating technologies for high temperature applications; and a vaccine to reduce methane emissions from pastoral agriculture.

“This is accompanied by a structural shift away from pastoral agriculture – with animal numbers around 20 percent to 35 percent lower than today – to less emissions-intensive activity. New Zealand instead supports a diverse range of land uses including horticulture and crops, alongside extensive afforestation covering an additional 1m hectares of land by 2050.

“This shift in land-use patterns away from pastoral agriculture delivers lower emissions, a robust agricultural sector and continued economic growth.”

A 20 percent reduction in the national dairy herd by 2050 would take it back to where it was in 2008, and a 35 percent cut would take it back to 1998 levels. However, Vivid estimates dairy productivity would rise by 25 percent by 2050 under the Innovative scenario, compared to gains of 15 percent under Off Track and Resourceful. Beef and sheep would gain 15 percent productivity under all three scenarios.

The Innovative scenario delivers the best science for reducing cow emissions. Methane vaccines and inhibitors would cut them by 30 percent, selective breeding by 15 percent, nitrate inhibitors by 8 percent, precision agriculture by 10 percent, and low-emissions feed by 7 percent.

Jan Wright, the Parliamentary Commissioner for the Environment, examined the same technologies in her report on climate change and agriculture published last October. But she did not take the further step Vivid has of modelling the economic outcomes.

Federated Farmers stands Canute-like against this rapidly rising tide of science, economics and common sense, warning that farmers "can't stay in business if potential governments are going to threaten our family businesses this way".

Similarly, Federated Farmers water spokesman Chris Allen says, “nitrogen is organic and an essential to life".

Yes, but too much in the wrong place is harmful. Water is essential to life too. But you can drown if you are face-down, unconscious or paralysed, in an inch of it.

Bill English was even more apocalyptic on TVNZ’s Q&A last weekend. Asked about the severe decline in water quality and ecosystem health of Canterbury’s Lake Ellesmere over recent decades, he replied a lot of effort was going into solving those problems but they are “really complex, challenging issues”.

He continued: “There is one answer - slaughter the dairy herd. I suppose that would help. Then the next thing they [the opposition parties] will be talking about is depopulating cities because they cause pollution.”

Today, agriculture in New Zealand is bankrupt, as it was in 1985. Then it was an economic failure, particularly in the sheep industry. The sector was propped up by $1.2 billion of taxpayer funding under the Supplementary Minimum Price regime, most of it paid out in just two years to 1984. Adjusted for inflation, that would be $4b today.

The Lange Labour government swept away SMP and other bureaucratic encumbrances to farming. This was not deregulation. It was a radical shift to a superior market system backed by regulations on farming and food to ensure quality and to safeguard New Zealand’s reputation.

It is immoral to squander our environment. We have to learn how to be as wise, productive and conservative with our 'natural capital' as we learnt to be with our economic capital after farming’s previous bankruptcy.

The big transformation enabled farmers to thrive. Since the end of SMP and other sectoral constraints, the number of cows milked has increased by 120 percent to 5m, and milk volume has trebled to more than 20 billion litres a year.

Today farmers are highly regarded at home and abroad for their innovation, the quality of their products and – uniquely among farmers worldwide – doing so with essentially no government subsidies at all.

We taxpayers still pay, though, through heavy contributions to the sector’s science and R&D, irrigation, trade promotion, clean-up of lakes and rivers and other assistance.

But today New Zealand farming is environmentally bankrupt. Here is just some of the evidence from Environment Aotearoa 2015, our first comprehensive national environmental report:

- soil is the lifeblood of farming, yet 192m tonnes of eroded soil enter our rivers in 2012, Landcare Research estimated;

- over half the soils measured under dry stock (animals farmed for dairy, meat, wool, and velvet) and nearly 80 percent of soils under dairy farming are affected by compaction, which reduces the productivity of land;

- in the decade to 2009, our nitrogen imbalance was the fastest growing among the eight OECD countries with this problem; in contrast, 25 OECD countries improved their nitrogen balance over the same period;

- between 1990 and 2012, the estimated amount of nitrogen that leached into soil from agriculture increased 29 percent;

- of 175 monitored river sites in the pastoral class, nitrate-nitrogen trends were worsening at 61 percent and improving at 22 percent of sites over the period 1994–2013; and

- of our native aquatic species the government reports on, around three-quarters of fish, one-third of invertebrates, and one-third of plants are threatened with, or at risk of, extinction.

It is immoral to squander our environment. We have to learn how to be as wise, productive and conservative with our 'natural capital' as we learnt to be with our economic capital after farming’s previous bankruptcy. Doing so would unleash a new wave of innovation, prosperity and sustainability for farmers.

This is an imperative for all businesses, as a number of leading multinationals in agribusiness, food and other sectors demonstrate in their work in, for example, the Natural Capital Coalition and the World Form on Natural Capital.

Far more importantly, it is the imperative for all of us. Natural capital makes human life possible.