The OECD is calling for the Government to include agricultural emissions in the Emissions Trading Scheme.

In its third Environmental Performance Review of New Zealand, it says agricultural emissions make up 49% of all New Zealand’s emissions - the highest portion in the OECD.

Yet the Government is refusing to budge on the issue, saying making farmers pay more would send them “only one signal… reduce stock numbers”.

Referencing the contribution agriculture makes to the New Zealand economy, Environment Minister Nick Smith says the Government has a “duel objective” and needs to “look further than just environmental issues”.

Nitrogen balance increasing more than other OECD countries

In its report, the OECD warns New Zealand's growth model is starting to "show its environmental limits, with increasing greenhouse gas emissions and water pollution".

Despite the country only accounting for a tiny share of global emissions, the OECD warns intensive dairy farming, road transport and industry have pushed up gross greenhouse gas (GHG) emissions by 23% since 1990.

It says growth in intensive dairy production has increased the level of nitrogen in soil, surface water and groundwater. The nitrogen balance (the difference between nutrients entering and leaving the system) increased more than in any other OECD country from 2000 to 2010.

Overall, the OECD notes New Zealand has the second-highest level of emissions per GDP unit in the OECD and the fifth-highest emissions per capita, even though it generates 80% of its electricity from renewable sources - among the highest in the OECD.

“Having largely decarbonised its power generation, New Zealand needs to ensure its climate policies are effective in curbing emissions in all sectors, notably transport and agriculture,” says OECD Environment Director, who's also a former National Party Environment Minister, Simon Upton.

Yet Smith says it would be “unwise” for dairy, beef and lamb farmers to be incentivised to reduce their stock numbers, as they have a smaller carbon footprint than their counterparts around the world that would replace any shortfalls in their production.

Furthermore, he doesn’t believe the ETS “could cope with the uncertainties that are associated for instance with the measurement of agricultural emissions at this point”.

“So no, the Government is not giving consideration to adding those agricultural emissions into the Emissions Trading Scheme,” Smith says.

“We’re putting our energy and our focus into a very ambitious global research programme so that we can find the technologies for which we can grow our agricultural industries, but reduce those greenhouse gas emissions.”

Government open-minded to envrionment-related pricing tools

The OECD suggests that if agriculture isn’t included in the ETS, the Government needs to develop alternative measures to counter the pressures of farming.

Smith says the National Government has enabled regional councils to put caps on nitrate levels in waterways.

“We accept the OECD’s message that there is limits, but we want to implement those in a sophisticated way that recognises that not all regions and waterways in New Zealand are the same,” he says.

The OECD also suggests the use of environment-related taxes, charges and prices should also be expanded.

Asked whether he sees room to up taxes, Smith says: “We’re open-minded about where you might sensibly extend pricing tools.”

OECD: Government needs to review funding for irrigation

The OECD recommends the Government review its financial support for irrigation in such a way that funding is only provided for projects that would not proceed otherwise, and that have “net community-wide benefits”.

Currently, 75% of water in New Zealand is used for irrigation and some regions are approaching water allocation limits, while others have already surpassed them.

The OECD says the grants and concessionary financing for irrigation projects lack “systematic consideration of environmental and community costs” and are in potential conflict to the Government’s freshwater management policy.

It notes the fact that on the one hand the government wants one million hectares of land under irrigation by 2025. It also seeks to double primary industry exports in real terms between 2012 and 2025.

Yet on the other hand, the 2014 amendment to its 2011 National Policy Statement for Freshwater Management was an “important milestone” that has filled a long-standing gap in national policy guidance under the Resource Management Act.

It also says the Government is underusing economic tools to address water allocation and pollution.

“This is partly because the government declared that ‘no one owns water’. Charges for water abstraction and pollution discharges are minimal, covering only the administrative costs of resource consents.”

Overall, the OECD says: “Water quality continues to deteriorate in some regions due to diffuse pollution from agricultural and urban run-off.

“Half of monitored river sites have enough nitrogen to trigger algal blooms. New Zealand has some of the highest levels of threatened native freshwater species in the world.”

Despite the Government’s efforts, the OECD says it could do more to assist local authorities in setting rigorous freshwater policy goals and speed up implementation.

“Regional councils have been slow to put the freshwater management policy into action. This has created uncertainty for water users and investors, and it reduces opportunities to bring environmental impacts to acceptable levels,” it says.

Urban development concerns

The OECD’s review also looks at New Zealand’s fast-growing cities and suggests that a simpler urban planning system, less restrictive land-use regulations and better co-ordination between land, transport and infrastructure planning, could help ease the pressure.

It notes car ownership in cities is also high, and current vehicle standards and taxes do not sufficiently encourage a shift towards cleaner, more efficient technologies.