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Cost of ETS will hit New Zealand Restaurants 20 June 2011 It is a shame the recent debate over the impact of the proposed Emissions Trading Scheme got captured by politicking, in particular the price of milk. New Zealand restaurateurs should be more concerned about the price of meat than the price of milk, and while we all might worry about climate change, we should also be concerned about the threat to New Zealand’s food production posed by imposition of the Emissions Trading Scheme (ETS). Introducing agriculture into the ETS will not reduce global greenhouse gas emissions; it will increase the price of meat for New Zealand customers. It will also hamstring one of New Zealand’s most productive and competitive sectors when the country is in need of foreign exchange. The price of lamb, venison and grass-fed beef will be affected by the introduction of the ETS. Unlike dairy products, where New Zealand has an insignificant share of world production, New Zealand has a substantial share of world lamb, grass-fed beef and especially venison production. Changes in New Zealand supply do have an effect on the price. If you reduce the supply of something, the price will go up, and the only result of the ETS in its current form will be a reduction in New Zealand agricultural production. At current rates, the ETS is forecast to reduce the average red meat farmer’s after-tax income by 10% in the first year of agriculture’s inclusion, and by an increasing amount each year thereafter. The only alternative is to plant trees – reducing livestock numbers and replacing productive pasture with forest plantations. Farmers would change their production practices to reduce methane and nitrous oxide emissions if they could – but the sad fact is that at the moment there is no practical method for reducing the amount of methane a sheep burps or amount of nitrous oxide released from pasture, and even if there was, the current form of the ETS does not provide any incentive to individual farmers to change – it slaps a blanket tax on food production. No other country proposes subjecting food production to an emissions trading scheme – New Zealand remains alone in this. So New Zealand’s pasture-based production, with the additional cost of the ETS applied, risks being replaced by food production in countries excluding agriculture from domestic carbon trading, like Australia and Brazil. In effect New Zealand may be subsidising the clearance of the Amazon to grow more beef in Brazil. So sorry Mr Goff and Mr Key – your proposal to tax the farmers might play well with urban voters in an election year – but how happy will they be when restaurants start putting their prices up to compensate for the continued reduction in New Zealand meat production. Amazon Basin Beef anyone? Innes Moffat |
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