New Zealand’s animal emissions tax: Fighting climate change or hot air?

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. The world is waging a war against climate change and I hope it's not a shock to me when I say it's a complicated fight. So while in some areas there's momentum for change, other sectors are moving just a little bit more slowly. The good news is the transformation of our energy grid is well underway as we embrace renewable energy and with increasing commitments from carmakers to transition from internal combustion engines to electric vehicles. We can say the same about our transport sector. It's a great start. Together, electricity and transportation make up nearly 50% of total global emissions. However, 18% of emissions come from agriculture and land use and this is proving to be a little more of a challenge. Earlier this month, New Zealand proposed a world first, having farmers pay for the emissions of their animals. Essentially, it's a methane tax. So naturally, here at the dive, we wanted to understand how this would work. It's Friday, the 17th of June. And today, I want to know how our New Zealand proposing to tax emissions from agriculture. And is this a model the rest of the world will follow? To do this, I'm joined by my colleague and the co-founder of Equity Mates. It's Alec Renehan. Alec, welcome to The Dive. 

Alec: [00:01:26] Hi. It's so good to be here. A lot of media are talking about this story as a burp tax reform talks. That's the last time you'll hear us mention either of those terms in this episode. 

Sascha: [00:01:36] Excellent. I'm glad we have a buyer. And I know that this is a particular area that you love talking about sustainability. Anything to do with moving towards a greener climate. So let's get into it. Agricultural emissions are a concern around the world, but they are particularly in New Zealand. Can you tell me why? 

Audio clip: [00:01:54] With a population of just 5 million? New Zealand's carbon footprint is relatively small. It's hoof. Print, however, is through the roof. 

Alec: [00:02:02] In a country of 5 million people, they have 10 million cows and 26 million sheep. Animal emissions are front of mind in New Zealand's battle to get to net zero. To put some numbers to it in the UN's 2019 climate change report, emissions from land use, including agriculture, forestry and land clearing make up 22% of the world's greenhouse gas emissions. But that changes from country to country. In America, 11% of greenhouse gas emissions are from agriculture. In Australia, it's about 15%. In New Zealand it's about 50%. So animal emissions make up a much bigger proportion of the total in New Zealand than in some other countries. 

Audio clip: [00:02:46] The average cow emits a whopping £220. 

Sascha: [00:02:50] Of methane gas a day. So New Zealand, unsurprisingly then has tried to tax agricultural emissions before, but they just haven't done it with any success. Can you tell me about those previous efforts? 

Alec: [00:03:02] So after the Kyoto Protocol in the early 2000, which was pre Glasgow, pre Paris climate agreement, New Zealand went home and tried to tax animal emissions. Then they introduced the agricultural emissions research levy that proposed to tax farmers a total of $8.4 million a year for the emissions of animals. Now, this was absolutely derided at the time. A National Party member of Parliament drove a tractor up the steps of Parliament in protest. The media lampooned it as a fart tax or a burp tax. Suffice to say, Sascha, the levy did not get put on. Then in 2009, New Zealand implement a emissions trading scheme. 

Audio clip: [00:03:45] New Zealand is introducing an emissions trading scheme after years of controversy and compromise. 

Alec: [00:03:51] And there were efforts to include agriculture in this emissions trading scheme. Again, these efforts have been unsuccessful, well, at least unsuccessful until now. 

Sascha: [00:04:01] So knocked down, but not out because New Zealand's government is going again. And it makes sense because even though they've had an emissions trading scheme since 2009, it doesn't cover the agricultural sector and with that 50% of their total emissions. So how effective can it be? But what makes this time different, Alec, is that it appears they've got the farmers on board. 

Audio clip: [00:04:26] And now in a world first New Zealand farmers will have to pay a tax for every one of them methane emitting 10 million cattle and 26 million sheep that roam this scenic countryside. 

Alec: [00:04:36] So it appears they've got the farmers on board. 

Sascha: [00:04:40] Okay. 

Alec: [00:04:40] It appears the farmers have proposed this plan, but we have to be clear, it has been proposed under great duress. Jacinda Ardern's government told farmers they need to come up with an emissions pricing system and if they don't, then agriculture would automatically enter the country's emissions trading scheme from. It's currently exempt. So a partnership between farmers and government has come up with the proposal, but it really was come up with a better proposal or you'll be stuck with this one, which I think is what? 

Sascha: [00:05:11] Yeah. Come up with a better proposal or else. Yeah. Tell me what the details of this 2022 plan are. 

Alec: [00:05:17] So the proposal would start in 2025 and it would charge livestock farmers an initial price of $0.11 per kilo for methane and 0.4 cents per kilo for carbon dioxide or nitrous oxide. And then those numbers would increase over time, more and more, since I think methane is meant to peak at about $0.35 from memory. Now, per the University of Adelaide, a single cow produces between 70 and 120 kilograms of methane annually. So some quick maths, Sascha, that would cost between 7.70 and 13.20 per year per cow. At this $0.11 per kilogram. Right, which doesn't say that much. But if you have 10 million cows in a country, all of a sudden that's $77 million. So the group estimates that by 2030, these price increases will reduce agricultural emissions of methane by approximately four and a half percent and of nitrous oxide by approximately 3%. 

Sascha: [00:06:21] And the response has been divided. On one hand, we've seen farmers take to the streets in protest and on the other hand we've seen the plan criticised by climate activists for not going far enough. So Alec, can you give me a sense of the criticism from both sides? 

Alec: [00:06:37] I think we can agree that both sides hate this plan, not just for very different reasons. So Mike Joy, a New Zealand freshwater ecologist and science communicator, called the plan pathetic and I quote, It's not ambitious. It's a cop out that just puts more pressure on other sectors of society. 

Audio clip: [00:06:56] As you and I know that work in Canada is not going to address the big issues like nitrous oxide, like synthetic fertiliser, like intensive dairy farming is. 

Alec: [00:07:06] And then on the other hand, the spectator criticised the plan as a truly reckless idea and suggested that, quote, the farming industry is likely to suffer under any sort of punishing climate talks, but. 

Audio clip: [00:07:18] Let's not let the science get in the way. 

Alec: [00:07:20] Of the virtue signalling. So on one hand, climate activists don't think the plan goes far enough, and on the other hand, people that don't believe in climate change or don't believe that agriculture should be responsible for changing, think it's going to decimate New Zealand's farming industry, in particular their farming exports? But Sascha, maybe this is the case of if both sides hate what you're doing, you're probably doing something right. 

Sascha: [00:07:46] Hey, that's a motto to live by. I think New Zealand might be the first country to propose a tax on the agricultural sector to tackle emissions, but they're not the only country that's ramping up action on their agricultural sector in an effort to combat climate change. Let's take a break. And then when we come back, I want to talk about some of the other countries and how they're trying to tackle this problem. Welcome back to The Dive today. We've been talking about New Zealand's plan to tax agricultural emissions. And at this stage it's unlikely that we're going to see countries following suit and taxing farmers directly after all. Globally, more than $200 billion of government money is used to subsidise farming. So it's fair to say we're a long way from the taxation side of things, but we are seeing plenty of other solutions being proposed. So Alec, take it away. I want you to tell me about them. 

Alec: [00:08:45] Well, certainly, I think a lot of the world will be watching New Zealand and taking notes, but we haven't seen a lot of countries suggest they'll be following suit. And as you said, a lot of countries around the world still subsidise the agricultural sector. So don't expect to see taxes implemented any time soon. The good news is there are other solutions being proposed and I think we can group them into three buckets. Firstly, reducing the number of livestock. Secondly, reducing emissions per livestock. And thirdly, changing livestock themselves. 

Sascha: [00:09:18] Oh, I'm so curious about the last one, but we'll go with the first to kick it off. 

Audio clip: [00:09:23] One of the biggest shake ups in the food world and the technology world over the past five or so years is the popularisation of plant based meat. 

Sascha: [00:09:29] I'm speaking for all of us here, but I think most of us are aware of or even eating the alternatives. There's plenty of plant based meat. I don't think I've had lab based meat, but I know it exists. And the logic is pretty simple. We substitute livestock based meat, traditional meat, for something that looks, cooks and tastes very similar. And that, in turn, is going to reduce the overall emissions from the agricultural industry. 

Alec: [00:09:54] Yes. So that's right. And beyond meat and impossible foods are the two big brand names in the plant based meat industry. Most people are familiar with plant based meat, but there is another technology looking to create a substitute for livestock meat that gives us all of the taste and none of the emissions lab grown meat, which is essentially meat grown from animal cells.

Audio clip: [00:10:16] This is real chicken, except it's made in labs, in commercial food production facilities instead of being raised on a farm. 

Alec: [00:10:23] Now it's still early days, but Singapore was the first country to approve the sale of lab grown meat, or, as they call it, cultured meat. A U.S. company in 2020 got approval to sell lab grown chicken nuggets in Singapore. So there's a lot of, I guess, the agricultural industry or the agricultural adjacent industry that is pushing to reduce agricultural emissions by substituting livestock for some of these other products. 

Sascha: [00:10:52] Can I say the cultured meat name choice is a very clever PR move because lab grown meat just doesn't have a great ring to it, does it? 

Alec: [00:11:00] Sascha, do you want an even better PR term that using no kill meat? 

Sascha: [00:11:04] I'm not sure I'm okay with that one either. With that in mind, let's move to the next big bucket of solutions reducing emissions per livestock aurochs, primarily a sheep and beef farmer. But he's also a carbon farmer. 

Alec: [00:11:18] So then the next bucket is reducing emissions per head of livestock. And we've seen farmers work to make livestock operations carbon neutral or even carbon positive. 

Audio clip: [00:11:30] Growing plants. 

Alec: [00:11:31] Photosynthesise and grass is no different. It takes atmospheric carbon out of the air. It's turned into sugars and cellulose that both goes into the. 

Audio clip: [00:11:40] Plant structure itself and into the soil to feed the muck organisms. 

Alec: [00:11:44] Now this involves working to reduce your carbon and greenhouse emissions to as low as possible and then offsetting the rest with tree planting or buying carbon offsets or something similar. And there are a number of options to reduce your greenhouse gas emissions that involve a variety of farming techniques. The choice of animal feed. You use manure management covering those storage facilities, rotational grazing to allow soil to regenerate. But Sascha, there are two particularly exciting developments in this space that I want to talk about here when we talk about reducing emissions per head of livestock. And the first one is let me introduce you to asparagus. 

Audio clip: [00:12:22] This very special. 

Audio clip: [00:12:23] Seaweed called asparagus. This was eliminating methane from those fermentations.

Alec: [00:12:28] Asparagus. This is a seaweed that can be added to animal feed to reduce methane emissions. And a study conducted by the CSIRO, Meat and Livestock Australia and the James Cook University confirmed the effectiveness of asparagus in reducing methane. They found that emissions were reduced by 80% when asparagus accounted for just 3% of the kettle's feed, which is a really exciting development when we're talking about reducing greenhouse gas emissions. 

Sascha: [00:12:58] I mean, humans are just so clever. We are in safe hands. There's lots of people working on amazing solutions. 

Alec: [00:13:03] Yeah, as long as we don't get complacent and we keep working. But the second development, Sascha, is that New Zealand is also working on a, quote, methane. A vaccine which would trigger an animal's immune system to generate antibodies in their saliva that suppress the growth and function of methane producing microbes in the cows stomach. Again, theoretical at this point, but an exciting opportunity to reduce the emissions per head of livestock. 

Sascha: [00:13:31] And I think that talking about the vaccine is a great segway into the final category, which is changing livestock. It does sound, I'm going to admit, pretty ominous to me. So what exactly do you mean here? 

Alec: [00:13:46] So this is about the genetic make up of cattle. And to be clear, we've been genetically engineering animals for years with selective breeding and the like, improving disease resistance, removing horns from a lot of cattle, different physical traits, breeding animals to be bigger so they have more meat. This isn't new, but what is new is our ability to edit genes with such precision with technologies like CRISPR.

Audio clip: [00:14:14] A South Korean research team has discovered genetic traits in cows with low levels of carbon emissions by analysing the genetic big data of cattle.

Alec: [00:14:24] So there's now a school of thought and a school of research that is looking at how we can edit the genes of animals to reduce their greenhouse gas emissions. The University of Adelaide in Australia are studying if they can breed low methane cattle and xynomic's. An Anglo Danish company, has looked at more than a thousand dairy cows across multiple breeds and multiple countries to try and identify novel targets for the association between the animals genomes, its rumen, which is it stomach and methane emissions to try and figure out which genes can be edited to create low emission cattle. Basically. 

Sascha: [00:15:04] That's just incredible. And listening to you talk about these three different solutions, it sounds as well like none of them are mutually exclusive. There is a world where New Zealand style tax prices, the emissions from agriculture, which then incentivises additives like asparagus. And it makes sense to pay to add asparagus to your animal feed if in turn it means that you avoid the emissions tax. So the livestock meat that is produced will be farmed in ways that are way more sustainable and release less emissions. And equally in the supermarket, consumers are going to be given more choice options between livestock meat, but also lab grown meat, cultured meat, no kill meat and plant based meat. And they can choose the ways that they want to consume this. So all of these initiatives that you're telling me about could work together. 

Alec: [00:15:55] That's right, Sascha. They absolutely could. And honestly, they probably need to for us to get where we need in terms of emissions reduction in the time that we have. 

Sascha: [00:16:05] Well, one thing I can say with confidence is we're not going to resolve the debate today. So let's leave it there. We will watch with interest, though, the development in New Zealand in their wars and the broader global response to the challenge of agricultural emissions. Thanks so much for joining us for today's edition of The Dive. If there's a story that you want to tell us about, then do contact us at the dive at Equity Mates dot com or follow us on any of the social media channels. All those details as per usual in the show notes below. I want to say a huge thank you to those of you who reviewed us. So I've seen a couple come in over the last week, so we'd love it if you could also give us a five star review. And remember to subscribe so that every time there's a new episode we're on Mondays, Wednesdays and Fridays, it's there. You don't have to go searching for it. We're just right there. Ready in your feed, ready to play. Until next time, Alec. Oh, you're having a week off, so we'll see you on Monday week. 

Alec: [00:17:00] Sounds good. Enjoy the week without me. 

Sascha: [00:17:03] Enjoy is not the right word, Alec, but we will soldier on and hope you have a great week off. Until next time. 

Alec: [00:17:08] Thanks.