NZ dairy industry’s biggest challenge is meeting methane gas emission targets

New Zealand dairy farmers are some of the most efficient producers of dairy milk in the world, and while the past year has been tough for many industries, the overall picture for dairy has been overwhelmingly positive.  Returns to farmers have been at record levels,. along with the economic contribution to NZ.

Dairy  export receipts are  nudging $20bn  a  year, up  from $4.58m  in 2000.

But  now  the  industry  is  facing  its biggest  challenge.

Dairy  cattle are  responsible  for  22% of  NZ’s emissions. Can  NZ  meets  its methane  emission  targets  without  slashing  the   size of the  national  dairy  herd?

The  threat of  global warming  has  become all too plain  to  New Zealanders  in recent weeks and the pressure  on   the  government to  act  is  mounting.

It  can’t   dodge  making  decisions  on  the  Climate  Change Commission  report  it  received   earlier this  year. But  its  proposals  could  have  a  severe  impact  on   the  dairy industry. Continue reading “NZ dairy industry’s biggest challenge is meeting methane gas emission targets”

Climate change just got cheaper – or maybe not …

Britain’s fiscal watchdog – the Office of Budget Responsibility (OBR) – has some good news.  It thinks the cost for the UK of getting to zero carbon could be much less than anticipated:  

While unmitigated climate change would spell disaster, the net fiscal costs of moving to net zero emissions by 2050 could be comparatively modest.”

Under its ‘early action scenario’ government net debt would rise by a mere 20% of GDP in the years to 2050 from the current 105%.  That almost seems encouraging when compared with the near-30% of GDP increase responding to the Covid pandemic , and the roughly 50% surge which followed the global financial crisis.

Continue reading “Climate change just got cheaper – or maybe not …”

Yes, we could try to be world-beaters in tackling climate change, but the reason for wanting to set the pace is unclear

Ministers in the Ardern  government  are getting to grips  with  the  Climate Change  Commission report  which,  if  adopted  in  full, will  reshape the  NZ way of life. Some say if all the  recommendations  the  commission  has  framed  are  applied, it will put NZ in the  vanguard  of the  battle  against global warming.

Just  why this country should want to be  among  the  front-runners,  and  possibly  the first,  to  meet  its  commitment  under  the  Paris  agreement to reach zero carbon emissions   by 2050  is  not  exactly  clear.

Nor may  there  be any  deep  conviction  that  the  Ardern government has  the  capacity to deliver  the   most  appropriate  measures  to  meet  its  climate  targets, given  its  long  list  of  policy  failures  including  Kiwi  Build, wiping out homelessness, eliminating child  poverty, and improving mental health, not to  mention the  Covid  vaccination  rollout.

NZ’s CO2 emissions are considerably less than those in the US and Australia (which is among the highest in the world). Transport makes up 33% of NZ’s “long lived” gases. Continue reading “Yes, we could try to be world-beaters in tackling climate change, but the reason for wanting to set the pace is unclear”

The climate-change dilemma facing dairy farmers – milk more cows or cull the herd – is politically challenging, too

From one Wellington  platform  Reserve  Bank governor Adrian  Orr is  telling  the  country   strong global demand for NZ primary products is ensuring the economy remains resilient during the Covid-19 pandemic and is helping offset tourism losses. He  says  Fonterra’s  forecast  of a  record opening milk price is “very good news” and is included in the bank’s projections.

From another platform, Climate Change Commissioner Rod Carr told hundreds of people – including farmers – at an agricultural climate change conference that for the agricultural sector there would be no way to wriggle out of slashing emissions.

Carr said agriculture made up about half of NZ’s emissions, and this needed to be reduced to meet climate obligations.International customers would go elsewhere, costing the economy billions of dollars in the coming years.

So  here’s  the  problem:

Should  dairy  farmers  be  planning to  milk  as  many  cows as  they  can  next season —  or should they be  sending animals to  the  works  to  cut emissions? Continue reading “The climate-change dilemma facing dairy farmers – milk more cows or cull the herd – is politically challenging, too”

The world is keen on our dairy products, which is great for our economy – but what happens when we start culling the cows?

Although  global  trading patterns  are still recovering from the  Covid  pandemic, the  positive  outcome   for  New Zealand   is  that  it  has  strengthened  demand for  the  kind of foodstuffs we produce.

In particular  the   dairy  trade is booming  and  though  the current  production season is beginning to tail off, Fonterra’s latest global dairy auction showed  demand, far  from  falling off, is  still  very  strong,  with  prices  for  whole  milk  powder   51%  higher  than at the  level they were at  this time  last  season.

Dairy products are the country’s largest commodity export and Fonterra estimates milk payments to its 10,000 farmer suppliers for this season would contribute about $11.5 billion to the economy.

The  encouraging  factor   for those  producers  is  that  there  is  every sign  the   high prices  being  earned  at  present  will  be  sustained  into  the  next  season.

Last month, Fonterra raised its forecast milk price for this season to between $7.30 and $7.90 kg/MS, with a mid-point of $7.60.  Some  analysts  are   forecasting $7.70 for this season, ahead of Fonterra’s mid-point.For next season, the  forecasts  range between $7.30   and  $7.50.

While the global dairy trade price index slipped 0.1% from the previous auction a fortnight ago, prices for whole milk powder, which has the most impact on what farmers are paid, gained 0.4% to an average US$4097 (NZ$5713) a tonne.

What  may  be  an irritant  for  the  industry, currency  movements  are  taking  some  of the  gloss  off the  prices  being earned.

With the rising Kiwi currency, the latest auction brought overall prices -2.0% lower in NZ dollars. The key WMP and SMP prices were virtually unchanged in US dollars. The best performer was cheddar cheese, up +1.2% in US dollars but even that was not enough to record a gain in NZD.

The   strong  market  is largely driven by China where a wealthier population and an increased focus on health and wellbeing after the Covid-19 pandemic is stoking demand for better nutrition.

North Asian buyers were back in force, taking up their usual positions as the major buyer.

At the latest auction, 99% of the whole milk powder on offer was sold. There were slight  downward movements  with both of the cream group products. That was  attributed  in part to  the extra volume of butter on offer.

Fonterra  indicated previously it is producing more butter to take  advantage of the  high return for it. That was  sensible,  with butter topping $US5,100  a  tonne.

Given the  outstanding  work  of  the  dairy  industry,  how    will  the  government  react  when  it   comes to   deal  with  the  Climate Change Commission’s  proposal  to  cut  dairy cow  numbers  by  15%?

Taking stock: Govt should pump more into science to lift farm production as animal numbers are reduced

Here’s  a  conundrum for  New  Zealand: pastoral farming last year produced more  than 40% of  the country’s export income, but  the Climate Change Commission is calling   for  a  15%  fall in the  national headcount of    sheep and  dairy and beef cattle by 2030  and  another 5% by 2035.

Even if the  productivity  of  the animals  can  be  improved, the  commission appears to be  saying that  NZ  will have to adjust  to a  flattening out  of  its export income  from farming, and  therefore to a  slower  rate of  what already is a slow rise in living standards.

So  what is  going to fill  the gap  when the  headcount of dairy  cows  falls?

Or  (a better question, surely) is  there  a  better  way of  meeting  NZ’s  emission reduction  targets  than the  methods  the  commission  recommends?

It’s   a  fact  that  methane  emissions  comprise  49%  of  NZ’s  total  emissions  but methane, although a potent greenhouse  gas, has  a  relatively short-lived impact.

Dairy farmers  who argue that  their work, besides providing  them with their livelihoods, benefits the national economy  through  foreign  exchange earnings, will find  this doesn’t wash  with  the  wider community .

As  Brian  Fallow in the  NZ  Herald put it,  NZ is  internationally accountable for its emissions and  if  those who profit from  them  continue  to escape  any  cost and therefore  receive no price signal to reduce  them, then  that  is a subsidy from the rest of us. The subsidy’s days  are numbered. Continue reading “Taking stock: Govt should pump more into science to lift farm production as animal numbers are reduced”

Climate Change Commission has plenty of new energy developments to consider before completing its final report

Thirteen   wind farms, each the size of the country’s  largest, will need  to be  built in the  next  15 years  to power  the  country’s fleets of  electric vehicles, and boilers. That’s  what the Climate Change Commission has urged in its  recent    report to the  government.

Whether   the  country’s power  companies  will see it  the  same way  as the commission is  far   less certain. Already  Contact, one of the biggest, has stepped  up  to the plate and says  it  will  invest $580m  to build a  new  geothermal  station at Tauhara.

Contact’s  chairman, Rob McDonald,  says:

“We believe the Tauhara geothermal project is NZ’s  best  low-carbon ren ewable electricity opportunity.  It will operate 24/7, is not reliant on the weather  and is ideal for displacing  baseload  fossil fuel generation  from the  national grid which  will significantly reduce  NZ’s carbon emissions”.

Construction is  expected to be  completed  by  mid-2023. Japan’s Sumitomo Corporation  is  leading the build, in partnership   with Naylor Love  and Fuiji Electric.

Meanwhile   Genesis Energy  is  reviewing whether it  should keep its investment in the offshore Kupe  oil and gas field,  or look at “better investment  opportunities”.

It  says the field  has “attractive” cash flow and a  strong  growth outlook, and its operators are looking at further development, including  further  exploration and drilling  another well.

Kupe  provides  around 15% of  the  country’s  natural gas  and half  of  LPG demand.

Last  August  its gas  reserves  were revised  upwards  by  more  than 20%.  Its  importance to  the  country  has  risen  after  Beach  Energy  and NZ  Oil  and  Gas (Genesis’  other  partners  in Kupe)  relinquished  PEP  52717 (Clipper)  which contained  the promising Barque  prospect off  the  Canterbury coast  this  week.

NZ  Oil  and  Gas  said  it  was with “much regret”  they  gave  up the permit  after years of  work to mature  it  and  bring in appropriate partners. CEO Andrew  Jefferies  says  he  expects it  will not be  the  last offshore  acreage  to suffer  the same fate.

He  points to a  confluence of  events including adverse regulatory settings, the  dry  hole in OMV’s Tawhilki permit,the recent announcement

Terminating the  Wherry-1 drilling, and the effects of Covid drill costs having  formed  a perfect storm, making  the task of finding suitable drill partners in the required timeline impossible.

Both  Beach  and  NZOG  reaffirm their commitment  to NZ  with  Kupe   which they say “remains a  key supplier to the  country’s energy needs”.

At Kupe they are halfway through a major compression project  to maintain production, and say  the offshore  permit has both development and near-field  exploration potential.

Their enthusiasm  for  Kupe  suggests   both   could be interested   in  channelling  more of  their capital,  now  they  will be  no longer funnelling   any  towards the  Barque prospect, into Kupe. They might  also  be interested  in snapping  up   Genesis’ stake  if it comes on the market.

However  that  works  out, there  are  other interesting  moves   in the  energy  field  which makes  some of  the  Climate Change Commission’s scenarios  look  out of  date  even  before  they reach the government.

Energy  consultants    report   keen interest by  overseas  interests  in investing   in large-scale  solar  projects  in NZ,  now  that  the price  of  solar  equipment   is falling.   Where big solar  farms   can  be  located  adjacent to large sources  of demand,   the  lower  transmission costs  are  said  to make  the economics  look very attractive.

With  the  government  moving  last week to  stiffen up the Emissions  Trading Scheme, incentives  in the  energy  sector   are  changing  rapidly. Climate Change Minister James Shaw  claims  the government  had to lift the price  to emit  because  the  scheme had  failed to deliver on its primary purpose  of bring down carbon emissions.

The  Climate  Change Commission will have to bring these developments into consideration before its final report  reaches the government  for  action next  December.

There’s a good case for meeting emission targets with free-market remedies rather than central planning

Richard  Prebble,  in his  column  in the NZ Herald, is  dismissive   of the Climate Change Commission’s draft plan to reduce carbon emissions to fulfil  NZ’s  obligations  in meeting the global warming threat.

He contends the commission is proposing to  centrally plan  the economy for the next 35  years — but it’s impossible to plan 35 years out .  “It  would be like today’s economy having been planned in pre-internet 1986”.

Prebble  writes:

“So when faced with an existential  threat  like global warming why would a  government respond by using an economic tool, central planning, that has never worked?”.

The  commission intends

  • The closure of aluminium and methanol production,
  • a switch from coal, diesel and gas to electricity,
  •  dairy, sheep and beef animal numbers reduced by around 15%,
  • phase out imports of light internal combustion  engine vehicles,
  • no further natural gas connections to the grid or bottled LPG, and
  • more walking, cycling  and public   transport.

Continue reading “There’s a good case for meeting emission targets with free-market remedies rather than central planning”