Farming, Forestry & Energy in NZ Style Trading Scheme?

The very idea of an ETS, in any form, seemed inconceivable a week ago. But one focused on agriculture, and possibly the energy industry, could be a deal-maker, along with the broadband network. The great irony of this would be that agriculture was excluded from the ill-fated CPRS because the leading farming bodies couldn’t get their mind around the matter. So says Giles Parkinson in Climate Spectator.

Giles Parkinson in Cimate Spectator 24 August 2010

Australia may have a New Zealand-style emissions trading scheme – centred around agriculture – quicker than anyone might have expected before the election.

It is just one of the fascinating scenarios being painted by observers and analysts as the trio of country, or “populist agrarian”, independents prepare to begin negotiations with the mainstream political parties.

The very idea of an ETS, in any form, seemed inconceivable last Friday. But one focused on agriculture, and possibly the energy industry, could be a deal-maker, along with the broadband network.

The great irony of this would be that agriculture was excluded from the ill-fated CPRS because the leading farming bodies couldn’t get their mind around the matter.

But what has made a change entirely conceivable is the huge popularity of the recently introduced ETS among the farming community in New Zealand, and a wholesale change of attitude in the US.

This has been accompanied by a growing appreciation in Australia – including among the three independents in question – that a carbon trading scheme could provide enormous opportunities for farmers.

For the past several weeks, New Zealand government ministers and bureaucrats have barely missed an opportunity to trumpet the positive reception to that country’s ETS. The decline in forestry plantings has been dramatically reversed, and farmers are finding new and profitable uses for marginal lands, particularly those that have steep, erosion-prone and largely unproductive land.

Bloomberg reported late last week that New Zealand’s sheep farmers are flocking to a government carbon trading program because some of them are finding that it pays more to plant trees than sell wool and mutton.

“The New Zealand experience shows that bringing in an ETS could be very positive,” says Anthony Hobley, the head of climate change practice at legal firm Norton Rose. Hobley says that, while the US legislation didn’t get up, the idea of an ETS was receiving positive support from the agricultural community because of the way that it was designed.

One of the three country independents, Rob Oakeshott, made it clear yesterday that re-engaging the mainstream parties on the subject of an ETS would be one of his biggest priorities. The other two are likely to be sympathetic if it can be skewed in favour of their rural constituencies.

“The independents, on balance, seem to support action on climate change,” Deutsche Bank analyst Tim Jordan wrote in a report on Monday. He says an ETS could be accelerated, particularly under a minority Labor government.

The irony is that it would only need a small flick of the switch for either mainstream party to support such a measure. Tony Abbott would simply need to re-brand his party’s proposed “abatement market” for soil carbon, and allow it to include forestry, and for the units to be traded, rather than simply bought by the taxpayer.

That shouldn’t be beyond the bounds of a classic conservative agenda that trumpets free markets and small government. He could even use the opportunity to rebrand the “great big new tax” slogan and call it a “great big new asset”.

For Labor, it would simply mean bringing a much abbreviated CPRS back into the sort of timetable that had been envisaged when they were originally elected in 2007, even if it means bypassing the citizen’s assembly.

An agricultural-based scheme would be relatively simple – at least compared to Labor’s CPRS – and simplicity and clarity is key if a carbon price is to successfully introduced.

To make any sense at all, any ETS would need to include at least an energy-based carbon price, as either a tax or a market-based scheme. But that should not be too controversial, because it is now well accepted that the tens of billions of investment so desperately needed in the sector cannot be made without it.

In the energy industry, no one pretends that a carbon price of some sort will not emerge at some point: better for all to deal with it now.

The Greens, however, will be in a position from next July to demand less indulgence towards the heavy emitters than was offered in the CPRS, and might be convinced to allow a staged introduction – with mechanisms to bring in a softer tax-based scheme in other sectors over time – if that was the case. That is the sort of hybrid scheme that was entertained by US Congress before it was all put in the too-hard basket so close to the mid-term elections.

The influence of the country politicians, and their ability to guide the debate towards the substantive issues, rather than rhetoric, could provide a surprising and unique opportunity to develop good policy. That is the attraction of an influential third force.

Source: www.climatespectator.com.au