Ireland and New Zealand agriculture: trade and climate change

Address to the Institute of International and European Affairs Leadership Forum on Climate-Smart Agriculture, 16 July 2015

It is a great pleasure to be in Dublin – it always is. I have visited Dublin regularly since my first visit in the early 1980s and my visits are always focussed on agriculture.

When I first came to Dublin I was the so-called Foreign Policy Adviser to the New Zealand Prime Minister, Sir Robert Muldoon. What I remember most about that visit was an extraordinary conversation over dinner with your then Taoiseach, Charles Haughey, not at the official Irish Residence, but at Mr Haughey’s personal Residence. I was told at the time that there were tax considerations behind this choice of venue.

Both Leaders were trained as chartered accountants. One, your Taoiseach, was the real Irish deal; the other, given his family name of Muldoon, obviously had strong Irish heritage. They were pretty much a match for each other.

We had come to put our case to the Irish Government on the issue that is today long dead, but then was a huge, on-going battle between us for access to the UK market for butter and sheepmeat. After a memorable dinner of outstanding Irish Salmon en croute, and a more than sufficient quantity of good French wine to help it down, Rob Muldoon laid out the NZ case to Haughey. The Taoiseach responded thus: ‘I’ll tell you what Rob. I won’t support you, but I won’t put the boot in’. And with that, we left on our merry way.

Ireland and New Zealand in Global Agriculture Markets Today

What a different environment we both face today. And what opportunities we both have. The simple reality – masked by yet another cyclical downturn in many soft commodity prices, including dairy – is that the world needs more protein and this is something Ireland and New Zealand do as well as anyone.

New Zealand’s capacity to increase production is constrained by pasture-based production and dependent on climatic conditions – the long run average increase in production only around 2% per annum. What Ireland has done since the removal of milk production quotas is simply remarkable - Irish milk production is already up 13% year-on-year since quota removal in April 2015.

The world needs between 60% and 70% more food by 2050 to feed another 2 billion or more people. These realities are driving an entirely new trade and investment relationship between New Zealand and the EU. Turning history on its head, we are now discussing openly and positively an FTA between NZ and the EU.

It starts with a simple piece of political logic – New Zealand is one of only 6 WTO Members with which the EU does not have either a preferential trading relationship (Canada being the most recent addition), or is in the process of negotiating one. The negotiation now underway with the United States – the TTIP negotiation – being by far the most important. The world has moved on and leaving New Zealand out of this network of FTAs looks both odd at a political level and completely unnecessary at an economic level.

In today’s agricultural trade environment, an EU-New Zealand FTA is about opportunities for partnership and collaboration in meeting these increased global demands for high quality foodstuffs.

In sheepmeat, and because of Chinese demand, we cannot supply the EU market even up to the amounts bound in the WTO at the end of the Uruguay Round. In dairy, New Zealand total exports to the EU account for only 0.5% of total EU dairy consumption.

Agriculture is in the early phase of globalization and the early development of agri-business global value chains, having been locked up for decades behind ludicrous high trade and investment barriers.

Only last week, we opened a new state-of-the-art factory in Friesland, developed in partnership with Dutch conglomerate A-Ware Food Group, which has built a major new cheese plant next door. Whey and lactose, by-products of A-Ware’s cheese-making process, will be processed into specialty ingredients by the Fonterra plant. These will be used in high-value paediatric, maternal, and sports nutrition products for sale in the European Union and beyond into export markets outside the EU.

This is such a different outlook to what I described in my anecdote about the memorable dinner between our Prime Ministers over thirty years ago. Efficient food producers like the Ireland, France, the Netherlands and New Zealand have outstanding futures in global agri-business, increasingly as partners, not competitors, and I am confident we shall both make a success of it.

Climate Change: The Setting for Paris

2015 is a big year for climate change. Paris will be a critical meeting but it is, I believe, a mistake to measure the adequacy of the global effort on climate change solely through the prism of the formal UNFCCC climate change negotiations. Huge advances in clean technology, and massive cost reductions, are at least as important. However, a well-constructed comprehensive climate change agreement will unify and influence energy and climate change policy across all the countries concerned.

I appreciate that there is more to the climate change negotiations than mitigation, but the absolute priority is to broaden mitigation efforts beyond Annex 1 countries, or developed countries roughly expressed.

Putting this in political terms, if we don’t achieve that, ladies and gentlemen, we are all wasting our time with our own climate change efforts. Developed countries cannot possibly meet the challenge on their own. The Kyoto Protocol – fatally weakened from the inception by the departure of the United States – now accounts for around 11% of global emissions. Far broader participation in the new Global Agreement is the central negotiating issue.

To achieve this, emerging economies and developing countries generally need technology, finance and assistance with adaptation challenges. But most of all, they need to be sure that any commitments they take on from 2020 in the context of the new comprehensive climate change Agreement on the table in Paris will not call into question the development process.

They want what our societies have achieved over the course of the industrial revolution, powered by fossil fuels – decent housing, dependable electricity at affordable prices, universal education and basic health services, the liberation of people by giving them the means of private transport and above all, they want food security. These are needs that cannot be denied.

It is in the context of the last of these human needs – food security - that I want to focus on the role of agriculture in climate change.

Agriculture – Its Role in Developing Countries

In international politics generally, the preservation of peace and security trumps everything. After that, the most sensitive issue is agriculture, food security in particular.

The need to have food security is wired into the historical DNA of human beings. If we set up a binary choice between climate change and food security, there is no possibility of developing countries prioritizing climate change, whatever the predictions of IPCC computer models may say.

New Zealand has put a huge diplomatic and negotiating effort over many years into trying to get a serious discussion of this issue going in the UNFCCC.  It has proved extremely difficult.  This is rooted in the politics of food production and food security.

A number of major developing country agricultural producers are very wary of getting into discussion about managing agricultural emissions.  They assume production constraints are an inevitable outcome – and that is untenable for them.

I don’t have the slightest difficulty in understanding why they take this position, extreme though it may seem to some who are looking at the issue solely through a climate change framework.

China aside (where massive progress has been made), underfed children is still a shocking problem in many developing countries. Such countries put their own deep and understandable concerns of food security and rural poverty through the political lens of how industrial countries have treated agriculture emissions in the Kyoto fungibility model and conclude – ‘we are not going to disincentive food production’. I get it. So should everyone.

Eventually, something has to give here. The ‘Science’ in climate change – or rather, the key point about the influence of anthropogenic greenhouse gases on climate change – may indeed by ‘settled’ in broad scientific terms. But the politics of climate change around this – including the metrics and methodologies - are not.

Agriculture Emissions: The Kyoto Model

International negotiators in both trade and climate change are a conservative lot.

The structures of the Kyoto Protocol shape the entire debate, and that structure includes treating agriculture emissions as just another set of emissions.

The Kyoto modalities were developed with industrial emissions by industrial countries in mind. Their generally small agriculture emissions were an afterthought. Even for the US, the world’s largest agricultural exporter and one of the world’s largest emitters of greenhouse gas from agriculture, agriculture emissions account for only around 7% of their total emissions. So the industrial economies could safely take responsibility for their total emissions, including agriculture emissions, and leave agriculture outside their domestic policy response, precisely because agriculture emissions were a small part of their carbon footprint.

Furthermore, there was striking climate change logic, as well as political logic, behind those choices. The real problem in climate change is carbon dioxide from energy and industrial processes. Carbon dioxide, or CO2, comprises some 80% of all greenhouse gases in the atmosphere and worse, stays around for hundreds and hundreds of years, unlike short-lived gases such as methane from animals.

I am sure that professional climate change scientists have long been aware of this point. But my political sense is that it has been only recently that the absolute primacy of reducing carbon dioxide, above all other gases, has started to be absorbed widely by policy makers. Personally, I think it is hard to overstate the importance of this.

The Kyoto modality – taking five other Greenhouse Gases and converting them to carbon dioxide equivalents in what economists would call ‘a fungibility model’ - is elegant, sophisticated and logical for industrial economies trying to get their energy and industrial processes on a lower emissions pathway. It does not make a lot of sense to an economy with relatively large agriculture emissions.

At one level, there is an important debate amongst experts that the ‘apples for apples’ metric they used – 100 year GWPs (Global Warming Potential) – is flawed, precisely because it does not prioritise action on carbon dioxide, which is the essence of the climate change problem which is all about the long term, not the short term.

Personally, I suspect the critics may well be right and it may well be better either to put a different coefficient in front of GWPs to focus mankind’s effort on long-term gases or use the alternative metric of GTP. That in itself would have important implications for enteric methane, a short-lived gas.

One way or other, we need new thinking on biological emissions. In the past, the model only seriously disadvantaged one small developed country – New Zealand, since half our emissions come from producing food for other countries. Ireland and France were in the same boat, but to a much lesser extent – particularly since membership of the EU allows internal trade-offs not open to New Zealand.

But that was the past – we now need developing countries to start to take mitigation actions. And many of them have a huge proportion of their total emissions coming from agriculture. If we keep treating agriculture emissions in the same way, we are putting up a massive barrier to economy-wide mitigation efforts. And that, ladies and gentlemen, is a very large rock in the road towards a truly comprehensive global climate change Agreement with real, as opposed to phony, mitigation commitments. This is no longer just ‘a New Zealand problem’.

Biological Emissions

Given the structure of our agriculture sectors, all my comments below relate to emissions from livestock, not  rice and the many other forms of agriculture that exist around the world that all have their own characteristics.

With livestock in mind, I prefer the term biological emissions’ to ‘agriculture emissions’. No country puts a carbon price of any sort on biological emissions – only in New Zealand is this even a matter of serious political debate, let alone action.

In New Zealand, it is incorrect to say ‘agriculture is not included’ in the ETS. Our farmers, like all New Zealanders, pay a price on the carbon they use every time they jump on a tractor, use a digger or drive in their cars – through the carbon price on petrol or the electricity they purchase. Ok – the carbon price they pay, and thus the disincentive to consume carbon, is very low.

But finally our farmers here are treated no differently from other New Zealanders – though you would never believe it if you listened to the shrill political debate in my country around the issue, with loose talk about ‘subsidising farmers’ from NZ politicians and commentators who have never heard of, let alone be involved in, the WTO debate over massive agriculture subsidies.

Second, all agriculture processing – dairy factories, meat abattoirs above the same threshold level that applies to non-agriculture companies – are also included in our ETS. What is not included is nitrous oxide and enteric methane from our livestock.

Last week, our Government committed provisionally in what is called our ‘INDC’ (or Intended Nationally Determined Contribution). We are aiming to achieve by 2030 a 30% reduction in our overall emissions on a 2005 base, consistent with the base chosen by the United States and several others. We have, consistent with the Kyoto acquis, included our proportionately large biological emissions in that responsibility target.

Under the Kyoto model, each country is entirely free to decide how it frames domestic policy to achieve these targets – and New Zealand is certain to meet its initial Kyoto target and all but certain to meet its second commitment period target to 2020.

But our underlying problem with the existing Kyoto approach has not gone away. Until such time as our farmers can access technologies that allow them to maintain production at far lower emissions, putting a price on biological emissions just raises tax revenue and at the margin depresses our agriculture production and thus depresses New Zealand exports. We don’t want to do that – we are trying to raise the ratio of exports to GDP, not reduce it.

The Global Research Alliance on Agriculture Emissions

Since becoming Government in 2008, we have not, however, just sat on our political backside worrying about the problem. We are the only country in the world to have established an entire new international science institution dedicated to fighting the threat of anthropogenic greenhouse gas warming – the Global Research Alliance on Agriculture Emissions, now with over 44 members, including Ireland, which has identical interests to ours in livestock emissions.

Our value proposition was based on some fundamental principles:

• Just ignoring emissions from food production – the current global political default - was not responsible from a climate change perspective. Globally, emissions from food production comprise some 15% of global emissions.
• In a planet that needs more food not less, policies that simply disincentivise agriculture production would be irrational and unsustainable politically. If you are a dairy farmer in County Clare and the Irish Government, courtesy, bien sur, of the Commission in Brussels, slaps a tax on you for your biological emissions and there is no commercially alternative climate change technology for you to do anything about it, what do you do? At the margin, you reduce production to maintain profitability to offset the tax or carbon price. Is the global climate any better off? No, worse off, because Ireland, like New Zealand, is a very carbon efficient agriculture producer.
• So we calculated we needed new climate change technologies that did not penalise productivity. And we needed a concerted international science effort around that objective.

That is the rationale, both climate change and political., behind the Global Research Alliance on Agriculture Emissions. So how are we doing? Politically, we are making some progress, but it is not shifting the debate. Scientifically, and within the field of livestock emissions, we are doing rather better than we had expected at the early research stage. 

Our researchers are showing promising results in a variety of research fields:

• Low Methane Animals: genetic markers of naturally low methane emitting sheep & cattle for use in breeding programmes
• Low methane feeds: feed options that can help reduce GHG  emissions
• Methane Vaccine: Produce a vaccine to inhibit methane production
• Methane Inhibitors: inhibitors against methane generating microbes
• Reduce nitrous oxide and nitrate leaching: Develop new and support existing technologies and develop on-farm management options
• Increasing soil carbon: Identifying ways to measure and increase the carbon content of New Zealand grassland soils

The New Zealand Agricultural Greenhouse Gas Research Centre has recently identified compounds that reduced methane emissions from livestock digestion (enteric fermentation) in animal trials by 30 to 90 per cent. That is huge. Of course there are important hurdles to overcome before this technology can be commercialised, but, given methane from livestock digestion produces roughly 5% of global greenhouse gas emissions this is promising indeed.  Promising - but still some time away from market.

The Political Challenge

While the research continues, we need to have a more honest debate about how agriculture will be treated in a new long-term comprehensive agreement, in view of the fact that any new comprehensive climate change agreement that makes sense has to be literally ‘comprehensive ‘ – it must include mitigation commitments from developing countries, however it is done and over whatever time period.

We have an open mind on a range of different approaches. Alternative commitments could include:

• Putting a price on carbon used in all agriculture processing above a threshold level – here, we would in fact continue with the classical Kyoto approach since there is no difference conceptually in energy used in a milk powder plant and a cement plant;
• Upgraded commitments to research and development – ie ramping up the NZ initiated Global Research Alliance on Agriculture Emissions;
• With respect to biological emissions, setting national targets for continual improvement in greenhouse gas efficiency;
• These could then be reflected in intensity targets for agriculture;
• There could be targets set around reducing food loss and wastage – there would be massive economic co-benefits if we were deliberately to incentive this in an international commitment. The greenhouse gas footprint of food produced and not eaten is estimated at 3.3 gigatonnes of CO2e – making food wastage the third largest ‘emitter’ after the US and China.

These are not binary choices and there are no doubt many other ideas. I think these are exciting possibilities. But if we just sit within the existing Kyoto orthodoxy of treating agriculture emissions as ‘just another greenhouse gas’, what do you think is actually going to happen on agriculture emissions over the next 5-10 years, particularly in the developing world?

Well, there are lots of earthy agriculture expressions that Irish or New Zealand farmers might use to answer that question. I will just leave you to think about it.

Thank you.