The big news in agricultural circles last week was that the government released their proposal to price agricultural emissions.
New Zealand is the first country in the world to actually tax agricultural emissions.
It’s no surprise that many farmers are not happy about it.
The main farming representative bodies are quite accepting of the concept of taxing emissions.
But they are not happy with the current proposals. Today I wanted to discuss the overall concept of taxing animal emissions and how farmers may respond.
New Agricultural environment
It’s common for countries to have environmental limits but to date, they don’t tax the CO2 or methane emissions from farms.
New Zealand may be the first country in the world to tax farm emissions.
But it’s clear other countries will follow suit in the next few years.
In the Netherlands, farmers have been protesting for months now after their government regulated Nitrogen and demanded farmers reduce their usage by 30-70%.
These regulations made some farms unviable. Which has prompted the government to buy the farms of farmers who can’t meet the restrictions.
This has caused much controversy among Dutch farmers.
The Dutch government also has plans to reduce animal numbers by a third by 2030 in order to meet its climate goals.
The Irish government has announced that it will cut farm emissions by 25% by 2030.
The EU also has plans to reduce its greenhouse gas emissions by 55% by 2030.
It’s clear where agricultural policy is going.
We are going to see massive destocking take place around the world.
Two types of farms
It’s hard to know exactly how farmers will adapt to these changes.
My feeling is that we will see two types of farms emerge.
The first, is farmers who accommodate the increased charges by becoming more efficient. These farms will be high-production intensive farms that are very efficient on a per-unit basis. i.e., methane/litre or Co2/kg.
They will achieve this by doing agriculture at a greater scale and prioritising efficiency.
The second, is low-emission farms which will meet their emission targets by reducing stock numbers. The way they will make up for the reduced production and added costs is by receiving more money for their product. They will do this by either receiving a premium for their product, diversifying into other products, or selling direct to consumers.
No middle ground
I think it’s going to be very difficult for farmers to be in the middle ground.
They are neither super-efficient nor suited to selling direct to consumers or achieving some sort of sustainability premiums.
The middle ground is where most farmers sit today.
It’s important to note that we need to be sympathetic to farmers who find themselves in these positions.
They have some valid points about the new rules. Some of them are not well-designed and I struggle to see the scientific case behind them.
In my mind, any opposition to these new regulations is just delaying the inevitable.
I chose a long time ago to get ready for the new agricultural environment. We will see farms shut down around, the world and the global trend of farms consolidating into fewer, but bigger farms will continue.
Unintended Consequences
There are always unintended consequences when regulations are introduced.
Outcomes that weren’t obvious to the people writing the rules.
I’ve outlined a few consequences that I think may happen.
Only the most productive animals will survive
The cost of feeding an animal means they become a liability if they are not productive.
If an animal’s emissions are also taxed, the animal now has a double liability against them.
The incentive to farmers, is for only the most productive animals to stay on the farm.
You can imagine all the different ways this will affect farm animals.
The most profitable will survive not the most sustainable
It seems to me that the NZ emissions tax will have the least impact on dairy farming.
Even though dairy has the most emissions. The modelling is showing dairy farmers will suffer a 5% reduction in profitability.
Sheep and beef farmers have much lower emissions, but they will suffer a 16-20% reduction in profitability.
Dairy is more profitable than sheep and beef so dairy will continue.
I’m not so confident about the sheep and beef industry though.
Sheep and beef farmers are already getting bought up in huge numbers by international companies who turn the farms into pine plantations to offset their carbon emissions.
Any additional tax is going to affect the least profitable.
This is another incentive force against sheep and beef farmers.
Promotion of monoculture agriculture
Animals will now be taxed on their emissions. There is now a financial disincentive to use animals.
This applies to farming systems where animals can be beneficial.
In recent weeks I’ve discussed how damaging monoculture cropping can be to the environment.
Animals and crops working in rotation with each other is the most sustainable form of cropping system.
It’s much less common practice these days and now that animal emissions are taxed, there is less incentive to add animals to any farming systems. We’re likely to see more monoculture cropping, more horticulture, and more pine plantations.
A bright future for Happy Cow Milk
It’s been clear to me for a while that dairy would eventually have to account for its emissions.
I feel that farmers are finally seeing that the Happy Cow Milk model has been designed to operate in this kind of environment.
I couldn’t be more confident about the future of Happy Cow Milk Co.
Farmers all around the world are looking for ways to stay viable with fewer cows.
We enable farmers to double their revenue by providing them with an easily transported “farm to customer” system, that allows them to sell milk directly to their local community.
Many farmers will be facing a painful future and we have a solution for them.
Global Ethical Dairy
While the world gets ready to reduce cow numbers, Happy Cow Milk is just gearing up.
My five-year vision for Happy Cow Milk is to help 500 farmers around the world transition to the new world of dairy. We can do this by helping a small percentage of farmers in countries around the world.
