Reducing emissions from the pastoral agriculture sector and other sectors with internationally traded products

In 2015, animal products accounted for 51 per cent of New Zealand’s merchandise exports by revenue (Statistics New Zealand 2015). This was the country’s most valuable category of exports, accounting for five times more value than the next most important export category (forest products). It indicates the sector’s strong exposure to international competition.

This raises concerns about the competitiveness implications of efforts to reduce emissions from pastoral agriculture. If emission reductions impose additional costs on farmers, the competitive position of New Zealand’s most successful export industry may be threatened, reducing domestic income and threatening employment.

However, agricultural practices can adjust to maintain agricultural profitability. First, alternative agricultural land uses might generate equivalent or greater value from the land: in the last 12 years, for instance, horticulture exports have grown faster than dairy exports. Studies also indicate that pursuing agricultural de-intensification – using fewer animals on the same quantity of land – can be an effective strategy to mitigate potential profit losses.

The same pressures also raise important questions regarding the global efficacy of policies that seek to reduce New Zealand’s emissions by changing its land use. Given constant or growing global demand for animal products, any decrease in pastoral agriculture land use in New Zealand would likely be offset by greater production elsewhere. This would substantially reduce the global emission reductions resulting from New Zealand’s actions. Indeed, it could potentially lead to an increase in global emissions, if the emissions intensity of production is higher elsewhere in the world.

However, in a world committed to the Paris Agreement, global patterns of food consumption and production could change dramatically. Most analysis of stabilising global temperature increases at 2°C or lower includes reducing losses and wastes in the supply chain; changing diets from animal products to plant-based food with equivalent protein content; and a reduction in over-consumption. Significant technological advances could also lead to the rapid development of low-cost synthetic milk and meat substitutes. Viewed from this perspective, the change in land-use patterns under these scenarios could be seen as an internally coherent strategy for building New Zealand’s economic resilience in a low-emissions world. It also need not compromise New Zealand’s long-run economic performance.

Emissions leakage concerns apply to other emissions-intensive sectors where products are traded internationally. In New Zealand, some of the most salient industrial sectors where this may be a concern include refineries, steel manufacturing and food processing. Again, in a world that is collectively committed to achieving the Paris Agreement goals, these concerns would be expected to diminish over time. In the short-to-medium term, when countries may make progress towards implementation of the Paris Agreement at different speeds, there is a growing body of evidence on how to design emission mitigation policies in a way that can help alleviate such concerns (Partnership for Market Readiness 2015).