Embracing a new mindset

New Zealand has an emissions profile unlike many other countries.¹  The majority of emissions come from primary industries, with the bulk from biogenic methane in the agriculture sector.²  While New Zealand is one the most efficient dairy and meat producers in the world, with a carbon footprint nearly half that of other international producers,³  reducing on-farm emissions to achieve net-zero targets is not as simple as decarbonising our energy and transport systems, for which there are known solutions.

It is worth taking action

Decisive climate action by New Zealand and the world means New Zealand’s economy could be $64 billion larger, in net present value terms. This is in contrast to a scenario of inadequate action on climate change, which allows the planet to warm by 3°C above pre-industrial levels by the end of the century.

With decisive action on climate change limiting global warming to as close to 1.5°C above pre-industrial levels as possible, the agriculture sector in New Zealand could contribute $1.2 billion more to New Zealand’s economy by 2050, compared to a scenario of inadequate action.

In fact, if New Zealand manages to lead the world in the reduction of biogenic methane, such as through finding, implementing and scaling methane reduction technology and methods earlier than competing countries, the agriculture sector could contribute $1 billion more to New Zealand’s economy by 2050, when compared to decisive action alone. Economy wide, leading the world in biogenic methane reductions has the potential to add $114 billion dollars to New Zealand’s economy in net present value terms, $50 billion more than in the scenario of decisive action alone.

Reducing biogenic emissions faster and more effectively means New Zealand’s agricultural sector reduces its exposure to an increasing price of emissions quickly, giving its exports a comparative advantage over other countries in the midst of their respective decarbonisation journeys.

These findings are based on our report, Aotearoa New Zealand’s Turning Point, which models the economic future of two scenarios: inadequate action and decisive action on climate change. Our modelling shows decisive climate action is worth the initial costs. New Zealand will reach a turning point in 2036, where the initial costs of decisive action on climate change are outweighed by the benefits of rapid decarbonisation. At the centre of our research and analysis is Deloitte Access Economics’ unique Computable General Equilibrium (CGE) Climate Integrated Assessment Model, the D.CLIMATE model.

A change in mindset is required

The benefits to the agricultural sector of decisive action, or decisive action with rapid on-farm emission reductions, are not guaranteed, however. A change in mindset is required. Clear and consistent policy direction on climate change and support from both government and the private sector to transition New Zealand’s economy to a lower carbon one, are crucial pillars.

Our modelling assumes that with decisive action, agricultural emissions are priced in New Zealand and across the globe. This emissions price is also raised through to 2050, providing an economic incentive to find, implement and commercialise solutions to finding on-farm emissions. Such a move is not without cost, and the growth of the agriculture sector is lower, relative to inadequate action, for a time, as the sector decarbonises and finds solutions to on-farm emissions. This period of lower growth also persists, reflecting the difficult task associated with decarbonising the agricultural sector, meaning its turning point is later (around 2046) when compared to other sectors of the economy.

Significant investment by both the public and private sector is also required for the agriculture sector to reach its turning point. Reducing emissions based on pasture-based production methods employed in New Zealand already exist. However, public and private sector investment is needed to commercialise these. Our modelling envisages a scenario where investments and collaborations, (such as the Global Research Alliance, the Centre for Climate Action on Agricultural Emissions, and the joint venture between the Ministry for Primary Industries (MPI) and industry to accelerate innovation) bear fruit, allowing the agriculture sector to reduce on-farm emissions without sacrificing production.

The agriculture sector is up for the challenge

The extent of the biogenic emissions underpinning our modelling is ambitious. Our modelling envisages a scenario where the agriculture sector is able to reduce biogenic methane emissions by around 61% compared to 2022 levels by 2050, which is more drastic than the stated targets under the Climate Change Response Act 2022.⁴

However, our discussions with key participants in the agriculture sector show the sector is up for the challenge. The mindset shift required for rapid on-farm emissions is already in play. Being a world leader in biogenic methane emissions reductions, is also a stated ambition of many participants we talked to.

The effects of climate change are also already being felt by the sector. This ranges from reducing or changing operating hours to reduce heat stress on people and livestock, to diverting resources to repair damage to existing infrastructure and assets. This supplements the sector’s ambition and mindset to meaningfully reduce its emissions.

The task of decarbonising and reducing on-farm emissions for the agricultural sector is not an easy one. However, our modelling demonstrates that doing so is worth it and that being a world leader presents an immense additional opportunity. There is no better time than now for New Zealand to work together for a better and more sustainable future for one of its most important sectors.

References

¹ Ministry for the Environment (2021) How New Zealand compares to other countries.
² Statistics New Zealand (2022) Greenhouse gas emissions (industry and household): March 2022 Quarter.
³ Dairy NZ (2021) Research shows NZ dairy the world’s most emissions efficient.
⁴ The Climate Change Response Act 2022 sets a goal of 24 to 47 per cent reduction below 2017 levels by 2050, including 10 per cent reduction below 2017 biogenic methane emissions by 2030 – see https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/emissions-reduction-targets/greenhouse-gas-emissions-targets-and-reporting/