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Methane and Metrics: From global climate policy to the NZ farm

Author

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  • Zach Dorner

    () (Motu Economic and Public Policy Research)

  • Suzi Kerr

    () (Motu Economic and Public Policy Research)

Abstract

Stroombergen and Reisinger’s (2012) modelling suggests global pricing of all greenhouse gas (GHG) emissions, including agricultural emissions, would be beneficial for the New Zealand economy, with higher GHG prices leading to greater economic benefit. Though this inference may seem counter-intuitive for a country in which agriculture is economically important, when the effects of GHG charges flow on to global commodity prices, the rise in global prices more than compensates NZ for the costs of our GHG emissions. These conclusions rest on a single set of models and several assumptions; however, the broad direction of the conclusions makes sense given the relatively low GHG emissions intensity of agriculture in NZ and the high importance of global commodity prices for NZ’s economic fortunes. In this paper we investigate the implications of Stroombergen and Reisinger’s (2012) results for a model NZ dairy and model NZ sheep and beef farm. We consider three climate policy scenarios that differ by whether agricultural emissions are included and priced globally, and in NZ. We find that NZ farmer interests generally align with NZ’s economic interests, though farmers are more greatly affected by differing international policy scenarios compared with the NZ economy as a whole. We find that the impact of the choice of metric (that is, how agricultural emissions are traded off against carbon dioxide emissions) is minor, especially when compared with the differences between international and domestic policy scenarios. On balance, our results suggest that long term, the best scenario for NZ and our farmers is to fully price global agricultural emissions within an international climate change agreement that allows NZ farmers to exploit their competitive advantage.

Suggested Citation

  • Zach Dorner & Suzi Kerr, 2015. "Methane and Metrics: From global climate policy to the NZ farm," Working Papers 15_11, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:15_11
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    File URL: http://motu-www.motu.org.nz/wpapers/15_11.pdf
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    References listed on IDEAS

    as
    1. Jessica Strefler & Gunnar Luderer & Tino Aboumahboub & Elmar Kriegler, 2014. "Economic impacts of alternative greenhouse gas emission metrics: a model-based assessment," Climatic Change, Springer, vol. 125(3), pages 319-331, August.
    2. Mark H. Cooper & Jonathan Boston & John Bright, 2013. "Policy challenges for livestock emissions abatement: lessons from New Zealand," Climate Policy, Taylor & Francis Journals, vol. 13(1), pages 110-133, January.
    3. van Vuuren, Detlef P. & Weyant, John & de la Chesnaye, Francisco, 2006. "Multi-gas scenarios to stabilize radiative forcing," Energy Economics, Elsevier, vol. 28(1), pages 102-120, January.
    4. Lennox, James A. & van Nieuwkoop, Renger, 2010. "Output-based allocations and revenue recycling: Implications for the New Zealand Emissions Trading Scheme," Energy Policy, Elsevier, vol. 38(12), pages 7861-7872, December.
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    Cited by:

    1. Michele Hollis & Cecile de Klein & Dave Frame & Mike Harvey & Martin Manning & Andy Reisinger & Suzi Kerr & Anna Robinson, 2016. "Cows, Sheep and Science: A Scientific Perspective on Biological Emissions from Agriculture," Working Papers 16_17, Motu Economic and Public Policy Research.
    2. Suzi Kerr, 2016. "Agricultural Emissions Mitigation in New Zealand: Answers to Questions from the Parliamentary Commisioner for the Environment," Working Papers 16_16, Motu Economic and Public Policy Research.

    More about this item

    Keywords

    Climate change policy; methane; metrics; New Zealand; agriculture; greenhouse gas; economic impact; dairy farm; sheep and beef farm;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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