New Zealand is the first country in the world to plan an agricultural emissions tax.
In mid-October, the government of New Zealand announced a new pricing system that aims to combat the country’s greenhouse gas emissions. Much of the country’s emissions can be attributed to animal agriculture, which is dominated by cow and sheep farming. These animals are ruminants, meaning they have specialized digestive systems containing methanogens–– microbes that produce the greenhouse gas methane. The effects of methane in the atmosphere are about 80 times as powerful as carbon dioxide and therefore contribute significantly more to atmospheric warming. Nearly 90% of New Zealand’s methane emissions come from the livestock sector; the dairy sector alone contributes to 46% of total greenhouse gas emissions annually. Nitrous oxide, another greenhouse gas, can enter the climate system from the urine of these animals. So, if the government is going to tax any area of its economy in an attempt to limit the release of carbon dioxide, methane, and other heat-trapping compounds into the environment, animals are a smart place to start.
In 2019, New Zealand pledged to reach net-zero emissions by 2050, but the proposed Zero Carbon bill suffered from one big and relevant loophole: the exclusion of biogenic methane emissions from plant and animal sources. The country was omitting the one factor that contributes vastly to climate change. A tax could mitigate some of the damage done by leaving livestock emissions out of the 2019 equation, but New Zealand is not rolling it out immediately.
New Zealand’s Prime Minister, Jacinda Ardern, made a statement promising the program would be in full force beginning in 2025. So what exactly would an agricultural emissions tax entail? In addition to its population of about five million people, New Zealand is home to approximately 10 million cows and 26 million sheep. When it comes to taxing livestock farms, the industry will face substantial new expenses. Farmers who meet a certain threshold of herd size and fertilizer use would pay a levy set by the government every one to three years. The price of this tax, according to Ardern’s proposal, would adjust based on the country’s emissions progress and international promises. It goes hand-in-hand with carbon pricing systems that policy experts have been pushing for around the world for years. By taxing animal emissions, there is an incentive to produce less.
Another good thing about this scenario? The additional revenue collected by the New Zealand government would be recycled back into the country’s farms through investment in green technologies and practices. Not only will it become more expensive to farm a larger number of animals, but the country’s agriculture will have the ability to improve in other ways with the tax revenue. The country also wants to keep this program separate from the Emissions Trading Scheme already in place, to prevent farmers from buying offsets and avoiding the issue of their emissions in the first place.
If New Zealand’s emissions come largely from animals, why did it take so long for the government to make a change? Economic policies come with ripple effects, and this one is no exception. New Zealand is the world’s seventh largest exporter of beef, and 95% of the milk produced in the country is shipped to other countries. Even more alarming, nearly 50% of New Zealand’s exports are produced by livestock. When there are a lot of eggs in one basket, the risk of playing with the market through economic adjustments is bigger. Not only is New Zealand’s economy reliant on animal agriculture, but many other countries count on their exports as a source of meat and dairy. This means pricing changes made by farms due to this tax plan will have a broader impact on the global economy for meat and dairy.
Although much of New Zealand’s exports are from these industries, it is certainly not the only place in the world that is heavily dependent on animal agriculture. In fact, compared to the rest of the world, dairy production in New Zealand is among the most efficient for this sector. Regardless, that does not change the fact that the country produces so much dairy that environmental damage comes along with it. An agricultural emissions tax may be plausible in a smaller economy like New Zealand, but how does that carry over into other countries that are more heavily responsible for the footprint animal agriculture has on the environment?
The US, for example, is the world’s largest producer of beef, followed by Brazil. Combined with the European Union, these three places account for roughly 50% of all beef production. New Zealand isn’t included in these numbers at all. So could this new taxing system be the move that pushes the U.S. and Brazil to adopt similar measures? The consultation document in New Zealand is set to be signed by the cabinet next year, and the effects of this tax won’t be seen until it is officially imposed in 2025. Activists in Brazil have been emphasizing that a similar agricultural levy could be effective in combating Amazon deforestation, which, to no surprise, is largely driven by cattle ranching: cows require a lot of land, and most of the land being cleared is carbon-sequestering rainforest. There is also currently no tax on non-fossil fuel emission sources in the United States, a place that could also largely benefit from a reduction in anthropogenic greenhouse gas emissions.
New Zealand has set an ambitious plan in place that could be implemented on a far larger scale worldwide. If international climate targets seek to be realistic, more countries must join in on combating the environmental impacts of the agricultural industry. Countries and farmers that own hundreds of millions of acres for livestock grazing and farm millions of animals are where these techniques can be most effective. Building a circular economy through agricultural taxes which bring revenue back into farmers’ livelihoods and incentivize businesses to improve ecologically is important for moving forward. We cannot continue pushing economic incentives and paving paths forward while leaving behind an emissions-heavy and rarely accounted-for industry.
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