Friday, April 11, 2008

Climate change: farmers can afford it

With Fonterra announcing a record payout to dairy farmers of $7.30 / kg of milk solids, I thought it was an opportune moment to look at whether the claims from dairy farmers that they can't afford to pay for the costs of their carbon pollution were justified. Here's some quick calculations:

  • I've previously established that each dairy cow in New Zealand emits 0.3627 T CO2-e per year of nitrous oxide and 1.686 T CO2-e per year of methane, for a total of 2.0487 T CO2-e per cow (this is based off the methodology in the 2004 National Inventory Report. The same methodology is used in the 2005 report as well).
  • According to MAF [XLS], there were (provisionally) 5,279,612 dairy cows in New Zealand in 2007.
  • On-farm dairy-sector emissions are therefore 10,816,341 T CO2-e.
  • Fonterra's 2006-2007 production was 1.246 billion kg of milk solids. this year's production is expected to be 80 million kg lower, for 1.166 billion kg.
  • Dividing one by the other gives rough emissions of 9.276 kg CO2-e / kg of milk solids.
  • Assuming a carbon price of $30 / ton, this works out to 27.8 cents / kg of milk solids, or less than 4% of the total.

That's the gross figure. But the government is planning to credit farmers with 90% of their 2005 emissions (9,379,888 T CO2-e), meaning they only have to pay for 1,436,451 T CO2-e. This gives a final price of 3.7 cents / kg.

And they say they can't afford it.

There's no justification at all for giving farmers a five year holiday on taking responsibility for their emissions. They're polluting, and costing the country money. And rather than profiting from it and enjoying an explicit subsidy from the taxpayer, they should be paying for it.