Thursday, December 01, 2022

Climate Change: Be careful what you wish for

Throughout the (misnamed) he waka eke noa process, farmers have insisted on farm-level pricing, largely as a way of getting more subsidies for their pollution - and sadly, Labour looks set to give it to them. They're already complaining about the "bureaucratic nightmare" - a nightmare entirely of their own making - which means they're going to spend a lot of time to learn what we knew all along: their choices are basicly to shoot cows or plant trees. But there's another nightmare they're setting themselves up for. Farm-level pricing means that there will be farm-level emissions-data. And banks look likely to demand this and use it in their lending decisions:

Fonterra and its farmers risk not being able to access debt funding in the future if they don’t meet banks’ sustainability expectations.

“We're starting to see more and more pressure come from the banking sector,” Fonterra chief executive Miles Hurrell said in an interview at Fieldays near Hamilton on Wednesday.

Banks were wanting to set Scope 3 carbon emissions targets, which includes emissions they are indirectly responsible for, and not meeting their expectations could result in less favourable funding rates or ultimately not being able to access funding in the future, he said.


Farmers would be facing similar risks with their businesses, he said.

This is because banks are setting scope 3 emissions targets, covering everything they are responsible for - which includes the farms they lend to. They want to meet and exceed those targets, so the pressure is going to go on borrowers to reduce their emissions. Farmers with poor emissions records may find themselves with less favourable terms, or even unable to get credit. banks are already facing pressure over lending to the fossil fuel industry; this is going to enable environmental groups to pressure them on lending for cows as well as coal.

But its not just the banks. Fonterra is also setting such a target, and is already facing significant consumer pressure over its emissions. So it will also be demanding that farm-level data, and using it to make decisions about who they accept milk from and how much they pay for it. So dirty farmers may find themselves unable to sell their product, and unable to renew their mortgage, and be forced out of business. Which is I think a win for the rest of us.

The irony is that farmers had accepted putting agriculture in the ETS at the producer level a decade ago, they'd be facing only pressure from Fonterra. Dragging their feet and insisting on the less efficient and less effective pricing mechanism has left them more exposed. Perhaps they should have been more careful in what they wished for?