Emission pricing mechanisms: GXP100 or GWP*?

Adoption of modern science, including use of the more accurate GWP* calculations for methane emissions, will allow us to achieve ambitious and fair climate change targets, argues Deane Carson.

Emission pricing mechanisms for livestock and fertiliser use have recently been released. To understand the importance and validity of them, a short review of the past is helpful.

For decades climate change, carbon emission and livestock effects have been pushed by environmentalists. During that time, some have viewed the rural sector as sluggish to acknowledge its role and to take responsibility. Some of that reluctance has come from reasoned issues such as equivalencing gases like methane from ruminant belches with fossil fuel emissions from vehicle exhausts.

Traditionally methane emissions were simply multiplied by 28 times to give a CO2 equivalence (CO2eq). This calculation is part of methods known as GWP100 and has been shown to misrepresent the impact methane has on warming.

‘My message to the HWEN team would be thanks for your hard work, can we please have an analysis that includes GWP*.’

In July 2018, Professor Myles Allen, Dr Michelle Cain both of Oxford University, and Dr David Frame of New Zealand’s Victoria University tackled the problematic and erroneous GWP100. They looked at methane as a short-lived gas that cycles and came up with a calculation that considered the change in methane over time to closer match the impact it has on warming. This calculation was called GWP* and has recently been acknowledged by Intergovernmental Panel on Climate Change (IPCC) reports. This science initiated the concept of a split gas approach and treating methane separately.

Fundamental to this new position, is that static levels of methane have a relatively small impact on warming, increases in methane have a much bigger warming impact than previously acknowledged, and reasonable decreases can have a cooling effect.

In August 2018 the Parliamentary Commissioner for the Environment (PCE) Simon Upton looked at methane reductions with this split gas lens. With modelling done by Dr Andy Reisinger, he found that a 10-22% reduction in biogenic methane would be required by New Zealand to meet a goal of no further warming from methane by 2050. IPCC recently calculated a similar reduction target with 0.3% reduction per annum or 10% by 2050 representing no warming from methane. The equivalent of net zero carbon from methane.

Act seen as groundbreaking

In 2019, the NZ Government passed the Zero Carbon Act. It was seen by some in the rural sector as groundbreaking, as it established two standards of emission consideration. Where long term gases, like CO2, are required to reach net zero by 2050, short term gases like methane, are required to reduce by 24-47%. The reduction in methane is roughly in line with the Paris Agreement which requires a 24-47% reduction between 2010 and 2050.

Although many in the industry admired and lorded a split gas outcome, many also noted that there was a big difference between what science was telling us and what the Government had set as a target.

In October 2019, the Government agreed to work with the Food and Fibre Sector and Iwi on establishing a process to determine a pricing mechanism for the livestock and fertiliser sectors. He Waka Eke Noa (HWEN) was set up as a result. A complex relationship was established between the Ministries for the Primary sector (MPI) and the Environment (MFE), primary industry organisations and the Federation of Maori Authorities (FOMA).

In late November, HWEN released a discussion document and proposed two pricing mechanisms. A farm levy mechanism, where example farms would pay between $4500 to $22,500 by 2025; or a processor-farm levy hybrid, where the same example farms would pay $5900 to $18,500 by 2025.

A third position is considered, and that is if HWEN fails to meet its objectives, farming would enter the Emissions Trading Scheme (ETS). Under this position, the same example farms would pay between $4800 to $18,500 by 2025, and $15,500 to $60,100 by 2030 based on the assumptions. While the financial differences between systems don’t seem large, there are practical implications with the options included in their report.

Old system chosen

Critically, the calculations used to determine these numbers are GWP100. That’s right… The old system where methane is unfairly considered, but with a 95% offset to make an ad hoc adjustment. A system that reasonable logic suggests will become obsolete in the near future, due to it being a system that does not closely represent warming. A significant reason for choosing this metric seems to be about application. Nearly all the tools for determining emissions across the country are based on GWP100. Overseer, the B+LNZ emission calculator and even our official Greenhouse Gas Inventories are based on GWP100. GWP* also requires a calculation of methane over 20 years. Challenging to apply to a farmer who may not have been farming for 20 years.

These issues with GWP* as a regulatory calculation are not insurmountable. It is possible to annualise any calculation that occurs over a time period. Also, some of the emissions calculators were designed with the possibility to modify to accept GWP*.

Contraction represents cooling

There are other considerations with GWP* with warming and cooling effects calculated as being more pronounced. Costs associated with increases in emissions would be greater and credits for reducing emissions could be allowed for. Examples in practice include: if a land use reduces stocking rate or even quits ruminants in preference for something like trees, would a credit be given for cooling and to whom? Or if a more intensive methane systems per hectare occurred, like would typically happen with sheep to dairy, who would be liable? The sheep farmer or the dairy farmer? Or the industry?

I expect participants of the sheep and beef industry will quickly realise that industry contraction can represent a climate cooling. Sheep numbers have declined by 53% since the 1990s and lamb production has decreased by 9%. When HWEN proposes a tax rather than a credit, questions will be raised.

It strikes me that it is only through the adoption of modern science will we achieve ambitious and fair climate change targets. Important targets to humanity. My message to the HWEN team would be thanks for your hard work, can we please have an analysis that includes GWP*?

In tandem, I would appeal to Government agencies to show leadership that may require us to find an alternative to Paris and Kyoto agreement obligations. Profound changes to climate science are still happening. Fluidity and a bold purposeful approach will lead to efficient, meaningful change. Which is much needed.