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What role should dairy farms play in NZ's low-emission future?

Wetland restoration: Kaiwaiwai Dairies’ Aidan Bichan. Photo/Hagen Hopkins

New Zealand stands out among developed nations because half of our greenhouse-gas emissions come from agriculture. The billion-dollar question is how we maintain productivity while reducing emissions. 

In the middle of the patchwork of paddocks along State Highway 53, between Featherston and Martinborough, is a hint of a more ancient Wairarapa, a tiny stand of kahikatea with their roots anchored deep in a bog.

The wetland is artificial, constructed around a remnant of native trees on a dairy farm by a group of landowners firmly focused on the future of farming.

Kaiwaiwai Dairies milks 900 cows during peak times. The cattle graze on about 360ha of pasture and produce calves twice a year to deliver winter milk for Fonterra. The wetland, built on a productive but soggy section of the farm, is just one in a number of initiatives to reduce its carbon footprint.

Macro alias: ModuleRenderer

In an office building behind the farmstead, Aidan Bichan, dairy farmer, farm consultant and one of seven shareholders, is crunching the numbers. The Kaiwaiwai wetland was created in 2014 to reduce nitrate leaching into Wairarapa Moana – the largest wetland area in the southern North Island, encompassing Lake Wairarapa and Lake Onoke – with financial assistance from the Ministry for the Environment’s waterways restoration fund. Since March 2015, monthly measurements have delivered data on what goes in and what comes out. It shows that the wetland removes about 500kg of nitrogen a year from the water.

“It takes most of the drain water from our neighbours,” says Bichan. “Probably 30ha of our farm goes through that wetland and several hundred hectares from other people. It makes a difference to Lake Wairarapa, so it doesn’t matter whose nitrogen it is as long as it’s no longer in the water.”

A reduction in the amount of fertiliser they use has also cut the amount of nitrogen that leaches into groundwater. “When we bought the farm, in 2005, they were using 200kg of artificial fertiliser per hectare, on top of the application of dairy effluent. Now we’re at about 60 to 90kg per hectare. If you’re not leaching nitrogen into the ground, or you’re reducing it, you’re also reducing what goes into the air.”

Aidan Bichan. Photo/Hagen Hopkins

Good farm management

Kaiwaiwai Dairies started tracking its greenhouse-gas emissions more closely in 2012, using an online modelling tool called Overseer. The software was originally developed to trace nutrient flows and to help farmers minimise fertiliser use, but it has a component that estimates greenhouse-gas production on a farm. It allows farmers to put in “what if” scenarios to test how changes in farm management would affect nutrient budgets and emissions.

Based on results from Overseer, Bichan says Kaiwaiwai Dairies was producing about 17 tonnes of carbon dioxide (CO2)-equivalent emissions in 2012, split roughly into thirds between CO2, methane and nitrous oxide. The latter two are known as biological greenhouse gases because they are produced directly by livestock – methane from belching sheep and cattle, and nitrous oxide from animal urine and synthetic fertiliser.

By 2017, emissions had dropped to 11 tonnes from the three gases. Bichan believes CO2 emissions may have dropped because they stopped ploughing the land and therefore used less tractor fuel. Instead, they opted for the no-tillage practice of drilling seeds straight into the ground.

The drop in artificial fertiliser, and more precise application of effluent, lowered nitrous oxide emissions, he says. When the cows come into the milking shed twice a day, they get their rations on a feed pad. The time they spend off pasture means that effluent can be collected in a sump, then stored and separated. The liquid is used to wash the yard, cutting the use of clean water by almost half, from an average of 70 litres per cow each day to 36 litres. When the effluent is pumped back onto the paddocks, it goes through pivot irrigators to spread smaller amounts more evenly.

Photo/Getty Images

The biggest change, however, was to move away from palm kernel. “Historically, we used about 300 tonnes and now we’re under 100 tonnes. Each tonne of palm kernel has three tonnes of CO2 emissions attached to it, mainly through deforestation and transport.”

Instead of palm kernel, the cows’ rations now feature kale, fodder beat and maize silage – all grown on the farm or on leased land close by. “That shift to other feeds has reduced the CO2 and nitrous-oxide footprint and it’s had some impact on methane emissions.”

All these measures combined have cut costs and increased the farm’s profitability. The next step, Bichan says, is to reduce the herd size. Fewer cows will produce less methane, but with better pasture management, he expects each animal will produce more milk and maintain the farm’s productivity while reducing its environmental footprint.

Bichan and Vern Brasell, another partner in Kaiwaiwai Dairies, are two of several climate ambassadors for DairyNZ, an industry organisation that has held workshops around the country to discuss climate change with dairy farmers.

“Our philosophy is that we don’t inherit land from our ancestors but borrow it from our mokopuna,” says Bichan. “The gains we’ve got in managing emissions are not about actually setting out to get greenhouse-gas emissions down. They are about getting environmental gains. What we’ve worked out, and what people are now saying, is that what’s good for the environment is pretty good for greenhouse-gas reduction as well.”

Feedback on the ETS: Bichan, left, and James Shaw. Photo/Dairy NZ

The price of milk

New Zealand stands out among developed countries because half our total greenhouse-gas emissions come from agriculture – more than from any other industry – mostly in the form of methane and nitrous oxide. Both gases are much more potent than CO2 in warming the atmosphere – by a factor of almost 300 for nitrous oxide and 25 for methane.

According to the Ministry for the Environment’s latest greenhouse-gas inventory, published earlier this year, total emissions from all sectors have increased by almost 20% since 1990. Methane from dairy cattle and CO2 from road transport were the biggest contributors to the rise. Emissions from transport have gone up by 82.1% since 1990, driven by a spectacular increase in car ownership. In 2015, New Zealanders registered 3.9 million vehicles, the highest number ever. If forests hadn’t offset nearly a third of all emissions, the increase would have been more significant.

The dairy industry alone is now responsible for about half of all emissions from agriculture, or 22% of New Zealand’s total. Between 1990 and 2015, emissions from dairying rose by 130% but were partially offset by a drop in sheep and beef cattle numbers. Dairy herds more than doubled, from 3 million to 6.5 million cows, but sheep numbers dropped from 60 million to 27 million. As a result, methane emissions have gone up by only 5% since 1990, but a five-fold increase in the use of nitrogen fertiliser has contributed to a 28% rise in nitrous-oxide emissions.

Although emissions intensity – the emissions required to produce a kilogram of meat or milk powder – has improved, overall emissions from agriculture continue to climb because farmers are producing more. It is difficult to see how New Zealand can meet its obligations under the Paris Agreement, let alone the more ambitious target of becoming carbon-neutral by 2050, without tackling the thorny issue of emissions from the primary sector.

In some quarters, any suggestion of change still triggers resistance. But the political landscape is a far cry from 15 years ago, when farmers up and down the country took to the streets and former National MP Shane Ardern drove a tractor up Parliament’s steps in protest at a proposed agricultural emissions research levy, better known as the “fart tax”. Now, the farming sector seems on board with the goal but remains at odds about what exactly “net zero emissions” means and what measures are required to achieve it.

Source: Ministry for the Environment

Global priorities

At a packed DairyNZ climate-change workshop in Palmerston North, a farmer trying to convince everyone that grass grubs are to blame for methane emissions is a lone voice. The rest of the 80-odd participants have come to discuss what’s at stake, what options they have, and who should pay for it. Milena Scott, a policy adviser who moved to DairyNZ recently from the Ministry for Primary Industries, stresses the global nature of agriculture’s contribution to climate change.

Of the nearly 200 countries that signed up to the Paris Agreement’s goal of keeping global temperature-rise well below 2°C above pre-industrial levels, 104 countries, including New Zealand, have specifically mentioned agriculture as a sector whose emissions they want to cut. “CO2 has been and will continue to be a global priority,” says Scott. “But it is important to tackle the other gases. Emissions from livestock, globally, contributed 23% of the warming that was observed by 2010.”

Making a dent in agricultural emissions will buy more time to deal with CO2, she says. “If we were to stabilise methane only at current levels, CO2 would have to be reduced much more rapidly and urgently. It doesn’t take away from the fact that we need to get CO2 down to zero, but it makes it more difficult. Globally, the land sector is vital, in helping to remove CO2 from the atmosphere through afforestation and bioenergy, and reducing the pressure by cutting emissions of non-CO2 greenhouse gases.”

Much of the workshop debate centred on methane and livestock. At almost 80%, it is the biggest contributor to farm emissions in New Zealand. But unlike CO2, which remains in the atmosphere for millennia and continues to accumulate, methane is short-lived and degrades within a decade or two.

In April, the Productivity Commission released a draft report (the final report is online now) on New Zealand’s transition to a low-emissions economy. It made several broad recommendations for how the country could deal with agricultural emissions, including a “two-baskets approach” of setting separate domestic targets for long-lived gases (CO2 and nitrous oxide) and methane, taking into account the latter’s shorter lifetime in the atmosphere.

This approach is reflected in the options the Government has put forward for the proposed zero-carbon bill. The first continues to exclude agriculture and instead focuses on a net-zero goal for CO2 only. The second proposes a net-zero target for long-lived gases and a stabilisation of methane emissions, albeit without specifying at which level it should settle. The third and most ambitious option calls for a net-zero target across all three gases.

The middle option comes as a relief to Federated Farmers vice-president and climate-change spokesman Andrew Hoggard. “One of the key messages I get from farmers is that the gases need to be treated differently. With methane, it’s not a case of driving emissions to zero, but deciding what an appropriate level should be. If we can all agree on that point, then we can have arguments about how much it has to come down.”

Synlait’s Dunsandel factory. Photo/Synlait

Sustainability strategies

However, Canterbury-based milk processor Synlait has staked out much higher ambitions. During the company’s annual conference in Christchurch in June, outgoing CEO John Penno told farmers and shareholders that Synlait “would never build another coal-fired boiler”. Instead, the company is commissioning the country’s first electrode boiler, taking advantage of the fact that electricity is already 85% renewable. It also pledged that, within a decade, it would reduce on-farm nitrogen loss by 45% and greenhouse-gas emissions by 35% per kilogram of milk solids, including a 30% drop in methane emissions.

“This is the way the future will be,” says Penno. “There is a growing emphasis on sustainability. People are concerned about the environment, animal welfare and the quality of their food. If you take into account the future cost of carbon, these are economically sensible decisions.”

The company already rewards its farmers for good environmental practice and has introduced a tiered premium system to encourage more uptake and ongoing improvement. Hamish Reid, who led the development of Synlait’s sustainability strategy, expects that increased precision in water management will go some way towards reducing both nitrate leaching into waterways and nitrous-oxide emissions into the atmosphere.

To bring methane emissions down, Synlait plans to be the first New Zealand organisation to use a chemical methane inhibitor developed by Dutch company DSM. As yet unbranded and known only by its chemical name, the compound has been shown to reduce methane burps in sheep, beef and dairy cattle by about 30% without affecting the animals’ feed intake or milk and meat production. It could be available later this year. The snag is that it works best on intensively managed farms where animals are fed indoors, but Reid says research is under way to develop a slow-release mechanism for pasture-fed cattle and sheep.

John Penno.

“As a first step, we’ll have the product infused into grain that the cows will take a mouthful of as they walk into the shed twice a day to be milked. This stuff is concentrated; it only takes 1.5g a day for it to work. If the cows get a mouthful of grain, that should be a sufficient dose for it to work.”

“I’m an entrepreneur at heart,” says Penno. “My confidence with our sustainability strategy comes from the rapid advances in technology that can help us … to progress to a lower-emissions future. It’s the right thing to do and I’m yet to meet someone who can successfully argue it doesn’t make long-term commercial sense for the sustainability of our business.”

Meanwhile, at Fonterra, the focus is on long-lived greenhouse gases. To reduce its reliance on coal, the dairy giant plans to co-fire boilers with biomass and is switching to electricity at its Stirling plant in South Otago. Its overall goal is to run solely on renewable energy by 2050. As part of this shift, Fonterra has surrendered its Mangatangi coal-mining permit and will divest itself of 296ha of land that had been acquired for coal mining by the end of the year.

By 2025, Fonterra will require all milk-supplying farms to have an environment plan to curb leaching and nitrous-oxide emissions. Fonterra’s chief operating officer for global operations, Robert Spurway, says the co-operative supports the ambition of a zero-carbon economy, but “net zero emissions means different things to different people. What we support is net zero long-lived gases by 2050 and a flexible approach to reducing and then stabilising methane.”

Fonterra is one of a number of organisations to invest in research into and development of technologies that could reduce emissions from livestock.

Robert Spurway.

A low-emissions future

The Productivity Commission’s other projections foresee significant shifts in land use, away from pastoral farming to horticulture and a doubling in the area planted in forests. It also recommended the establishment of an independent climate commission and that farming should be brought into a revised Emissions Trading Scheme (ETS).

New Zealand would be the only country in the world to put an emissions price on agriculture. Minister for Climate Change James Shaw has spent the past few months visiting farmers for their feedback on the idea of coming under the ETS. “Many say they’d be happy to join but want to make sure they have incentives and can control their own destiny. That makes perfect sense to me,” says Shaw. “They want a practical way that takes into account all the things that happen on farms, so they can get credit for the good things they do as well as [being accountable for] the animal emissions. The more people who get rewarded, the more people will do it, and that’s where you get real change.”

In May, at an annual farmers’ forum at Mystery Creek, Shaw told hundreds of farmers that the ETS will be reviewed as part of the Government’s work towards introducing climate legislation. “It hasn’t done what it was meant to do and bring emissions down. If you have something that applies right across the economy and is going to affect prices and who gets credits for what they do and who’s got liability, then you have to make every effort to get it right.”

Source: Ministry for the Environment

By June, National Party leader Simon Bridges was pledging his party’s support for a climate commission and offering a bipartisan approach to climate policy. During a speech at Fieldays, he stressed the importance of the primary sector to New Zealand’s economy and argued for a pragmatic approach based on innovation. “Technological change will drive much of the solution to climate change … we are already seeing opportunities to shift our transport sector to renewable energy through the uptake of electric vehicles.”

He told farmers that any policy on agricultural emissions would need to take into account the effect on the wider economy and New Zealand’s role as a food exporter that “produces more food per person than any other OECD country”.

While market-based price signals, such as an emissions trading scheme, could help bring about behaviour change, he argued that it is too early for agriculture to shoulder the cost of emissions. “The technology does not exist to mitigate emissions, and adding a tax just makes that industry worse off without reducing global emissions. The current lack of mitigation options [in agriculture] means the only behaviour change it will likely drive is the culling of herds, which risks simply moving food production overseas where taxes haven’t been imposed.”

Andrew Hoggard.

Federated Farmers has long argued that a carbon market would put New Zealand farmers at a disadvantage because of the relatively low emissions intensity of meat and milk produced here. Any drop in production here, climate-change spokesman Hoggard says, could be picked up by farmers with a higher carbon footprint elsewhere. The outcome could be worse for climate change and harm an important export industry.

To buffer farmers from any trade-related disadvantage, the Government’s coalition agreement sets out a phased approach, with only 5% of agricultural emissions initially entering the ETS. Shaw says New Zealand’s climate debate has been fixated on the idea that action on climate change is a sunk cost and that there is no upside. “This is one of the reasons why we’ve made so little progress in the past two or three decades. If instead of using the word ‘cost’ you use the word ‘investment’, you’re focusing on the return on that investment and everyone is pulling in the direction of wanting to have a more productive economy, one that creates higher-value goods and services than we are at the moment. The way we respond to climate change could be the greatest opportunity in a generation, economically.”

Vet and long-standing advocate for sustainable farming Alison Dewes recently joined state-owned farmer Landcorp, now known as Pāmu, as environment head. She still farms in the Rotorua catchment, where she shifted from grazing dairy heifers to rearing beef calves, taking advantage of a $40 million scheme that supports farmers who want to reduce their use of nitrogen fertiliser and change the way they use their land.

Alison Dewes.

She says agriculture faces the concurrent issues of water quality and emissions, and dealing with the former can help the latter. “The greatest increase in nitrous-oxide emissions in the past 25 years has come from intensification of land for dairy, often on quite vulnerable soil, and using a lot more fertiliser. It could be reduced by 20 to 30% through far more precise and focused use of fertiliser and by dropping stocking rates. On some farms, herd size could be reduced by 10% without affecting the bottom line.”

However, studies by economic research institute Motu and AgResearch have shown that current policy targets for water would have only a moderate effect on reducing overall greenhouse-gas emissions. Dewes says optimising farm management is only one aspect. “Apart from a system shift, we’ll also need a system reset towards more forestry and horticulture.”

Growing fruit and vegetables produces no methane and significantly lower levels of nitrous oxide for most crops. In a low-emissions future economy, the Productivity Commission forecasts that the land area used for horticulture could double, or even triple.

Brent Clothier.

Plant & Food Research’s Brent Clothier says horticulture covers about 120,000ha, with half of that taken up by the “big three” of kiwifruit, grapes and apples. But if factors that make land suitable for horticulture are taken into account, such as the number of frost-free days and flatness of the ground, there are about two million hectares – 17 times the present area – on which horticulture should be profitable. Most of that land, about 85%, is used for livestock farming, he says.

Back on the dairy farm, Aidan Bichan says when Shaw visited a few weeks ago, they talked about how to encourage farmers to do better by the environment. “We want to farm, not with regulation dictating to us, but with good outcome-based policy, and we want to be involved in the development of the policy, not just submitting on it afterwards,” he says.

“We need regulation for the 10 or 15% of laggards and we need good policy direction for the top half of people and some incentives and encouragement for another group. But if you try to bring out a stick that’s aimed at 80%, we may become quite innovative about how we avoid the regulation rather than being innovative about how we make things better.”

Source: Ministry for the Environment

Rise in emissions

Since 1990, New Zealand’s overall gross emissions have climbed by 19.6%. The top sources were agriculture, at 49.2% of total emissions in 2016, and the energy sector, at 39.8%.

Unlike agricultural emissions, which are mostly in the form of methane and nitrous oxide, emissions from the energy sector contribute CO2. They were 31.6% greater than in 1990, and largely due to transport, which spiked by 82.1%.

Graph 1: Methane agricultural emissions from 1990-2015.
Graph 2: The increase in emissions as a result of transport (including shipping and rail, and road transport such as cars and trucks) from 1990-2016.
Graph 3: The increase in the three main greenhouse gases (CO2, methane, nitrous oxide) from 1990-2016.

Managing methane

Changes in farm management only go so far in cutting emissions from livestock. Technology and genomics could be part of the answer.

Harry Clark, the director of the New Zealand Agricultural Greenhouse Gas Research Centre in Palmerston North and one of six recently appointed climate commissioners, has welcomed Synlait’s decision to adopt a methane inhibitor developed by Dutch company DSM as part of its “clean cow” project.

The chemical works by suppressing the methane-producing microbes in the forestomach of cud-chewing, or ruminant, animals. Clark says similar research under way in New Zealand has identified a number of promising substances that are going through long-term trials.

The search for inhibitors is one of four main strategies to reduce methane emissions from cattle and sheep. Selective breeding has already resulted in a small flock of naturally low-emitting sheep, which produce more wool and leaner meat than their high-emitting counterparts. The genetic trait is now available to sheep breeders, but not much work has been done on cattle.

Low-emission feeds, such as forage rape, are also under investigation and have been shown to curb methane emissions by up to 30%. A vaccine, which would essentially inoculate farm animals against the rumen microbes that produce methane, seems feasible but has yet to be shown to work beyond laboratory conditions.

Clark says there is scope to reduce cow numbers but increase the production per animal. “That, in a sense, is an efficiency gain and can lead to lower emissions. It is switching production to a per-animal rather than a per-hectare focus.”

He says as far as methane emissions are concerned, the farming sector is well placed to bring them down. “Across agriculture, emissions actually peaked in 2005 and although forecasts vary on where they will go, the sector is not on some trajectory that’s inevitably rising.”

Click here to read the Productivity Commission's report on NZ's transition to a low-emissions economy

This article was first published in the August 25, 2018 issue of the New Zealand Listener.