The $35 million of proposed government spending on irrigation delivers new subsidies to the dairy sector before there is any meaningful plan for unwinding existing emissions subsidies.
If irrigation projects open up new dairying on the scale assumed in the government’s modeling, then the carbon bill to the taxpayer will be an additional $30 million to $140 million a year (at carbon prices of $20 and $100 per tonne respectively).*
Unless and until pastoral farmers meet the costs of their greenhouse gas emissions, the taxpayer will continue to pick up these such carbon bills. The taxpayer is already set to subsidise agricultural emissions during the five years from 2008 to 2012 to the tune of $1.1 billion – assuming a carbon price of $30/tonne. Carbon prices are expected to rise in future and New Zealand has pledged to meet a tighter target for emissions reductions through to 2020.
Further, the Treasury clearly has significant doubts about the overall economics of the plans and states: “There are undoubted agricultural productivity improvements, increased exports and wider economic benefits arising from increased irrigation. What is less clear is whether those benefits outweigh the significant costs (estimated by MAF at around $6 to 9 billion) arising from the necessary off-farm and on-farm investment. Currently, none of the 14 potential projects is in a state where a well-informed decision to invest can be made, although it is clear that some are more viable than others.”
*This in on the basis that 42% of the 347,000 ha of newly irrigated land is converted to dairy. For details on this and later Treasury quote, see cabinet paper on schemes at: http://www.maf.govt.nz/environment-natural-resources/water/irrigation/irrigation-acceleration-fund-background-documents As New Zealand currently has no plan to reduce emissions to the level pledged for 2020, all additional emissions represent costs to the taxpayer until met by the emitter.