Smith Lockwood: Climate Change (Emissions Trading and Renewable Preference) Bill — In Committee 
Smith Lockwood: Climate Change (Emissions Trading and Renewable Preference) Bill — In Committee 
[Volume:649;Page:18149] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I will follow on from the points the Minister in the chair David Parker just made in talking about the point of obligation in respect of agricultural emissions and the estimation of those emissions. I accept what the Minister said which was basically that the bill in its current form has the processor level as being the fall-back position for the point of obligation but with an option open for it to be at farmer level. 
What I want to take up with the Minister is this. With the point of obligation as laid out in the bill being at the processor level during the select committee process I asked the officials whether they could do an estimate for us. I stress “estimate” because members should all be aware that this bill does not propose we measure methane emissions from ruminant animals on farms; under this legislation we estimate them. 
I asked the officials to do a sample estimate for us of a processor as this bill lays out. I asked them to take a processor be it Fonterra AFFCO Silver Fern Farms Alliance or whatever and do an estimate of the emissions this legislation would require. This is what happened and I quote directly from the officials—I think I am allowed to because presumably all these reports have now been released. On 5 June we requested advice on this estimation. The officials came back and said: “The methodologies for accounting for agriculture GHG emissions at the processor level have yet to be developed. Therefore it is not possible to undertake the necessary emissions calculations and provide a figure for uncertainty at the 95 percent confidence interval.” I hope that people note what I quoted there: they said it was “not possible” currently to do the estimates that this legislation requires. 
The officials went on to say: “The major component of uncertainty in the New Zealand methane inventory is the uncertainty around the quantity of methane emitted per unit feed of intake. Similarly in the nitrous oxide inventory the major uncertainty arises from uncertainties in the direct emissions of nitrous oxide per unit of nitrogen deposit on pastures. These key elements of uncertainty”—and what they said here to the committee is important—“will be the same for the national inventory or for specific emission methodologies developed for either a processor level or farm level point of obligation.” The officials were telling us there that those uncertainties around estimation will be the same whether the estimations are made at the processor level or at the farm level point of obligation. 
The issue becomes one of how big these uncertainties are. Given the best estimates of estimation of say methane emissions from our ruminants—from our sheep and cattle—how big are these uncertainties? Again I go back to the advice from the officials at the select committee. We were told that the way we estimate these is to take the number of sheep and cattle—the number of ruminant animals—and their dry matter intake and where there is a methane conversion rate from that dry matter intake we estimate their methane emissions from that. We cannot measure their dry matter intake. We cannot know how much the sheep and cattle around the farms of New Zealand are each eating. It is not possible. So we estimate how much they are eating from their yield of product—from the meat yield the meat going through a meatworks the milk going to the processing plant and so it goes on. We estimate it that way. 
The problem with that of course is that the more efficient the ruminant animal—the more efficient the cow is at producing milk for instance—the more the farmer will be clobbered for methane emissions. Even if the animal is a low methane emitter because of its particular diet the farmer will be hit more for more methane emissions because it is producing more milk with the way it is calculated. 
But that is not the main point I want to make. The main point I would make is that the officials told us that they could not do a range of estimate at a processor level—and certainly they could not do it at a farm level—but they could do at a national level the total methane emission estimate for New Zealand taking our total production and our total number of animals. But the crucial thing is how accurate the figure is. I want members of this Committee to realise what we are passing legislation to do. What is the range of estimates of what we call the 95 percent confidence level? In other words if one comes up with an estimate what is the chance of that estimate being wrong more than 5 percent of the time? 
I will turn it round the other way. It is important for this reason. The officials came up with a figure. Taking New Zealand’s total methane emissions into account they came up with an estimate. They have done it twice; they did it in 1990 taking a 1990 estimate and they took a 2001 estimate. In both cases the figure was just over 1000 gigagrams per annum and one gigagram is 1000 tonnes so we are talking there about just over 1 million tonnes. That was the mid-estimate point. 
But the crucial thing is if one makes an estimate like that what the range of figures that could be equally accurate is. The officials provided for us what we call the 95 percent minimum confidence figure and the 95 percent maximum confidence figure. In other words if we come up with a particular figure we might be wrong more than 5 percent of the time or we might be right more than 95 percent of the time. With that range in figures—and remember the estimate was 1 million tonnes or 1000 gigagrams—the minimum estimate at the 95 percent confidence level was exactly half of that and the maximum figure at the 95 percent confidence level was 1½ times the estimate. 
What that means for the benefit of members of the Committee is that the range of figures where we have no better accuracy where we cannot tell that one figure is any more accurate than other is over a threefold range. I am not talking about one figure being 5 percent 10 percent 20 percent or 30 percent more or less than another figure but about the range of estimates where we cannot be more certain that the accuracy is any lesser or greater. It goes from 500 to 1500. This estimate was done for 2 years 1990 and 2001. 
I hope that members can see the issue here. The accuracy of the estimate at the point of obligation will be no more accurate the officials have told us. The problems around variability in the estimates are just as great because at the national inventory level we have complete knowledge over the total product—over the number of animals. Some of those variables are actually taken out of the equation and we average the efficiency of the individual animals. So in some ways one could argue that the national inventory figures are more accurate yet the officials’ advice to the committee was that we could not tell one figure to be more accurate than another over a range of threefold; from 500 through to 1500 the accuracy of any figure within that range would be essentially the same. 
How do we in all good conscience legislate for our agricultural industry to come into a scheme when that is the accuracy of the estimates? I just put it to the Committee that this needs far more analysis before we impose this point of obligation be it at farmer level processor level or whatever level. The variability is so huge. 
I have some experience in this area. I was a ruminant physiologist so I know a little bit about the problems of estimating methane emissions. I would just put in front of the Committee the officials’ own figures on this matter which show that threefold range in estimation at the same accuracy level. There is no way at any point of obligation that one can run a scheme where a farmer comes up with an individual estimate and no one can be certain that that figure is any more accurate than one that is 50 percent less or 50 percent more. They could be equally accurate. How does one run a scheme that involves the purchase and releasing of carbon units when one cannot actually estimate any more accurately than that? 
I put it to the Minister in the chair that he should be up front with the public of New Zealand and this Parliament about the information that was provided to the select committee. When we asked the officials whether they could do an estimate for us to show us how it would work they said that they simply could not do it.