The Greens and nitrate tax: ‘we want farmers to thrive’

The Greens say we need to wean ourselves off nitrogen to save our waterways, and propose a levy on farmers to make it happen – but can it work here when it has failed elsewhere? Lynn Grieveson reports.

Scientists first discovered early last century how to synthesise the nitrogen that makes up nearly 80 percent of the air we breathe into nitrate needed by plants to grow. A few decades later, easily available nitrogen fertiliser had revolutionised farming, resulting in much greater crop yields and the increasing industrialisation of agriculture.

In few places was it taken up more enthusiastically than in New Zealand, where aerial top-dressing planes circled the skies above our farms from the 1940s onwards, often flown by pilots who had trained in the wars.

Why is nitrogen a problem?

It can take a long time for nitrates to drain through the soil and reach waterways. Some of that fertiliser dropped in the 1940s is only now contributing to the raised nitrate levels in our rivers and streams.

But ecologists warn there is worse to come. The Ministry for the Environment reports that the amount of nitrogen fertiliser used in New Zealand increased about 10 times between 1985 and 2007. Since then the rate of conversions of farms from sheep to dairy has increased still further.

"Nitrogen from livestock manure, which contributes around five times the amount of nitrogen to the land as nitrogenous fertilisers, has also steadily increased," MfE says. "The high density of grazing stock on dairy farms delivers more nutrients to the land than other forms of farming."

"It's like kids on a sugar binge, we have just gone silly on it and we just have to get out of it"

The Parliamentary Commissioner for the Environment's report on water quality says we have another 30 to 60 years’ worth of nitrate still to travel through the groundwater system, "affecting drinking water supply and lowland stream quality".

In 2012, 1.96 billion kilograms of nitrogen were applied to agricultural land as fertiliser. An estimated 137 million kilograms of nitrogen leached from the soil, ending up in waterways. Only 19 percent of the loss was directly from fertiliser; the remainder was through livestock waste.

Cows eat the grass grown with all that fertiliser and then they urinate. A lot.

This is a problem for our waterways because, like grass and crops, algae also loves nitrates.

"The problem is not the nitrogen itself," says Massey University ecologist Mike Joy. "Even though the Ministry for the Environment tried to play this scam on everyone talking about nitrate toxicity, the toxicity of the nitrogen is not really the problem.

"The problem is the algal growth. The algal growth sucks the oxygen out of the water, causes those huge oxygen fluctuations and that sucks the life out of the river."

He says that happens long before nitrate levels reach the amounts described as "toxic" in the Government's national policy statement for freshwater.

Joy also warns that scientists are not yet sure of the effect of nitrates on the stygofauna that live in our aquifers and help purify the water. Stygofauna are tiny invertebrates that filter and clean contaminants and bacteria from ground water.

"It's just idiotic," he says." We used to be able to farm without nitrogen, just with atmospheric nitrogen, so it is just a stupid trap – it's like kids on a sugar binge, we have just gone silly on it and we just have to get out of it."


What do the Greens want?

The Green Party want a levy of $2 per kilogram of nitrate that is lost to land and water per hectare of farm, per year. It would initially apply only to dairy farms, but would be eventually be extended to all forms of agriculture and horticulture.

"Farmers are savvy enough to know how much nitrogen fertiliser they put on their farms, how that nitrogen goes from the cow into the soil and from there into the water," Greens leader James Shaw said at the release of the policy last weekend.

"So we can measure and put a price on that pollution. We estimate that levy will raise about $136.5 million a year, but the cost to farmers will be no more than five percent of their pre-tax profit based on the averages that we see from DairyNZ."

Shaw said all the money would be put back into "funding sustainable and transformational farming programmes that can help them turn their farms into environmentally sustainable or organic pieces of paradise."

The policy includes new funding for organic and sustainable standards and certification, a "transformational farming partnership fund" of around $70 million a year, and allowing accelerated depreciation on dairy farm equipment.

"We are going to help indebted farmers, particularly those in the dairy sector, free up the capital that is locked into their dairy sheds, their irrigators and their vehicles so they can have the breathing room to pay down their debt and move away from intensive farming. And we are going to take a breather ourselves on relentless dairy conversions and put a moratorium on new dairy farms," Shaw said.


Telling the clean, green story

The Greens are adamant they don't want to force farmers to the wall or kill off New Zealand's primary sector.

"We want farmers to thrive. We are going to continue to produce food and fibre but we need to do it in a way that maintains our reputation and enables us to get a premium," says water spokesperson Eugenie Sage.

She says, sooner than people expect, the market is going to be disrupted by cellular lab-grown foods. New Zealand needs to protect its clean, green image before it is tarnished further and harness it as the keystone of its brand.

"If we are going to get a premium for our products we have got to tell that story of sustainably produced food and fibre that has provenance," she says.

The Greens policy includes an independent, sustainable farming accreditation system, the Good Food Aotearoa New Zealand brand. 
 

It's been tried before

In an effort to cut pollution by pig farmers and meet the World Health Organisation safety limits on nitrates in groundwater, the Netherlands introduced the Mineral Accounting System (MINAS) in 1998.

Resistance and outright refusal by farmers to comply, and fraud

Farmers were required to register all mineral inputs and outputs of the farm and file an annual MINAS return so they could be taxed on the difference.

It meant every truckload of manure leaving a pig farm had to be weighed and samples taken to be tested for mineral content.

But the system was beset with problems, with high levels of unjustified levies and resultant refunds, high admin costs, increasing exemptions and loopholes which were then exploited by farmers, resistance and outright refusal by farmers to comply – and fraud. The scheme was abandoned in 2003 when the EU ruled it didn't meet its standards.

Sage says the difference is New Zealand has the Overseer software, already being used by farmers to measure their nutrient losses.

"Data collection will be done by processors, and when we get the beef sector in, by meat processors as they have already got their levies, it's an accepted way of collecting levies and it seemed to us administratively efficient. And Fonterra is already requiring farmers to use Overseer – and that is where this differs from the Netherlands."


More work required

However, Sage admits the software needs more work before it is robust enough to be used for compliance.

"Overseer has got flaws in that each version seems to spit out different results which frustrates farmers," she says.

She says the funding to fix it could come out of the Ministry for Primary Industries' budget, but there could be intellectual property returns.

"Farmers we've talked to say it needs at least $10m investment to make it more robust and that would include a lot more field proofing, a lot more research."

"The OECD did a report on diffuse pollution and how it is being tackled throughout the OECD and they recognised that Overseer was quite innovative with the modelling approach. So there is potentially intellectual property benefits for us if we can get it right, but it does need much greater investment in getting Overseer to be more robust."

But in any case, she says, any levy would take time to be introduced. "This would require a law change: it would be tax legislation. So there would be consultation before that was introduced."

Farmers would just 'screw the number down'

Access to Overseer may be one difference from the Dutch pig farmers, but Waikato dairy farmer Chris Lewis warns that something else would likely remain the same: resistance from farmers and exploitation of loopholes to minimise or evade the tax.

"The question is what are they trying to achieve here by having a nitrogen tax apart from trying to balance the books?"

He says he has used Overseer voluntarily for ten years as a tool to understand how to minimise environmental impacts from his farm.

"At the end of the day I might use Overseer as a friend, as a tool or aide to reduce my number. If I just see it as straight compliance, then let's just screw the number down any way I can and pay as least as I can. It might sound dishonest. That's human nature and that's just what people might do," he says.

Lewis says he puts every bit of information he can, confidential or otherwise, into the Overseer modelling software - but if it were a Government compliance tool he would no longer be able to use it as effectively.

"You don't provide information to your accountant unless they need it, whereas we have put everything in there so we can have the absolute best information. But if it was going to be used for a Government purpose I wouldn't do that."

He agrees that there are still problems with the software: "I use it as a tool in the toolbox but it is nowhere near being my number one tool at the moment. They are still getting the science right behind it. There are still fluctuations of 30 percent plus."

Lewis also criticises the narrow focus on nitrogen, saying that in his catchment nitrate levels are already low enough to meet the Government's "swimmability" target and the focus needs to be on sediment and eColi.

"The question is what are they trying to achieve here by having a nitrogen tax apart from trying to balance the books?

"I can reduce my nitrogen number and be 'top of the class' for farming but it will not achieve swimmability or better water quality in our area."
 
A lot at stake

DairyNZ chief executive Tim Mackle says farmers always knew water would be a hot topic this election, but are concerned at the "proliferation of levy and taxation proposals we’ve seen during the election campaign, most of which are often tackling only one dimension of New Zealand’s environmental management challenges - and in a blunt and piecemeal manner."

"The dairy sector brings in a yearly average of $14.4 billion to the New Zealand economy, which means New Zealanders have a lot at stake in the backroom bartering that inevitably goes on post-election."
 
Mackle says regional councils are already tackling nitrogen leaching.

Farmers "can't stay in business if potential governments are going to threaten our family businesses this way."

The National Party agrees, saying limits on nitrogen and other nutrients leaching into waterways are already set by regional councils and that is the right way to proceed. Bill English described the Greens proposal as too bureaucratic and "yet another new tax."

Federated Farmers is outraged by the proposals, warning that farmers "can't stay in business if potential governments are going to threaten our family businesses this way."

"Kiwis are being fed a steady diet of half-truths and mis-information about the condition of our waterways, by all kinds of groups who just want your vote," says water spokesperson Chris Allen.

"We note the Greens are only interested in cleaning up rivers and lakes - what about harbours and beaches that are arguably in a worse state? Or is that issue too hard to raise in an election campaign? Nobody wants to tell urban voters how bad their waterways are.

"Nitrogen is organic and an essential to life," Allen finishes.

The Greens would need support from Labour for the policy to proceed. Leader Jacinda Ardern has said the party is focused on campaigning on its own policies, and potential support for the Greens' proposals "would be a conversation for after the election."  Labour's water spokesperson David Parker said the party's focus was on setting strict nutrient loss limits catchment by catchment as part of a much tougher national policy statement on water than the current Government's version.

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