How green finance rules could harm NZ farming: Dr Jacqueline Rowarth

NZ Herald

21-07-2025

Yet the finance taxonomy, proposed by the independent (but with Government funding) Centre for Sustainable Finance, bases the classification of farming being green (or not) on the amount of greenhouse gases per hectare.
Not production. Not the number of people fed what they need. An area.
Further, to be considered green, a farm would have to be emitting less than one tonne of greenhouse gases (measured as carbon dioxide equivalents) per hectare.
Current estimates for dairy, responsible for over $26 billion in export revenue (45% of the total) from less than 7% of New Zealand's total area, are 3-19 tonnes/ha, with an average of around nine tonnes/ha.
For sheep and beef, the average is approximately 3.6 tonnes/ha.
To achieve the new 'green' threshold of below one tonne/ha would require a lot of new trees and not much animal production.
The Government's goal of doubling the value of the export economy would fail.
The economy would fail.
So would New Zealand's commitment to the Paris Agreement – that we would do everything we could to improve adaptability and resilience while reducing greenhouse gases in a manner that does not threaten food production (Article 2.1.b).
The Paris Agreement recognised that global population growth meant a rethink of food production.
What it didn't mandate was 'how'.
Nationally Determined Contributions (NDCs) were supposed to enable countries to choose their own reduction targets, recognising their different abilities to achieve them.
At the same time, the Paris Agreement included (Article 2.1.c) 'Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development'.
This is what the Centre for Sustainable Finance has tried to do, starting with agriculture and forestry.
The vision is admirable: 'An equitable, inclusive financial system that enables a resilient, sustainable Aotearoa New Zealand.'
The strategy of achieving it, however, is more well-meaning than practical.
Federated Farmers of New Zealand has warned that the taxonomy's 'green' finance rules are 'ideologically driven, unworkable, and risk doing real harm to rural communities'.
The problem is that various suggestions, such as low-emissions fertiliser, are either already in use (coated urea) or rather more talked about than in existence – green urea, made from green ammonia, is an example.
Investigations on green urea for Australia, led by the CSIRO, reported that it is very challenging for fertiliser production routes to use 'green' pathways to completely decarbonise agriculture and the food industry.
Listen to Jamie Mackay interview Dr Jacqueline Rowarth on The Country below:
The researchers concluded that achieving the goal would be difficult.
(The actual words were 'would require proper energy management systems to synchronise and optimise such a multi-player orientation for a common objective of maximising the penetration of renewable sources at competitive costs'.)
Without affordable new technologies, farmers can reduce greenhouse gases by reducing fertiliser and animal numbers.
Doing this on a farm that is already efficient also reduces food production, with implications for the economy and for employment.
It might also increase the greenhouse gases per unit of production.
This has been shown for organic versus conventional production.
In addition, the food produced from organic systems costs more than that from conventional systems.
Is the world, let alone New Zealand, ready for higher food prices?
The UK has decided that it is not and is halting plans for adopting a green taxonomy.
Immediately, comments were made about the Government stalling on sustainability reporting requirements for companies.
But the UK finance industry was already contending with other regulations, and the proposed taxonomy contained conditions that critics described as 'burdensome' and 'not useful in practice'.
Similar negative comments are likely to be made if the Centre for Sustainable Finance's taxonomy is not adopted by New Zealand.
But the reality is that banks are already making decisions on investments to assist farmers with implementing green technologies, and the decisions are made based on the individual farm and farmer.
The result is included in the calculations that the meat and dairy processors are doing to show farmers what they are achieving in terms of greenhouse gases per unit of production.
The data are used by the processors when negotiating with customers.
Rewards then pass to those farmers achieving top results, gauged as greenhouse gases per kilogram of product.
These products are in demand, as indicated by the prices being paid for meat and milk by overseas buyers.
The internal competition and fascination with new technologies ensure that farmers continue to make the improvements that are appropriate for their soil-plant-animal-ecosystems.
Food production is the goal, with minimum impact.
Models that processors are using are under constant adjustment to ensure that they are capturing advances.
It is difficult to imagine how a taxonomy, well-intentioned as it might be, could make a positive difference.
Independent groups do their job by stimulating thinking about different possibilities; sometimes, they confirm that what is already being done is the best for the current times.