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By Cameron Cooper

Like many countries, Australia and New Zealand are grappling with the complex issue of measuring and minimising agriculture emissions.

Neither Australia’s National Greenhouse and Energy Reporting (NGER) scheme nor New Zealand’s Emissions Trading Scheme (ETS) account for agriculture emissions. This means calculating overall emissions in the two countries, which have both signed up to climate-related disclosure regimes under the Paris Agreement, is problematic.

A spokesperson for the Department of Climate Change, Energy, the Environment and Water (DCCEEW) says Australia’s agri-emissions are estimated through the National Greenhouse Accounts initiative.

“Understanding agricultural greenhouse gas [GHG] emissions at a national and entity level is important to plan for the sector’s contribution to Australia’s emissions-reduction targets, and provide information to markets, supply chains and financial institutions,” the spokesperson says.

DCCEEW reports that, in 2022–2023, the agricultural sector contributed the second-largest proportion of Australia’s emissions profile after energy, accounting for 18.2% of net national emissions. The sector emitted 82.4 million tonnes of CO2 equivalent (CO2e) in that period, out of the national net total of 453.4 million tonnes CO2e.

As part of Australia’s planned transition to net-zero GHG emissions by 2050, the Albanese Government has released its Net Zero Plan. The DCCEEW spokesperson says an associated Agriculture and Land Sector Plan will be one of six sector emissions-reduction plans that supports the Net Zero Plan. “The plan indicates all sectors, including agriculture, will need to play a role in reaching Australia’s 2035 and 2050 emissions targets.”

Farmer concerns

In addition to CO2 and nitrous oxide, farming generates significant quantities of methane, which is largely belched out by ruminants – principally sheep and cattle. New Zealand has an unusual, methane-heavy emissions profile compared with most countries, courtesy of having about 10 million cattle and 26 million sheep. Almost half of the country’s GHG emissions come from agriculture. Methane alone makes up 43% of total emissions, with most of that methane coming from livestock.

Charles Rau FCA, a tax partner at BDO Gisborne in New Zealand, is also a deer, sheep and cattle farmer. Rau says the climate change goals signed off by 194 signatories to the Paris Agreement fail to reflect New Zealand’s unique situation. It is crucial, he says, to distinguish between:

• Fossil-fuel emissions such as CO2 which can stay in the atmosphere for centuries
• Methane from fossil fuels that are dug out of the ground and added to the environment
• Biogenic methane from plant and animal sources, which typically persists for only a few years and which is circular in the environment.

“Not all emissions have the same warming effect,” says Rau, who laments that farmers are often unfairly vilified for the agricultural sector’s impact on the planet.

Rachelle Nowland CA, a senior partner at Findex in Wyalong, NSW, has worked with agricultural businesses for decades, drawing on her family’s history of more than 120 years on the land. She agrees that farmers often get a bad rap over emissions, adding that many have “an aversion to the way emissions are being measured”.

International standards categorise emissions as scope 1, 2 and 3. Scope 1 covers all emissions from farm fossil-fuel use, such as diesel. Scope 2 accounts for emissions from purchased energy, such as electricity. Scope 3 covers emissions produced by inputs that come into the farm, such as feed supplements and fertilisers, as well as downstream transport, distribution and waste management.

Nowland says responding to scope 1 and scope 2 can be relatively easy because most farmers can calculate factors such as electricity and fuel use from existing data, although calculating methane emissions requires some additional data. However, scope 3 is more complex and will present a compliance burden for farmers, many of whom run family operations and have limited administrative resources.

“There’s also some dissatisfaction that there hasn’t been public acknowledgement that long-term family farms are by their very nature aimed at sustainability,” she says. “So, the concept of having a reporting scheme and potential penalties and costs enforced on them isn’t received with open arms.”

Seeking credible data

Accurate data can help farmers manage their operations more sustainably. But collecting it is not so easy. The complexity of natural systems (emissions fluctuate daily, meaning high-frequency measurements are required) and the diversity of farming practices (with varying soil types, livestock breeds and crop rotations) can complicate agriculture emissions measurement.

The countries that get it right stand to benefit on the trade front. Nick Donald, who leads the on-farm emissions calculation program at the Ministry for Primary Industries in New Zealand, says measuring and reducing emissions is part of “really pragmatic trade considerations”.

“Emissions reduction is increasingly relied on as a mechanism as part of free-trade agreements,” he says. “That’s really relevant to export-oriented countries like New Zealand and Australia, where if you’re sending beef overseas you need to be able to demonstrate that it’s compliant.”

As part of efforts to appease trade partners and help farmers, New Zealand has introduced a standardised online calculator to measure on-farm GHG emissions. The software powering the calculator lets farmers estimate their emissions using existing data.

For example, farmers add inputs such as livestock numbers on their farm, the amount of synthetic nitrogen fertiliser, lime and dolomite that is used, and the area of forest they have maintained, grown or cleared.

“All of these inputs tend to have a receipt attached, which means that if you’re buying fertiliser there’s a receipt,” Donald explains. “If you’re moving stock or you’re buying stock, it’s either valued as part of your tax return or there’s a receipt. If you’re buying feed, there are receipts.

“The idea is that for every input, there’s some form of paper trail. We’ve tried to do that in a way which minimises the burden on farmers.”

Donald says unifying the method of measurement is crucial. “Otherwise, if you use different tools on the same farm with the same inputs, you’ll get different emissions numbers,” he says. This damages the credibility of data and deters investment in mitigation technology.

“The most promising thing for sheep and beef is this potential for a vaccine. If that ever eventuates, we may have a practical solution to reduce emissions.”

A better way

The latest emissions-reduction efforts span better cropping and soil management (including green fertilisers), superior livestock management (such as getting animals to market waste faster) and smarter horticultural practices (including switching to solar- or battery-powered irrigation pumps and tractors).

One initiative in New Zealand is a trial of EcoPond, a new effluent-pond mobile dosing service. It uses polyferric sulphate and sulphuric acid to reduce and prevent methane emissions in the effluent ponds, with studies suggesting the treatment can cut a farm’s effluent pond emissions by at least 90%. Donald says there is also considerable investment in vaccines and other methane and nitrous oxide reduction tools. He expects some of the innovations to clear regulatory hurdles and be in the market by 2028.

One of them – a methane-blocking vaccine – shapes as a possible game-changer in the ongoing and controversial battle to reduce agricultural GHG emissions. The problem is that such a solution could be a decade away from proof of concept. Rau says giving livestock a vaccine to counter gut microbes responsible for producing methane has great appeal.

“The most promising thing for sheep and beef is this potential for a vaccine,” he says. “If that ever eventuates, we may have a practical solution to reduce emissions.”

Rau adds, though, that even if a successful vaccine is developed, its successful use would be tied to the backing of meat-importing countries. “We don’t want to suddenly have all of our meat being unsaleable because of conditions that customers attach to it.”

In Australia, the government is currently developing voluntary GHG emissions estimation and reporting guidelines for the agriculture sector and it is supporting the incorporation of the guidelines into calculators and accounting tools. CA ANZ is on a reference group providing guidance and advice on these initiatives.

Nowland observes that the chief focus in some parts of Australia is on emissions offsets, rather than reductions. However, she notes that the CSIRO is developing a seaweed feed ingredient called FutureFeed that significantly reduces methane emissions. It stops the formation of methane by inhibiting a specific enzyme in the gut during the digestion of feed.

Industry will likely be more responsive to “simple tools”, according to Nowland. “If they can then be refined with better information as time goes on, that will definitely be a bonus.”

Role for accountants

New Zealand has announced plans to lower the nation’s 2050 biogenic methane emissions reduction to 14–24% below 2017 levels from 24–47% previously. The current government has removed agriculture from ETS reporting obligations and plans to implement a pricing system outside the ETS for on-farm emissions by 2030.

Australia has mandatory climate-reporting rules requiring the nation’s largest businesses to estimate their emissions, but by 2027 thousands of other corporate and not-for-profit organisations will come into the net. Australia has set a national target to reduce all emissions by 62–70% below 2005 levels by 2035, while the government projects a 28% drop in agriculture emissions by 2050 under its plans for the sector.

Rau believes accountants have a key role in helping farmers meet their emissions compliance goals. However, he notes that moves towards a new, formal measurement and reporting system are not due until 2030. “That means we don’t currently have a compulsory reporting requirement when we talk about helping farmers understand their emissions profile.”

Nevertheless, with about 28,000 farmers in New Zealand likely to need some assistance in the years to come, Rau says accountants should be ready.

“This is a watch-and-wait space,” he says. “Regardless of who is in government long-term, there is an emissions-reduction goal and there is a resourcing need to help farmers measure emissions. The accounting community is one of the few groups that potentially has the scale and capacity to help farmers with that.”

Donald agrees, noting that emissions reduction and sustainability are increasingly aligned with measures such as productivity and profit. “So, there’s a really strong opportunity for accountants to be part of the conversation.”