How a growing economy can also support a healthy environment

21 July 2015

How a growing economy can also support a healthy environment

Speech by Dr William Rolleston, Federated Farmers President, to the Local Government New Zealand Conference, Tuesday 21 July, 2015.

People often ask me, “How did a doctor end up in agriculture”. The answer is easy. In medicine doctors must make decisions within the uncertainty of biology and often based on incomplete information. Medicine can be exciting and frightening. At times you have a life in your hands. Above all doctors are passionate about what they do and have a genuine desire, whether they are in research or in the clinic, to leave humanity better at the end of their career. I loved every minute of my time in medicine.

Farmers share similar attributes. They have the challenge of biological uncertainty. Add to that the uncertainty of the weather and, of course, the market. Often farmers must make decisions with incomplete information. At times they have lives in their hands. Above all farmers are passionate about what they do and have a genuine desire to leave the land better than when they found it.

The goal of growing the economy in a way which also supports a healthy environment is an aspiration for every council in New Zealand. This aspiration also contains these elements of uncertainty and incomplete information.

Today I want to traverse some of the challenges which confront all of us – farmers, environmentalists and councils – and offer some direction, as we see it, from a farmer perspective.

Farmers and governments around the world worry about food security and climate change. How could we increase our production while mitigating our environmental footprint? How could we build resilience in a changing climate?

If agriculture is to continue its contribution to New Zealand’s economy we must also address the issues of productivity and environmental impact. We must continue to enhance our economic benefit by increasing productivity, adding value to our current products and developing new high value products. We must address the risks which exist in the market, in our social licence to operate, in biosecurity (including pests), and in our climate.

It is not axiomatic that economic progress means environmental deterioration. As a farming leader I have looked for solutions which enable economic progress while supporting a healthy environment. In this way the incentives line up and the need for punitive resource rentals, taxes and similar instruments is obviated. Let me give you some examples:

Nitrogen, whether in chemical fertiliser, organic fertiliser or fixed by legumes is a significant expense on many farms. It always shocks me just how little is actually utilised in product which moves off farm and how much is lost to the atmosphere and beyond the root zone. These losses contribute to adverse water quality outcomes as well as greenhouse gases. Interventions which increase the utilisation of nitrogen will result in better environmental outcomes as well as reduced expense for the farmer.
It is a myth that water is free. Farmers pay big dollars to have water reticulated to their farms through their own or other schemes. The proposed Ruataniwha Dam is a good example. In Canterbury we have seen significant increases in water efficiency through spray irrigation and now precision irrigation. Research is continuing to improve drought tolerance and water efficiency in the very plants themselves.
Soil erosion is a loss of capital from the farming system. It is not new and it occupied the minds of my farming grandparents on our property for as long as I could remember. New techniques such as no till agriculture where paddocks are sprayed with herbicide and direct drilled not only increases productivity but retains soil structure helping to preserve this valuable resource from wind and water erosion that ploughing would leave it vulnerable to.
Even without putting biological emissions into the Emissions Trading Scheme farmers have improved their carbon efficiency by 1.2 percent per year, for the past decade, through improved productivity. Not only that though, New Zealand farmers are amongst the most carbon efficient animal protein producers in the world. In the absence of mitigation tools and any charges on our competitors, penalising farmers to the extent it would reduce biological emissions would mean a movement of production to less efficient producers offshore and an increase in global biological emissions.

So in many areas economic and environmental goals are already aligned which is good business for councils. But alignment is not always possible and we can’t pretend that human activity does not have an effect on the environment. Of course it does. Our response could be to wind agriculture back, to reduce production to mitigate environmental impacts but this also has consequences.

We live in a global world whose population continues to expand. The FAO predict we will need to increase world food production by 60 percent by 2050 to meet demand.

New Zealand cannot feed the world, but we must play our part. It would be irresponsible of us to squander or underutilise our resources. Even if we are only feeding the rich and privileged – the worried well if you like – wetlands and forests will need to be converted to farmland at the bottom end to compensate for this indulgence. This is not supporting our environmental credentials.

When it comes to resources our Resource Management Act (RMA) works on a first come first served basis. This works well at the front end. Decision makers at that point cannot have the foresight to know what the demand for a resource will be. However first in first served becomes problematic as a resource reaches its limits when a more strategic approach is needed. Councils have grappled with this. Creating property rights through tradable quota however this is not the answer.

There is no doubt scarcity through quota creates value. However this is a double edged sword. On the one hand increased value can mean increased attention by the custodian, on the other hand that value can be artificial and limit options for more creative solutions.

In Canada for example, milk is produced under a quota system. Many Canadian dairy farmers oppose free trade because it will erode their quota value.

Creating ownership in water could have a similar outcome where water storage or increased supply may be resisted by the status quo.

But here decision makers have a problem, which the RMA is yet to solve satisfactorily. How do you allow movement of a resource to the best use in an efficient and equitable way without creating a property right that would flow simply to the entity that can afford to pay the most, or worse still, one which is banked to the detriment of the economy and the environment? How do you allow for new entrants?

Three potential answers lie in resource expansion, science to increase efficient use, and collaboration.

Water storage is a good example of resource expansion and remains at the top of Federated Farmers’ agenda.

Water storage builds resilience – the trifecta of economic resilience, community resilience and environmental resilience. It also creates headroom to dissipate the issue of constraint. The rationale however is still governed by cost.

The Opuha Dam in South Canterbury remains the leading example of water storage for irrigation. As well as economic benefit the Opuha Dam has increased river flows, generated electricity, provided Timaru City with water as well as recreation for water craft, fishers and campers.

The courage of a few to build the Dam has, through its living example, made possible the Canterbury Water Management Strategy and in turn the Land and Water Forum. The protagonists knew that economic and environmental gain together was possible.

Solutions for Maori economic aspirations in water could well come through water storage. By contributing to the development of water storage, government can help create the headroom for negotiation and settlement, if such a settlement is justified.

And note I used the word “contribute”, not “invest”. We already have Crown Irrigation Investments to address the hurdle of early capital shortfall and the Irrigation Acceleration Fund and these have been welcomed by Federated Farmers. But there is a case for government to directly contribute to water storage infrastructure, to create headroom for negotiation as I have just said, but also to reflect the contribution water storage makes to the environment and the community. Consider that at the time the Opuha water was switched off to farmers, 8 cumecs were still flowing to meet environmental needs – four times the natural inflows.
Farmers are willing to pay for the benefit they receive from water storage. But as I have mentioned water storage also provides the opportunity to improve habitat, increase environmental flows and provide recreation. Both local and central government should also consider their financial contribution to reflect the public good.

If we are to truly make economic gain while supporting a healthy environment, decision makers need to ensure they get the science right. As I mentioned at the beginning of this presentation the systems in which we operate are uncertain by their nature and information is often incomplete.

The Prime Minister’s Science Advisor, Sir Peter Gluckman, is concerned that decisions made without the proper application of science can entrench policies which are of little value and are not easily reversible, because there may be a popular or political perception that they are effective when in fact they are not. I share his concern.

So our challenge is to ensure regulators, politicians and the judiciary make decisions that are in line with the science, and reflect the uncertainty of the time but are not paralysed by it.

The use of caution in the decision making process is essential, but the activist view of the Precautionary Principle, which in essence says do nothing until all risk is eliminated, is an example of the paralysis which we should avoid.
Decision makers need to distinguish between disagreement between parties and scientific uncertainty. They need to understand what drives the certainty of any one party and put the uncertainty of experts in context.

We have some evidence that councils and other decision makers are starting to get it right.

In the discourse on fluoridation, immunisation and 1080 we are seeing the public and decision makers starting to back science and reject the worn out and unsupported rhetoric of the anti-campaigners.

Water is more complex but the same principles apply.

For some council’s the science surrounding genetic modification has not yet penetrated. Are they playing a political game hoping central government will play the bad cop and get them off the hook? I don’t know. What I do know is that that attempts to duplicate control of genetic modification at the local level is based on scientific fantasy as much as anti-fluoridation, anti-immunisation and anti-1080. What I do know is that significant biosecurity risks lurk in the garden plants of ratepayers but there is no call for strict liability there.

Is there uncertainty? Of course there is, but conventional breeding is uncertain too. Do we need regulation? Of course we do, but that regulation should be seated in a competent central government authority and based on the risk not the technology.
Opportunities to be pest free, to reduce our environmental footprint, to increase productivity and create new products exist with such modern technologies. These are the things which will prove our environmental credentials, not labels. If you as councils want to have economic growth supporting a healthy environment then you need to ensure farmers have choice and access to the modern tools of science such as genetic modification and nanotechnology.

A lot has been said about farming to limits and for councils numbers make decision making much easier. But I would remind you that the RMA was set up to be effects based and that blunt tools lead to dull outcomes. We need to remind ourselves that farmers have only been talking nitrogen for about a decade. The science is progressing quickly. The challenge for regulators is to ensure that regulations are flexible enough to cope with the evolving evidence and to take account of improvements or reductions in water quality.

It is my experience that farmers are environmentalists; why else would they dedicate their life to the land and spend over $1billion on the environment in five years? They are also problem solvers. But they need to understand the problem before buying in.

However to make fast progress it requires strong balance sheets and good cash flows. While it is unacceptable to go backwards regulators, environmentalists and the public need to understand that the rapid progress made in the last few years cannot be sustained when farmers are making a loss.

A growing economy can support a healthy environment but a shrinking one doesn’t stand much of a chance.

The best way to achieve both a growing economy while supporting a healthy environment requires sound judgements by councils, with the appropriate use of science, engaging not enraging farmers, providing them with the tools of modern technology and seeking solutions which align economic and environmental outcomes. These are all requirements to grow sustainably.

Thank you.

ends

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