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Appendix A: Agriculture Emissions Projections

The most likely value of total emissions over the five years of the First Commitment Period (2008–2012) of the Kyoto Protocol for the agriculture sector is projected to be 198.45 million tonnes carbon dioxide equivalents (Mt CO2-e). The range is projected to lie between 173.35 and 227.55 Mt CO2-e.

Average annual emissions over that period are projected to range from 34.67 to 45.51 Mt CO2-e, with a most likely value of 39.69 Mt CO2-e per annum (Table A1).

Table A1: Summary of annual emission projection scenarios for 2010 in million tonnes carbon dioxide equivalents (Mt CO2-e), based on the 2006 National Greenhouse Gas Inventory methodology

 

1990
Baseline

2006
Most recent

2010

Lower

Most likely

Higher

Total projected emissions

32.50

37.67

34.67

39.69

45.51

Projected emissions above 1990

 

5.17

2.17

7.19

13.01

Percentage change from 1990

 

15.9%

6.7%

22.1%

40.0%

This recent most likely value for annual emissions at 2010 is 0.93 Mt CO2-e lower than was projected in 2007 (the total being 4.65 million tonnes lower over the First Commitment Period). Uncertainty has increased: the difference between the lower and higher scenarios is now 10.84 Mt CO2-e compared to 9.66 Mt CO2-e in the 2007 forecast estimates.

The reduction in emissions over the First Commitment Period has been largely driven by a significant decrease (4.7%) in sheep numbers since the previous year’s projections of sheep numbers for 2010. Drought and poor product prices have played a significant role in the sheep population decline, as discussed in more detail later. The decline in sheep number has not been compensated for by increases in numbers of other animal species. The second feature is the 7.2 per cent decrease in projected nitrogen fertiliser use over the commitment period which will result in decreased nitrous oxide emissions.

Projected forecasts of future agriculture greenhouse gas emissions are influenced by prevailing conditions. All biological systems are greatly affected by climate, and agriculture is subject to changing economic conditions, including changing international commodity prices and the New Zealand dollar exchange rate. Every effort has been made to provide the best projections of future emissions as at March 2008; however, future adjustments are inevitable.

1 Introduction

Our projections are based on:

  1. the methodologies used in the National Greenhouse Gas Inventory submitted to the United Nations Framework Convention on Climate Change (UNFCCC) annually, and
  2. econometric and physical models developed by the New Zealand Ministry of Agriculture and Forestry (MAF). The inventory methodology conforms to the Good Practice Guidance methodologies developed by the Intergovernmental Panel on Climate Change and adopted by the UNFCCC.

Projections are driven by future estimates of:

  • forecasts of animal numbers by species: beef cattle, dairy cattle, deer and sheep in 2010, using MAF’s Pastoral Supply Response Model (PSRM)
  • forecasts of nitrogen fertiliser use in 2010 using MAF’s Nitrogen Demand Model
  • ruminant methane emissions per animal in 2010, extrapolated from emissions per animal between 1990 and 2006; and
  • nitrogen output per animal in 2010, extrapolated from nitrogen output per animal between 1990 and 2006.

Two further scenarios of projected emissions in 2010 have also been produced that represent the upper and lower bounds of projected emissions. These present emission estimates using the 95 per cent prediction intervals for the upper and lower bounds of methane and nitrous oxide emissions and animal numbers.

Table A2 provides a summary of the forecasts developed in the 2007 Net Position Statement for comparison.

Table A2: Summary of 2007 projection scenario emissions for 2010 in million tonnes carbon dioxide equivalents (Mt CO2-e)

 

1990
Baseline

2010

Lower

Most likely

Higher

Total projected emissions

32.50

36.00

40.62

45.66

Projected emissions above 1990

 

3.50

8.12

13.16

Percentage change from 1990

 

10.80%

25.00%

40.50%

2 Changes in methodology since last year’s assessment

The major change in methodology in this year’s projections is that all emissions produced by the National Greenhouse Gas inventory up to 2006 are now reported on a single-year basis rather than the mean of three years’ values as previously used. As the inventory is complied for the period two years prior to the present, this allows time for appropriate quality assessment of the data and calculations. Previously, timely provision of animal numbers was hampered by the requirement for the provision of three full year’s data. These data are collected through the annual animal production survey carried out for MAF by Statistics New Zealand.

The second major change was the use of a new data set of historical nitrogen fertiliser use for the Nitrogen Fertiliser Demand Model. In deriving the most likely, high and low scenarios for nitrogen fertiliser usage for 2010, the mean usage over the five years of the commitment period was used.

3 Development of the most likely scenario

3.1 Projected animal numbers and nitrogen fertiliser use forecasts

Future numbers of beef cattle, dairy cattle, sheep and deer are modelled using expected changes in farm-gate prices for milk, meat and wool. Urea prices are introduced into the analysis in order to forecast demand for nitrogen fertiliser. Figure A1 illustrates MAF’s current expectations for the key farm gate prices to 2010. These were developed based on international price movements and assumptions on exchange rate and inflation published in Treasury’s 2007 half yearly fiscal and economic update.

In the first half of 2007, international dairy prices increased rapidly causing the outlook for inflation-adjusted farm-gate milksolid prices to improve dramatically. This was driven by strong global demand for dairy products, and supply interruptions and constraints in key dairy producing countries. Over the first commitment period of the Kyoto Protocol, most, but not all, of these gains in international dairy prices are expected to be eroded by dairy production increases around the globe.

Rising demand around the world and high natural gas prices (natural gas is the main input in nitrogen fertiliser production) have pushed inflation-adjusted urea prices to levels not seen since the 1980s. Urea prices are expected to remain relatively high over the First Commitment Period (2008–2012) of the Kyoto Protocol.

Inflation-adjusted lamb and wool prices have both fallen by 35 per cent since 2002. This has severely affected the relative profitability of farming sheep and, combined with the impact of the 2007 Hawkes Bay drought, has caused national sheep numbers to fall by 4 per cent to the year ended June 2007.

Figure A1: Past and expected changes to key inflation adjusted farm-gate prices

 

 

Year

Milk solids

Lamb

Prime Beef

Wool

Urea

1990

100

100

100

100

100

1991

67

84

99

68

100

1992

93

87

102

71

99

1993

95

117

110

70

93

1994

81

116

106

66

90

1995

85

95

82

88

102

1996

103

96

61

76

104

1997

93

113

59

66

93

1998

88

103

68

66

83

1999

90

107

82

61

65

2000

93

118

101

64

70

2001

114

142

115

72

85

2002

110

157

120

68

71

2003

76

135

91

71

72

2004

89

131

88

60

77

2005

95

133

92

51

93

2006

79

109

87

44

87

2007

84

104

90

44

89

2008

142

97

81

38

123

2009

137

109

83

39

124

2010

112

117

86

39

126

2011

112

122

86

41

121

2012

114

123

85

40

116

2013

113

122

83

39

112

 

3.1.1 Animal number forecasts

Over the summer of 2007/08, a severe drought developed over many regions of New Zealand. This is having a material impact on the milk and meat production from New Zealand pastoral agriculture and will consequently reduce profitability for pastoral farmers. Sheep and beef farmers were already in a difficult financial position coming into the drought, and are expected to respond to the combination of drought and low lamb prices with deep and permanent reductions to sheep numbers (a decrease of 39% in 2010 compared to the 1990 level: see Table A3). Modest improvements to lamb prices over the first commitment period of the Kyoto Protocol are not expected to be enough to prevent this de-stocking.

Similar to the analysis in the 2007 net position report, record high farm gate dairy milksolids prices result in forecasts of rapid growth in dairy cattle numbers. Expansion of dairy farms is happening through conversions of lamb-finishing properties in the South Island and some areas of plantation forestry in the North Island.

Table A3: Animal numbers and nitrogen fertiliser usage for 1990, and forecast for 2010.

 

1990 baseline
(000)

2010 most likely
(000)

Percentage change

Beef cattle

4,593

4,192

– 9%

Dairy cattle

3,441

6,063

+ 76%

Deer

976

1,508

+ 55%

Sheep

57,852

35,288

– 39%

Tonnes of nitrogen fertiliser applied

59,265

396,967

+ 617%

3.1.2 Nitrogen fertiliser usage forecasts

The application of nitrogen fertiliser rises with improvements in farm gate pastoral agricultural output prices, especially the milksolids price, and falls with increases in the price of the fertiliser itself (see Austin et al, 2006). Empirical evidence suggests that output prices have a stronger effect, however. In the current situation, the strong farm gate milksolids prices are expected to spur increasing nitrogen fertiliser despite the discouragement of high urea prices.

3.2 Development of greenhouse gas emission projections: most likely scenario

3.2.1 Projections of per-animal enteric methane emissions

Projections of methane emissions per animal in 2010 are derived from linear trends of the methane emissions per animal between 1990 and 2006, extrapolated to 2010 (Table A4). The 1990–2006 values are those used in the national greenhouse gas inventory.

Table A4: Methane emissions per animal, estimated for 1990 and 2006, and projected most likely value for 2010, in kg CH4/head/annum (increases explained in text)

 

1990 estimated

2006 estimated

2010 projected

Beef cattle

50.65

58.02

59.64

Dairy cattle

69.35

79.36

82.30

Deer

18.76

22.17

23.16

Sheep

9.28

11.03

11.70

These animal emissions have been derived from the model developed by Clark et al (2003) that is used to estimate methane emissions in the national inventory (Figure A2).

The model determines animal feed intakes in monthly time steps for different age classes of each animal species based on the mean national animal performance derived from national statistics relevant to each species. For example, dairy cattle inputs include: animal liveweight, total milk production and milk fat and protein percentages. For each animal species, an empirical relationship has been derived for the amount of enteric methane produced per unit of feed intake. These relationships have been developed in New Zealand for beef and dairy cattle, deer and sheep, using the sulphur hexafluoride (SF6) technique that enables estimation of methane emissions under practical farming situations. The estimated annual methane emissions per animal take into account changes in animal performance over time.

Figure A2: Model for deriving ruminant methane emissions (Clark et al, 2003)

3.2.2 Methane per animal from ruminant animal waste

Methane emissions also arise from faecal material deposited on pasture and, in the case of lactating dairy cows, from animal faecal material in waste management systems. The projected methane emissions factor for each animal species in 2010 is derived by linear extrapolation of emissions data between 1990 and 2006 to 2010 (Table A5).

Table A5: Waste methane emissions per animal, estimated for 1990 and 2006, and projected most likely value for 2010, in kg CH4/head/annum (increases due to improved animal productivity)

 

1990 estimated

2006 estimated

2010 projected

Beef cattle

0.62

0.71

0.73

Dairy cattle

2.92

3.40

3.49

Deer

0.18

0.20

0.21

Sheep

0.09

0.11

0.12

3.2.3 Projections of per-animal nitrous oxide emissions

Nitrous oxide emissions are derived from animal nitrogen output and nitrogen fertiliser use. Animal nitrogen output is a function of animal feed intake and nitrogen content of the pasture eaten, minus any nitrogen stored in animal product (meat, milk, etc). Models developed by Clark et al (2003) for methane emissions also estimate nitrogen output per animal. Projections of nitrogen output per animal in 2010 are derived by linear extrapolation of nitrogen output per animal using data in the national inventory from 1990 to 2006 extrapolated to 2010 (Table A6). Nitrous oxide emissions are then calculated using the methodology used for the national greenhouse gas inventory.

Table A6: Nitrogen output per animal, estimated for 1990 and 2006, and projected most likely value for 2010, in kg N/head/annum (increases due to improved animal productivity)

 

1990 estimated

2006 estimated

2010 projected

Beef cattle

65.39

74.98

77.10

Dairy cattle

103.87

116.59

120.23

Deer

24.88

29.48

30.79

Sheep

12.61

15.12

16.08

3.2.4 Other animal species and greenhouse gas sources

No projections were derived for the methane and nitrous oxide emissions of minor animal species present in the national inventory ie, goats, horses, pigs, and poultry. Likewise, there are no projections for nitrous oxide emissions from crop stubble burning, savannah burning and nitrogen-fixing crops. Such emission sources make up less than 1.5 per cent of agricultural sector emissions in 2006, and there was no basis for assuming a significant change from their present levels in 2010. The impact of even large changes in any of these small emission sources on the total national emissions profile would be small, and so 2006 inventory emission values were used for the 2010 projections.

3.3 Development of lower and higher scenarios

Two further scenarios were developed: a lower and higher scenario. The higher scenario combined the upper 95 per cent prediction interval values for animal numbers, methane emissions per head, nitrogen output per head and nitrogen fertiliser use. The lower scenario combined the lower 95 per cent prediction interval values. These two scenarios estimate the values of the upper and lower bounds of future projected emissions at the 95 per cent confidence level.

3.3.1 Animal numbers and nitrogen fertiliser usage

To derive livestock and fertiliser forecasts for different scenarios, price uncertainty is introduced into Pastoral Supply Response Model. Variability of prices (or standard deviations equivalent to a 95 percent confidence interval) during the last 10-year period for each price series was used. This gave estimates for the upper and lower bounds of the stochastic forecasts that could be considered as lower and higher scenarios due to potential in prices (Table A7).

Table A7: Animal number and nitrogen fertiliser usage forecasts for 2010

 

Lower (000)

Most likely (000)

Higher (000)

Beef cattle

3,730

4,192

4,669

Dairy cattle

5,796

6,063

6,348

Deer

1,064

1,508

2,202

Sheep

32,198

35,288

38,401

Tonnes or nitrogen fertiliser applied

234,462

396,967

612,250

3.3.2 Methane emissions

Lower and higher estimates of methane emissions per animal were obtained from the 95 per cent prediction interval of the linear regression of emissions from 1990 to 2006. This gives an upper and lower bound for projected methane emissions per head in 2010 at the 95 per cent confidence level (Table A8).

Table A8: Methane emissions per animal, projections for 2010 in kg CH4/head/annum

 

Lower

Most likely

Higher

Beef cattle

57.86

59.64

61.41

Dairy cattle

79.53

82.30

85.06

Deer

22.25

23.16

24.07

Sheep

11.31

11.70

12.08

3.3.3 Nitrogen output

Lower and higher estimates of nitrogen output per animal were obtained from the 95 per cent prediction interval of the linear regression of emissions from 1990 to 2006. This provided an upper and lower bound for projected nitrogen output per head in 2010 (Table A9).

Table A9: Nitrogen output per animal projections for 2010 in kg N/head/annum

 

Lower

Most likely

Higher

Beef cattle

74.64

77.10

79.57

Dairy cattle

116.50

120.23

123.96

Deer

29.60

30.79

31.99

Sheep

15.74

16.15

16.56

4 Overall assumptions and limitations of the projections

All the above projections need to be assessed within the inherent uncertainties of biological systems, climate shocks such as droughts, and economic circumstances of the agricultural industry – which is largely driven by overseas markets. An assumption implicit in the projections is that the rate of increase in productivity per animal over the next four years will be similar to the rate of increase in animal performance over the past 16 years, and therefore a linear extrapolation of emissions per animal is appropriate. However, the rate of increase in animal performance may decline over time. Other non-linear relationships that have been tested gave no significant improvement in the relationship. The current per-animal productivity of New Zealand dairy cows is significantly lower than European and American animals and has the potential to rise significantly, thus increasing emission levels per animal.

Mitigation technologies that reduce emissions at an individual animal level may emerge over the next four years. These include products such as the nitrification inhibitor dicyandiamide (DCD), that has been shown to reduce nitrous oxide emissions in grazed pastures and is currently being adopted on a limited scale. No mitigation technologies have been factored into our projections as they may not be widely adopted over the First Commitment Period. For example, a scenario for the potential impact of nitrification inhibitors over the First Commitment Period, at the current rate of adoption, is a reduction of agriculture sector emissions of 0.3 per cent.

The adoption of mitigation technologies may be counter-balanced by greater increases in animal numbers and further improvements in animal productivity growth. Industry strategy plans, particularly the dairy industry, are seeking gains of at least 3 per cent per annum in milk production. The favourable commodity price forecasts suggest that these ambitious growth targets are more likely to be aimed for and possibly met, thus pushing emission levels up.

The recent announcement of the Fast Forward initiative, and the recently announced increased investment into sustainable land management and climate change research under the Plan of Action, may lead to development of other greenhouse gas-reducing technologies and practices in the future.

Current government policy on establishment of an emissions trading system (ETS) has agriculture coming into the ETS in 2013. It is proposed that the sector would initially be liable for 90% of emissions at 2013 based on a reference year for emissions of 2005. This process should result in greater adoption of mitigation technologies on-farm to reduce greenhouse gas emissions from 2013; however, it is uncertain what impact this might have on early adoption of mitigation technologies in the First Commitment Period.

5 References

Austin D, Cao K, Rys G, 2006. Modelling Nitrogen Fertiliser Demand in New Zealand. Paper presented at the New Zealand Agricultural and Resource Economics Society conference, Nelson.

Clark H, Brookes I, Walcroft A, 2003. Enteric Methane Emissions for New Zealand Ruminants 1990–2001 Calculated Using an IPCC Tier Two Approach. Report prepared for the Ministry of Agriculture and Forestry by AgResearch Ltd.

Ministry of Agriculture and Forestry, 2008. Briefing on Methodology for Forecasting Livestock Numbers and Nitrogen Fertiliser Use, 8 p.