Possible? Successful? Reasonable? Emission rights trading within New Zealand's pastoral agriculture : a feasibility study

Accounting for 10% of New Zealand's Gross Domestic Product, agriculture is of major importance to the country. In 2001, 43.5% of all goods exported were of pastoral origin, i.e. dairying, sheep, beef, and deer fanning. The strong economic emphasis of the livestock sector is reflected in New Zealand's greenhouse gas profile: methane, being emitted by ruminants, is the country's main greenhouse gas, accounting for 48% of New Zealand's greenhouse gas emissions in 1990. As emission rights trading is a widely appreciated policy instrument for efficiently reducing emissions, this study investigated the feasibility of methane emission rights trading within New Zealand's pastoral agriculture. While the study was mainly based on literature research, experts were consulted in areas where the literature could not provide sufficient information. Several assumptions on emission lights trading had to be made, in order to facilitate the research: (i.) emission rights trading was to comprise only ruminant methane emissions, with (ii.) individual farmers being the point of obligation, (iii.) no ruminants farmers being excluded from the trade, and (iv.) trade being at national level. With 'feasibility' being defined as 'being possible', 'being successful' and' being reasonable', a set of feasibility criteria for emission rights trading was developed, on which the following evaluation was based. While numerous criteria were fulfilled, monitoring methane emissions with reasonable accuracy - a major requirement - is not possible. Although several methane measurement techniques are available, their application within emission rights trading was considered to be prohibitively expensive. With transaction costs consisting partly of monitoring costs, the requirement of sufficiently low transaction costs was therefore not met either. Additionally, the criterion of costeffectiveness was considered to be unlikely to be achieved, as it may be strongly affected by the farmers' unwillingness to apply the individually least-cost abatement method. Further problem areas were the political feasibility of emission rights trading (considered to be only limited due to strong opposition) and the enforcement of emission rights trading (believed to be threatened by currently not sufficient sanctions for violations). Therefore, methane emission rights trading within New Zealand's pastoral farming was regarded as not being feasible.