The long awaited review of the ETS came out recently and is being criticised by all and sundry, either because they hoped for the system to be speeded up or because they hoped they could be left out altogether.

The government has since, via Climate Change Minister Nick Smith, announced it will override the report and defer agriculture's entry into the scheme indefinitely – stating that until ‘practical technologies are available to enable farmers to reduce their emissions and more progress is made by our trading partners to reduce their emissions'.

Well Federated Farmers is celebrating, but let's look at what the report actually said:

Having read most of the 98 page report, it is obvious the panel had done an enormous job in attempting to look at all aspects of all industries and the likely implications of decisions which could impose undue hardship or, alternatively, encourage others to subvert the system by claiming greater costs in order to increase their charges.

The report had, however, thrown up some falsehoods, which have been bandied around of late. Having looked at what is being done around the world, the claim that New Zealand is too far in front has proven untrue, with many countries, including the EU and China well advanced with plans or systems similar to or more draconian than ours. It has also pointed out that reductions in emissions for industries already included in the scheme have yet to happen in New Zealand.

There was a careful analysis of whether some form of worldwide reduction mechanisms is likely, with three different potential results defined. The overall conclusion was that some measure of agreement will be found and we stand to lose too much if we are not seen to be doing our bit.

Carbon trading is a somewhat patchy effort at present and only Forestry has the right to trade our NZU's overseas. Until a cohesive trading and measurement system does get going, the multiple systems must be carefully watched and other industries permitted to trade units when it is seen to be practicable.

So what happened for agriculture and its ‘biological emissions' of methane and nitrous oxide?

Well the report recommended that agriculture still be included and the dates for voluntary and mandatory reporting (2012) and surrender obligations (2015) weren't changed. What was changed is that the point of obligation recommendation has shifted to farm gate, rather than processor level.

The conclusion was this would be more likely to produce individual reductions in on-farm emissions. The panel considered that using forestry, nitrification inhibitors and ‘good practice' farm management techniques, which are already available, allowed for a 2015 start-up date to be considered reasonable.

The decisions weren't all hard on agriculture, however and the report had some softening recommendations on the transition phase and free allocation aspects which extend the one-for-two obligation to include agriculture for the first two years after entry, with a three year phase out after that, taking the full obligation date to 2019.

With regard to all industries, the report recommended a moving cap on the price of NZU's from the current $25, upwards by $5/year beginning in 2013 to a price of $50 by 2019. But it also separated the market price from the cap price, to preclude price gouging of consumers.

There had obviously been some bad maths done originally on the phase out of free allocation which allowed for no reductions after certain levels were reached. This matter has now been altered in the report to allow agriculture 90 per cent of baseline initially, phased out at 1.3 per cent per annum on a straight-line basis from 2016.

So something of a ‘curate's egg' set of recommendations, but when viewed as a whole, the report reflects a huge amount of consideration, a lot of work by the panel and reveals some current misperceptions of where New Zealand's efforts stand in a world scale.

It's a pity it looks as though a great deal of their efforts will have been wasted.

The report can be viewed at: http://www.climatechange.govt.nz//emissions-trading-scheme/ets-review-2011/review-report.pdf