Professor Alan Matthews:

To take up a couple of the points made by Senator Higgins, my main concern about the nitrates directive is that we should make use of it to address climate action as well as the water issue. We should think climate when we look at the revision. It is essentially a stocking rate limitation, and then the derogation allows farmers to exceed it but there are obligations required.

It is a commercially valuable derogation. It allows more intensive production and, therefore, dairy farmers who avail of the derogation should be asked to do more in respect of climate and water.

I agree with Senator Higgins regarding the methane issue. I hope she picked up the point that methane reductions are also a very important mitigation opportunity in the near term. I agree with her on that point. I did not put in the cap and trade idea as something which would be immediately applicable. More direct instruments are available to us, such as the CAP and the funding from the carbon tax revenue, that we could use to incentivise change. However, the key point is to think about what incentivising change means. At the moment, we pay farmers to produce food. We pay them for food and, therefore, not surprisingly, that is what they concentrate on doing and they do it very well.

However, no value is given to the other, negative, outputs, such as water pollution or climate pollution in the form of greenhouse gas emissions. Unless we somehow find a way to put a value on those elements, and it could be a price or a subsidy, which encourages farmers to think about the implications of producing these by-products along with food production there is no reason for farmers to take them into account. Some of these by-products can be positive, such as biodiversity, which we pay farmers to deliver, but some of them are negative externalities. There is no incentive now for farmers to take those negative externalities into account. That is the message I would like to get across. The instruments to achieve that goal are, of course, something that we can discuss later.

The Senator rightly highlighted the issue of the impact of policies on the distribution of incomes and farm sizes. My point in that regard is that perhaps we must think about different policies for different objectives. To the extent that putting a price on emissions is the right way to go, that may result in some tendencies we do not like. Therefore, we may need a different instrument to try to address this point. We should not try to do everything through the climate action instrument that we choose.