JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD díospóireacht -
Wednesday, 29 Oct 2008

Impact of Climate Change on the Dairy Industry: Discussion.

Chairman

On behalf of the committee, I welcome Mr. Michael Barry, director of the Irish Dairy Industries Association, IDIA, Mr. Vincent Gilhawley, chairman of the IDIA and chief executive officer of the Town of Monaghan Co-operative, and Mr. Paul Kelly. The delegates are here to make a presentation on the impact of the European climate change package on the dairy industry in Ireland. Before calling on Mr. Barry, I draw the delegates' attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

I understand Mr. Barry intends to make a PowerPoint presentation. I invite him to do so now.

Mr. Michael Barry

Thank you. My colleague, Mr. Gilhawley, will begin the presentation.

Mr. Vincent Gilhawley

I thank the committee for the opportunity to make this presentation on behalf of the Irish Dairy Industries Association. Unfortunately, Ms Audrey O'Shea, who was supposed to attend the meeting as part of the delegation, is unable to be here. In her place, we are joined by Mr. Paul Kelly, director of the food and drink section of the Irish Business and Employers Confederation, IBEC. My colleague, Mr. Barry, is the director of the IDIA, which is part of IBEC's food and drink section. I am chief executive officer of the Town of Monaghan Co-operative but am here today in my capacity as chairman of the IDIA. This is our first time to make a presentation to the Joint Committee on Agriculture, Fisheries and Food, so it is an historic event for us.

The IDIA supports sustainable agriculture as defined by the Sustainable Agriculture Initiative, SAI, Platform, which refers to producing safe agricultural products in a competitive, productive and efficient way, while protecting and improving the natural environment and the socio-economic conditions of local communities.

I will begin with a brief overview of the Irish dairy industry. There are currently 1.2 million dairy cows in the State. The country has a milk quota of 5.5 billion litres. Traditionally, our product mix has been heavily commodity loaded but it is a changing product mix, of which we still export 85% to 90%. There will always be a high emphasis on commodity products. This is an industry in which milk quotas will end in 2015, and we are working towards this.

The dairy industry is an important part of the Irish economy and contributes approximately 3% of gross domestic product. Dairying has been identified within all sectors of the economy as an area of strategic growth. Our overall industry is one of the best internationally in terms of class and has been identified as a sector which has much potential for the future. Also, we have many world-class companies in this sector that do valuable work in terms of dairy products.

The pie chart shown provides a breakdown of the product mix ranging from butter, of which 140,000 tonnes are produced, to cheese, which is identified as an area of significant growth in the future and of which 127,000 tonnes are produced, to skimming powder, which incorporates the infant formula sector in Ireland. Three of the biggest infant formula manufacturers are based in Ireland and 15% of the world's infant formula is produced in Ireland from Irish milk.

As regards the dynamics impacting on the market at the moment, the chart shows Irish exports or our market share by value and the continental EU figure, which is approximately 50% of Irish exports, by value. It is important to note that this is now a global market for EU and international markets. Anyone who has looked at products on supermarket shelves will have noted the many imported products on the domestic market with which we are now competing.

The Common Agricultural Policy is undergoing serious transition. Removal of many of the support measures has led to volatility in the market. This time last year the industry was stronger with milk returns to farmers averaging in or around 40 cent per litre. While milk prices to farmers have not yet reached as low as 24 cent per litre, based on current market returns, prices could go this low. We are competing with New Zealand and the United States, countries that can chase markets below this price level and remain competitive.

Global trade in dairy is increasing. Again, this time last year, the United States was practically negligible in terms of its international exports. However, as a result of serious increases in output and the weakness in the dollar, a major factor in the US during the past year, dairy exports from the United States to the European Union have grown by 142%. The dynamics of the market have changed rapidly during the past 12 months.

As to whether the industry is in crisis, we are questioning whether there is a need for debate on this issue at this point in time. Global dairy markets have collapsed during the past six to nine months. While this is not an issue on today's agenda, I will give members a couple of figures in this regard just to put the situation in context. In Northern Ireland, milk is sold at an auction system. This time last year, purchasers were paying 34p a litre for milk. Last week, that price dropped to 18p, a drop of almost 50%. This reflects the market.

The figure for the Irish Dairy Board is reflective of the returns to processors in Ireland. One can see that this time last year the Irish Dairy Board was paying €4,100 per tonne of butter. It is currently paying €2,050, exactly half that amount, per tonne of butter. The price for skimming powder this time last year was €3,600 per tonne compared with the current price of €1,750 per tonne. Unfortunately, we cannot be certain at this point that this will be the final price. The industry is in a serious situation.

Ireland is operating in a global market as a result of changes in the CAP. The market supports put in place a few years ago to alleviate the current crises in respect of export refunds, intervention and the internal support measures are all gone. They may remain on the Commission's books but it chooses not to use them. We are exposed to what is happening in the global market.

Any policies that will increase our production costs will reduce our global competitiveness. Recent data show that Irish exporters are 34% less competitive than they were in 2000. I draw the committee's attention to policy in regard to the EU climate change package which, if implemented, could have serious implications for us. The industry must meet its environmental commitments as obviously we benefit from the marketing of Ireland on a green and natural basis. All dairy processors are signed up to the International Climate Change Partnership, ICCP, licensing emissions trading scheme and nitrates directive in respect of the disposal of sludge, etc. This is a highly regulated sector with strong commitments to the environment.

I will hand over at this point to Mr. Michael Barry who will make the second half of our presentation on greenhouse gases and climate change.

Mr. Michael Barry

We are being told, in respect of the global and environmental impact of agriculture, that approximately 45% of Ireland's emissions in 2008 to 2012 will come from the agriculture and transport sectors. Let us compare these sectors.

On transport, one can apply a great deal of options and technologies to this sector. On agriculture, I would question whether the technologies exist to enable us attain the 20% reduction in emissions that people say we can achieve. A key point is that one cannot divorce the targets for industry and agriculture from producer and processor. At processor level, we are looking at emissions trading schemes. For producers, we are looking at trying to reduce greenhouse gas emissions. These sectors cannot be divorced. Without a competitive processor one cannot convert what is being produced at farm level into items which consumers will purchase at supermarket level. This is the basis of our argument.

Let us be clear: agriculture operates in a regulated environmental market. Ireland is already involved in this market and adheres to the high and strict standards that apply. If we choose to put an end to emissions trading and the free allocations of companies, we will end up with an uncompetitive processing sector. These costs are not recoverable because, as Mr. Gilhawley pointed out, we already operate in a global market. We compete in Irish, UK and European markets against those countries that do not have emissions trading schemes. If we opt to remove companies from the emissions trading scheme, this will not remove them from the requirement to achieve reductions in emissions through other mechanisms. That is an important consideration. We must look at agriculture in its entirety, namely, the farm and the factory.

One of the main issues I wish to discuss with the committee is a report we commissioned through the European Dairy Association. We commissioned the report and asked them to look at the data available, bring them together and make them relevant to the dairy sector. They have done this. The FAO report and the report, Livestock's Long Shadow, extrapolated and found that emissions from dairy cattle alone accounted for 1.2% of global emissions. Enteric fermentation is the primary cause of greenhouse gas emissions. It is methane that cows emit in the fields when they belch. It is the biggest emitter of greenhouse gases.

A high input dairy system has low emissions per gallon of milk produced. A low input system such as that in Ireland and New Zealand will have low emissions per cow. That is an important metric to consider. Another issue to consider is that when the product leaves the farm and is processed, 10% to 20% of the greenhouse gas emissions associated with dairy products are added.

It is difficult to compare with the appropriate management system. The figures given act as a reference for the committee to refer to at a later stage. As can be seen from the graph, if one looks at global greenhouse gas emissions, most emanate from the energy generation sector. The primary source from agriculture globally is soil emissions — carbon dioxide emissions from the soil. They are followed by enteric fermentation and manure management.

Methane is the element closely associated with enteric fermentation and cows belching in the fields. The energy sector is still the primary source of methane emissions globally. At a European level, enteric fermentation and the contribution of cows to greenhouse gas emissions change, but there are still considerable contributions of methane emissions from landfill sites and the energy sector. The reason the position changes is that when comparing European and global figures, there are higher concentrations of livestock in Europe than in areas such as Asia, Africa and southern parts of America.

The key question is how green is green? We always pride and market ourselves on our green agricultural system. If one looks at kilos of methane emitted per animal, intensive agricultural systems such as those used in Denmark have a high level of methane emissions per animal. As expected, New Zealand has an emissions figure of 78. Emissions per animal in Ireland would be expected to be similar to those in New Zealand, but they are not. They are higher than in the United Kingdom. If one looks at the methane figure associated with a kilo, gallon or litre of milk, one starts to see the highest emissions associated with those with the lowest output. New Zealand tends to have a high emissions figure per kilo of milk, while more intensive systems such as those used in Denmark have very low emissions. We must ask what we are really trying to achieve.

To return to our definition of sustainability and broaden the greenhouse gas debate to include it, we need to ask what is more relevant, emissions per animal or emissions associated with a kilo of milk produced? If one considers that a kilo of milk is the element from which costs are recovered, that is the relevant metric. If one looks at all the elements considered to measure greenhouse gas emissions from products, one ends up with a metric like that shown in the graph. In agriculture one looks at feeds and inputs. Animal feed is composed of corn, concentrates and other inputs such as grass. The other side of the equation is the farm — the animals and the manure they are emitting. Even at that level, if one changes the management system from low input to high input, all one is doing is transferring emissions from other inputs to feed and vice versa. Emissions are also transferred from animals to manure. It is a trade-off.

The current data show energy generation is still the primary source of methane emissions globally. From an agricultural perspective, it is enteric fermentation that is the primary source of greenhouse gas emissions. The relevant metric is emissions per kilo of milk produced. We are trying to compare on a global level, but do not have an international standard. Therefore, are we comparing like with like? Because of this, it is possible that countries are measuring different elements. To return to the previous model, people will give different weightings to different elements.

Irish data have been compiled and are based on eight model herds. We have been working through the farms which have been used in monitoring. We do not really know what is being emitted per commercial farm. There is a strong case to be made for a survey or analysis of at least 1,000 herds to see what is happening at farm level.

Emissions cannot be separated from what is happening in primary agriculture and primary processing because one depends on the other. Methane emissions are not just associated with agriculture. Ireland must concentrate on enteric fermentation. How do we square this with a 20% reduction? We do not have sufficient data from commercial Irish farms and do not have the cross-section of data needed to make decisions. We know that dairying only accounts for 1.2% of global greenhouse gas emissions. Based on our current knowledge, if Ireland says it will reduce greenhouse gas emissions by 20%, we will only be able to do this by reducing the herd by 20%. That poses the question: do we really know what we have agreed to?

Deputy Michael Creed

My apologies in advance, but I have another meeting to attend.

The awful term "a level playing pitch" comes to mind. We all want to do our bit for the environment, but are we assured that the objectives we have set for ourselves within the European Union will not disadvantage us, compared to New Zealand, the USA, Australia and emerging countries such as Argentina which are all ploughing ahead? We are on a hiding to nothing. The real difficulty we face is that the industry here is already highly regulated and to add a further layer of environmental objectives would only make it less competitive. Is the WTO an appropriate forum in which to bring these issues to bear to ensure a level playing pitch? It is well and good for the European Union to lead the charge to do the right thing for the environment, but if that means we are outsourcing food production to third country standards, we are not achieving any net gain globally for the environment. Accepting we have all signed up to these measures across the globe will only put processors and primary producers out of business for a lofty objective, to which we all, in principle, adhere. Does the delegation think the WTO is the appropriate forum in which to address these issues? The European Union has put its cards on the table in respect of what it sees as an irresponsible attitude to the emerging global crisis.

I was particularly interested in Mr. Gilhawley's opening remarks because this is the real issue facing the dairy industry in Ireland. Primary producers and processors are in a very difficult position, given the global position of the dairy industry. That is where the global dairy industry is now, particularly for processors who have an exposure to skimmed milk powder and butter. Those prices have collapsed by almost 50% in less than 12 months.

The voice of the processor has been absent from this whole debate in the context of milk quota policy. With regard to the European Union, many Irish farmers are clamouring for additional quota. There are so many nuances to this argument, I do not want what I am asking to be taken as my own personal position, but is there something contradictory about looking for additional milk quota for primary producers at the same time the market is in freefall? It would appear the absolute political imperative now for our Department of Agriculture, Fisheries and Food in a European context, given what is happening globally in dairy markets, is to put in place a floor price for dairy products and negotiate this in the Common Agricultural Policy health check.

A licence to produce more is to be sought to gain share in a market which we are all led to believe is growing globally. The more the Asians prosper, the more they will want a western style diet, including dairy products. I do not know if the collapse over recent months is due to a slowdown in the global economy or increased production in New Zealand, Australia, Argentina and the United States, or that we are not in a position to compete with those global players because we are more regulated and our costs are higher.

For Irish dairy farmers, if this is where the market is going, there will be wholesale casualties in the Irish dairy industry. People cannot afford the doomsday scenario mentioned by the witnesses. To process milk in the current global markets would cost in the region of 24 cent or 25 cent per litre, with collection costs of 4 cent or 5 cent per litre on top of that. This will lead to a number of processors in this country facing very difficult scenarios regarding viability.

It would appear the imperative now for politicians within the European Union and in the context of the CAP health check is to put down a floor price and take production out. At the same time, because the European Union is not filling its quota, there is significant demand from our own producers to allow for an increased quota. I am finding it difficult to square that circle so I would like to hear Mr. Gilhawley's comments.

Chairman

Do members mind if the witness responds to Deputy Creed who must go? Is that agreed? Agreed.

Mr. Vincent Gilhawley

I will deal with that and Mr. Barry will deal with the question concerning the World Trade Organisation. With regard to the demand for extra quota, if we go back 12 months to when this debate began, the issue was driven by Ireland wanting to get its share of the expanding market. It has now collapsed and there is a very definite division of opinion on it.

The silence of the processors is relevant in that this is a farming issue. The IDIA tries not to involve itself directly in farming politics, although there are different views within the farming organisations as to quota levels. At this point, that division is spreading further and is evident in different European countries. Much opinion is changing as to whether this is the time to be looking to increase quotas. We are producing more, markets are collapsing but our response is to produce even more. As somebody stated, we work even harder to get even less. It is a very difficult issue.

Why has the market collapsed? It is a combination of many factors and one cannot lay a finger on a particular cause. Ultimately, the issue comes down to supply and demand. World supply has increased, particularly from the United States and, in recent months, the southern hemisphere. The product is now coming to the market. Our ability to compete is definitely hindered by the removal of many supports which were in place.

When the European Commission changed the rules, it probably got lucky as markets soared, the single farm payment came in and everything looked rosy in the garden. Much product has come on the market and the EU has struggled to export it. Our butter exports, for example, are running at approximately two thirds of what they were this time last year. We are not competitive or able to move product, and so stocks are building up. In the case of whole milk powder, a Dutch exchange produces weekly quotations and for the past 18 weeks, the price of whole milk powder has dropped by varying amounts.

I concur with the Deputy's point and we may get to the point where some intervention or emergency measure is required to arrest the fall in the market. The only way that can be done quickly is for the EU to reopen emergency intervention to take product out of the market. If that is done, we will get to a floor and although the figure will not be very palatable — intervention is no longer an armchair — there will at least be a bottom in the market from which we can begin to rebuild. It is a very worrying time.

Deputy Michael Creed

I apologise for coming back with a supplementary question. Much of our market is to third countries and the Asian market in particular. If we take European product off the market and given that New Zealand production, for example, is up 9% this year, surely others will step in to fill the gap in the market anyway.

Mr. Vincent Gilhawley

That is a high risk but to consider it purely within the EU context at this time, product prices are now below the cost of milk production. The question has to be asked in the context of the Common Agricultural Policy. We cannot keep asking milk producers to produce milk that returns a product price below the cost of production. If we have rules, regulations and standards operating, we must examine all these issues. Otherwise farmers will be forced out of business.

This does not happen overnight but England is the best example of the decline in dairy farmers. Over the past ten years, English farmers got very poor milk prices and the exodus from milk production there has been colossal. It is to the extent that England is probably the only country in the EU at the moment where milk prices are going up. It is an entirely different market to Ireland now as more than 50% of the product is consumed in the internal liquid milk market. Retailers in particular realise they must keep the primary producers alive if they want milk produced there.

Mr. Michael Barry

The question on the World Trade Organisation was very relevant. What we have seen in the WTO to date is that while there is a global agreement in principle for liberal trade and an abolition of all tariffs, we found in the past year that when people got into the detail, it was not possible to reach a global agreement. A principle is very different to a detailed agreement.

In January next year there will be a global conference on climate change. If the global leaders can reach agreement in principle to attain a reduction in the footprint of activities, they will find our target will increase from 20% to 30%. The Deputy is correct in that an entity such as the WTO is required to go into details to ensure what individual countries and trading blocs are implementing is equitable. This ensures we are dealing with and comparing similar policies, and we would then have the comfort of knowing that whatever costs we place on the industry are equal to the costs placed on industries in other areas.

When the Commission initially proposed the climate change package, it said that if other countries did not put controls in place it would place a tariff on their goods coming in to Europe. It cannot do that in the context of the WTO. However, two weeks ago I met with Crawford Falconer, the chair of the WTO agriculture committee, and he stated clearly that it was so difficult for the committee to attain a deal on basic trade that broadening the agenda to include the environment is not a realistic option at this stage. What I fear is that in January, if there is another agreement in principle, it will be very inequitable.

Deputy Michael Creed

That is not acceptable.

Deputy Seán Sherlock

In assessing at first hand the contribution made by the Irish Dairy Industry Association, one concludes that the current policy of seeking to reduce greenhouse gas emissions will result in a net reduction in the number of cows, thereby reducing production, which will have a significant impact on the agriculture sector. Is it fair to assume that there are inherent flaws in the scientific analysis of greenhouse gas emissions with regard to agriculture? Mr. Gilhawley mentioned that eight model herds were used. Is that in an Irish context or a European context? The view coming across strongly here is that there is a long-term political imperative to reduce greenhouse emissions and, if I understand correctly, the measurements used for agriculture are inherently flawed, which means the final figures are flawed. Thus, agriculture is not as large a transgressor in terms of greenhouse gas emissions as we would believe. I am trying to get a rational understanding of the logic here. If the political imperative in this country — which comes from the Green Party, to make no bones about it — is to reduce emissions, is it the case that the assumptions on which this is based are wrong?

Is it the view of the representatives that based on the current scientific analysis, changing the inputs — in terms of feedstuffs and so on — could have a positive impact in terms of reducing greenhouse gas emissions and the production of methane? I always take the view that agriculture is not the big transgressor here and that it is easy for the political discourse to target it. There are so many other mechanisms that can be used. We need only look at the amount of waste and packaging produced but that has not been targeted in a similar way, politically, to agriculture. That is something this Government needs to consider.

With regard to milk prices, what is the actual equilibrium rate or economic rate of return for milk production, in terms of the market as we see it now and in five to ten years' time after — in a worst case scenario — a 10% reduction? The view of the representatives is that if production moves from Ireland to countries where there is less regulation, that will have effects in its own right. The question is, politically, how do we stop that flow? I am not sure whether the political will is currently there within the WTO to do this. Does Commissioner Fischer Boel have the political will to do it? My analysis is that she does not because she is trying to push through a number of what she would term to be reforms — CAP reform and the CAP health check — which will see pillar 1 to pillar 2-type spending. That will have a serious impact on agricultural production here in the long run.

I am trying to get a greater understanding of how we in this committee can lobby our Government and what the Government needs to do at the Council of Ministers and at WTO level to stem the reduction. Is there an alternative analysis to that being put forward by what I would term the establishment in terms of the reduction in cattle production, which we can get our teeth into and give a differing view? I take the view simply that agriculture is the one sector that has remained constant despite the fluctuations in the wider economy. We should not throw out milk and meat production for the sake of attaining the goal of decreased global greenhouse gas emissions if we will find in the long run that our analysis was wrong. That is the point I am trying to make in a very convoluted way. I ask the Chairman to forgive me.

An alternative analysis needs to be put forward. There is nothing within the presentation that I would disagree with but the politics of this will become very important. It all depends on how much power is wielded in Government by the Green wing and whether this wing will seek to use it as a political stick to gain concessions. That is not something I expect the representatives to answer, but it is a view that needs to be put forward.

Senator John Carty

I welcome the representatives. They have given us a very good talk and provided food for thought.

Many of the questions I wanted to ask have been asked, and Mr. Gilhawley gave comprehensive answers to a number of them. One of the interesting points was about the increase in milk prices in the UK. Is this because there are so few producers at the present time? The UK can import quite a large amount of milk and it has been doing so, especially through the large retail outlets.

Like other speakers, I do not believe agriculture is the main offender with regard to greenhouse gas emissions. There are many other factors the representatives have pointed out. Mr. Gilhawley's final point was that to seek a 20% reduction in emissions would mean a 20% reduction in cattle numbers. Is he referring to Ireland, to Europe or the world? There is a lack of data from Irish farms. Mr. Gilhawley mentioned a figure of 1,000 farms. Is there any move to survey those farms?

Mr. Vincent Gilhawley

Mr. Barry will deal with some of these issues.

Mr. Michael Barry

I will begin at the end. With regard to the 20% reduction, when the EU climate change package was initially proposed, targets were given to individual member states based on GDP. It was judged that the target for reduction should be based on ability to pay. Such countries as Ireland, because of the performance of the economy at the time, have a significantly higher target to attain than other member states which are allowed to increase emissions. The 20% figure for Ireland refers to a risk to Ireland of a 20% reduction in the number of animals and output.

I refer to the second part of the question, namely, the 1,000 farms surveyed. There are no moves as yet in this regard. A panel of environmental experts has been put together. They are managers employed by each of the dairy companies. The panel will meet tomorrow with several companies to try to understand how they operate in the United Kingdom where the driving force is a group of retailers which have sought to carbon footprint certain products. We are all using different methodologies, which is a concern. We seek an understanding of what the UK group is doing. It has collected a significant body of data based on an analysis of UK farms. I hope we can bring a proposal to the Department of Agriculture, Fisheries and Food and ask it to immediately initiate a survey of the magnitude to which I referred, that is, a minimum of 1,000 herds. The exercise is only meaningful when one surveys such a number. It involves examining many farms, farming types, management types, herd types and regional variations. At that stage one could build a picture of what the emission levels were from these farms.

There is no point in us approaching farmers and saying they must reduce their carbon footprint, if we do not say what actions they must take to do so — a second useful aspect of the evaluation. I consider this to be a mission critical exercise. It should be a key priority for us and we must do it immediately. We must remember where Ireland is relative to our European neighbours. There are other European countries with between 15 and 20 years of experience. They have done much work and have built much expertise. We need to get to that point rapidly and can only do this, away from analysis at the desk, by a significant amount of footwork on farms measuring what is in place. Only then can we build a model of sustainability on Irish farms.

Deputy Sherlock asked what would happen with this policy if we reduced production in Ireland by 20%. The demand globally for food is increasing by approximately 3% per annum and the capacity of global food production to respond to this demand is approximately 2% per annum at best. If one reduces production in areas with a natural production advantage such as Ireland, one finds production is being forced elsewhere. People must eat and food production migrates to areas where it is unnatural. This is the change one starts to see and there is a reversion to models such as trying to produce milk in deserts, which has a much greater impact on the globe. Global climate change needs a global solution and we will shoot ourselves in the foot if we try to dissuade production in areas with a natural advantage. Ireland is probably an area with the most temperate climate and we produce food in a very natural way, which is a key point.

I do not believe we can say whether the greenhouse gas analysis has inherent flaws. This is the reason we must find out the data and carry out the analysis across the commercial herds to see where we are, as suggested earlier. This is the starting point. Unless one has a starting point, one does not have an accurate means to reach agreement on what reduction targets will be. This is a crucial first stage. If one carries out an analysis of 1,000 herds, one should ensure one can compare like with like. For example, if I am measuring a farm in Cork, I should know I am measuring the same elements as the man in the Netherlands, France or England. We must have uniform methodology. We will then know we are comparing like with like.

I refer to the changing of inputs and whether it could have a positive impact. I showed a convoluted graph with all the elements which contribute to greenhouse gas emissions. Consider that by making one change such as changing feeding types from grass to concentrates, one alters the greenhouse gas emitted from the cow. If I move to a high concentrate system, there is a footprint generated from growing the crop and shipping it to the country, which also has a significant impact, as opposed to an extensive grazing system. The impact of this must be analysed.

I refer to the Commission's response and intention to move funds from pillar one to pillar two. It is a great shame that in recent years the Commission has spent significant amounts of money on rural development programmes such as the rural environment protection, REP, scheme. The benefits of the REP scheme for the environment are not counted in agriculture. Consider greenhouse gas emissions. If a farmer has well managed hedgerows or if he or she has grown trees on a couple of acres of scrub, that is not accounted for. A simple way around this is to use balance sheet methodology. Cows produce methane, as a result of which there is a detrimental impact from manure on the farm, but there is a positive impact from the environmental management a farmer undertakes. The forestry case is extreme and should be counted in any targets, but if a farmer has managed his or her farm as per the REP scheme specification, it should be counted. I suggest there is a significant policy conflict in funding a REP scheme and then not including the benefits in counting in terms of climate change.

I refer to the question of the economic set of returns for farming. Consider turning the question around and the comments of my chairman. There is an uneconomic return if a New Zealander can produce at a cheaper rate. The introduction of this policy could add anything from 2 cent to 4 cent per litre to production costs. That means a farmer is always 2 cent to 4 cent adrift of the competitor and if the competitor can sell produce cheaper at any stage in the market cycle, the farmer is uncompetitive and cannot produce milk because he or she cannot sell the product.

Mr. Vincent Gilhawley

Senator Carty mentioned milk prices in the United Kingdom. In the past ten years English dairy farmers have probably received one of the worst milk prices in Europe. The United Kingdom is constantly at the bottom of the tables, despite the fact that farmers there have one of the largest domestic markets. Much of the reason for this is they do not have a co-operative structure such as in Ireland or most of the rest of Europe. The pricing is driven mostly by public limited companies and the supermarkets because such a large volume of milk is consumed on the island of Britain. As a result, the rate of decline was exacerbated during the foot and mouth disease crisis when many English dairy farmers were wiped out and did not go back into production. Since then approximately 50 dairy farmers per month exit milk production in England where the average herd size is in excess of 100 cows, which is substantial. There has been a rapid, constant decline in milk production in recent years.

This year, for the first time, the supermarkets have taken a direct interest in production and set up direct supply contracts between retailers and farmers. Such companies as Tesco and Waitrose have set up contracts in order that farmers are guaranteed certain prices because they supply to supermarkets. This is done out of necessity. The supermarkets have seen how milk production has gone into decline and it is not like other sectors. History shows that when farmers exit milk production, they do not go back, because the commitment is 24 hours a day, seven days a week. The supermarkets saw an urgent need to address this issue and put in place a new milk pricing system. It may not necessarily apply to all farmers in England but it certainly does for those who have retail contracts. The result is that milk prices have actually increased this year. That is where the change has come from. Milk production is in a trough period in England. For the next few weeks they will be importing milk from Northern Ireland, Belgium and France. There is milk going in but it is purely a top-up. They are addressing an issue. They see a problem arising in the future where there will not be enough milk producers to supply the domestic market. Importing it on an ongoing basis for the fresh liquid milk market is a non-runner because many in England also use the red tractor symbol, which guarantees an English product.

Supply and demand have finally forced an awareness. Unfortunately, we are in a different situation and must export 85% to 90% of everything. We are exposed in the global market. It is worth emphasising that only 7% of milk produced in the world is traded in the global market and, unfortunately, that sets the price for us. New Zealand has grown steadily and has approximately one third of that market, and Europe's share has rapidly declined.

The economic cost of the production of milk is determined by efficiency. It is linked to another issue, and perhaps the CAP reform has undermined it. Do the economic rules of supply and demand apply to food production? This is an important question because we have developed a situation where massive volatility will be seen. I do not think the food production cycle can cope with going from boom to bust. These things will catch up; they have a serious lag and do not happen overnight. Without the support structure that has existed, we will experience volatility. There is school of thought that suggests the melamine problem in China was driven by people being forced to the lowest cost of production and that we should start looking at things which are detrimental in the long term.

Deputy P. J. Sheehan

I welcome Mr. Barry, Mr. Gilhawley and Mr. Kelly and congratulate them on their comprehensive illustration which contains much food for thought. They have portrayed the dairy industry as being on a sound footing.

There will be impediments in the future. The delegation stated we have 1.2 million cows and a milk quota of 5.5 billion litres which ends in 2015. Does the delegation think this will result in a reduction in our production? There will be no milk quota. Will a certain amount of non-viable farmers leave the industry and the national quota rely on productivity management?

The more we studied the projections before us, the more we asked questions. The presentation stated global trade was increasing. From 2007 to 2008, the United States's exports to the European Union increased 142%. It is an alarming state of affairs to think that the European Union had to import so many dairy products from the United States. The presentation states that the Common Agricultural Policy no longer supports markets in Europe, global dairy markets have collapsed, and the Northern Ireland auction in August 2007 was 34p per litre and 18p per litre in October 2008. There is a comparative reduction in butter prices.

The delegation stated that Irish dairying operates in a global market and that policies that increase Irish production costs reduce our global competitiveness, the EU climate change package being one such policy. This policy from the European Union is something we should be very careful of, and ensure it does not impose too many restrictions on dairy products in Ireland.

The delegation also stated that a green and natural Ireland is our brand equity. Are we promoting this to the best of our ability? The presentation noted that the nitrates directive sludge disposal and producer compliance is a highly regulated sector and has strong commitments to the environment.

Regarding Ireland's national greenhouse gas emissions projections, the presentation mentions that agriculture and transport account for 45% of projected total emissions for 2008 to 2012. Can the delegation break down the percentage to individual figures for agriculture and transport?

The presentation also says that primary production cannot exist without means to convert product to consumer products and that agriculture already operates in a regulated environment. Should we have a fear of global greenhouse gas emissions? It is stated 1.2% of global emissions are attributable to direct emissions of dairy cattle. Are all of our cattle exempt from emissions? While enteric fermentation was mentioned as a primary source of climate impact, reductions lead to trade-offs. It is also stated post-farm emissions add 10% to 20% and it is difficult to compare the effects of different farm management practices.

The issue of a green grazing system was raised. The figure is given in kilograms of methane per animal, and New Zealand is 78 kg of methane per animal. Ireland is 110 kg of methane. Why is there such a difference? In the kilograms of methane per kilogram of milk, New Zealand is racing ahead at 0.027 kg per litre of milk. Ireland is 0.022 kg per litre of milk. Can the delegation explain those figures?

On interpreting the data, the presentation states that emissions per unit of output is the relevant figure, but there is no international standard for measurement. Is there no international standard for measurement of the emissions per unit of output in Ireland? Have different countries measured different things? Only eight model farms were assessed in Ireland out of the total number of farms we have. Do we know what is emitted per commercial farm? Do we know what amount can be reduced per farm?

In regard to the final graph, based on the current knowledge, a 20% reduction in greenhouse gas emissions will mean a 20% reduction in cow numbers. If that is the case, will those same global emissions regulations appertain to New Zealand, the United States, Denmark and all other EU countries, including the UK? By and large if there is an international criterion for greenhouse gas emissions, will every other country in the globe adhere to it or will it be brought into world trade talks in future? If so, will it have a determining effect on the Irish dairy industry?

Deputy Andrew Doyle

I thank the representatives for their presentation. Deputy Aylward and I are also members of the Joint Committee on Climate Change and Energy Security. In fairness, there is a general mood to bring reality to the discussions and to any recommendations that go forward from the climate change strategy group to Government policy. This is a complicated matter so please forgive me if I ramble a little because it is difficult to get one's head around it in its entirety. The basic point is that dairying accounts for 1.2% of greenhouse gas emissions worldwide. Given what Mr. Barry said about a 3% increase in global food demand per annum, there is a moral question why we are talking about this given that what the cow produces, be it milk, cheese, leather or whatever, from the farm to the day it leaves the processor's gate is critical to the human race and world stability not to mention economies or even just the Irish economy.

Deputy Sherlock made a political point which needs to be made. It is an agenda driven by the Green Party to seek a reduction in agricultural output with a view to the Common Agricultural Policy health check because it is seen generally as a cost to the consumer. I and many others would make the point that the CAP keeps prices down because there is production at a lower cost price while still achieving a margin for the producer, but that is another day's work.

I refer to the producer's gate because in the absence of world tariffs and World Trade Organisation negotiations and on the basis of a new Kyoto-type agreement, if food miles are to count as part of the carbon cost of food production, a product that must be moved 12,000 miles to the market as opposed to 1,200 miles surely has a significant carbon cost attaching to it in so far as that should be counted against that unit of food, be it meat, milk, lamb or grain. It is not a question of tariffs but the New Zealand, Australia, Argentina and US competition in this market must have that cost built into the figure if we are to be serious about the issue. This goes back to the basic point about trying to establish international basic criteria or a system of harmonised calculations across the board.

Research is taking place in this country into the digestive pattern of ruminants to see if their diet can be tailored to achieve the high figure of 20% without having an impact by increasing production of feed or fertiliser. Ireland produces 22% to 23% but the level has reduced since Kyoto was agreed, mainly because of reduced production in the dairying sector. We have sought and are getting a general agreement in the Joint Committee on Climate Change and Energy Security to have a realistic examination of the issue by way of derogation or whatever because while the European average is about 9%, the carbon emissions from the Irish agrifood sector are much less. It is twice as efficient as the EU average at producing food if quantified in units per food.

Swathes of the South Island in New Zealand that were a carbon sink are being irrigated. Dams are being installed and it is being brought up to a huge production level. That is an extra carbon output which will have to be factored in if there is to be a level playing pitch. In Argentina, a cow is more productive than an acre of wheat but there is demand for ethanol from sugar cane, so rain forests are being taken out to deal with this demand. Is that not a carbon cost? What looks good on a national carbon output basis does not look good on an international basis. Unless we get to that point, we are at nothing here and as an industry, we should surrender nothing. It is fashionable to say our output is 23% but we do not have heavy industry which is why our output is pro rata higher. It is distorted because of that. The dairy sector accounts for 3% of gross domestic product, which is €3.8 billion. We cannot afford to lose that. Apart from anything else it means jobs.

I am not trying to agree with everyone. I am trying to put forward the arguments we should make. It is difficult and complicated but if everyone is honest, they will look at the entire picture, which includes the other big players in the world, in that 7% which is based around four major blocs.

Senator Paul Bradford

I will be brief. I welcome the witnesses. Certainly the debate has been interesting. In effect, we are having two debates, one on the greenhouse gas-environmental side of the argument and, simultaneously and probably of greater significance, on the present pricing problem within the dairy industry. I suggest we may need to have a separate meeting soon to discuss what is becoming a crisis. I am aware that 300 to 400 farmers in my area of north Cork last night attended an IFA organised meeting about the dairy industry where one of the key players in the province, if not the country, highlighted the fact that, unfortunately, prices would have to fall further from a competition point of view. The future of the dairy industry and milk prices is worthy of a full debate at this committee as soon as the Chairman can arrange to have the players before us and I invite and request him to do so.

On the environmental issue and the question of greenhouse gases, I do not proclaim to be an expert but one of the problems is that a substantial number of people are making careers out of the environmental-greenhouse gas issue and coming forward with very questionable facts and figures. If one were to believe all the scaremongers, we would all build a Noah's Ark because Armageddon always appears to be just around the corner. I do not think it is as serious as it is sometimes presented.

Regarding agriculture, I concur very much with what I have heard from my colleague, Deputy Andrew Doyle, which presumably is beyond discussion, that global dairying accounts for 1.2% of greenhouse gas emissions. That may be the price we pay for dairying, but from a social, economic, political and, as Deputy Doyle suggested, moral point of view we are getting an enormous return. We are keeping families employed and communities in existence and are supplying food to keep mankind alive. If 1.2% of total greenhouse gas emissions globally is the price we pay, we must look at the other side of the balance sheet. Mr. Barry referred to our measurement system and perhaps we should seek a substantial change in that system, but if we take a balance sheet approach we would end up with a very different picture. I agree with what Deputy Doyle said in that regard.

Agriculture must be much more robust in its defence of its methodology and practices. As Mr. Gilhawley said, we must examine how agriculture is measured from a production and price point of view. It is not similar to the property market, which was on a bizarre tangent but the inevitable end has now come. Food production, which is necessary to keep mankind alive, must be measured and examined in a different fashion but that is another aspect of the debate.

None of the figures presented this morning can be questioned because they come from the experts, but we must be realistic. Mankind cannot survive without food. We cannot have food without agriculture. We cannot have agriculture without animals. We cannot strip the sector bare. We must be realistic in our aspirations. Where sensible measures to control environmental distress can be put in place we should all support them. I am sure my colleagues on the climate change committee will agree that is a realistic approach but responding to a problem that is not yet quantified and believing we can solve the problem of greenhouse gas emissions and environmental concerns by shutting down agriculture is a daft approach. We must be strong and robust in our defence of agriculture. Where would Ireland or indeed Europe be without agriculture?

The first page of the presentation refers to sustainable agriculture. I am not talking about the Green Party, I am talking about the entire environmental movement made up of many good, committed people, but they must recognise that sustainable agriculture is about being productive, competitive and efficient and producing a safe product. There is a saying that one cannot make an omelette without cracking eggs. That is particularly appropriate to the debate in this committee. We want safe food and a natural environment. We will not be able to deal with world hunger and the annual 3% increase in world food consumption and demand by putting the world on a diet of chickpeas. We must have balanced agriculture. We are closer to being right in our approach in this country than we are to being wrong. There must be balance in any environmental measures we put in place. We must continue to reflect on that. A total of 1.2% of emissions from global dairying may be negative but there are many positive aspects as well.

Deputy Bobby Aylward

I apologise for being late. I welcome the IDIA group. I am sorry I was not here for the presentation.

Chairman

We understand the reason you were late.

Deputy Bobby Aylward

It is a long way from Kilkenny. The traffic——

Chairman

You are still celebrating.

Deputy Bobby Aylward

That has something to do with it as well, but the traffic was slow this morning. It is good to be able to celebrate.

I agree in the main with what the previous two speakers said. From what I heard of the presentation, I wonder if the rural environment protection scheme plan is not being taken into consideration. That is very serious. I am a farmer. I participated in REPS 3 and I hope to participate in REPS 4 next year, or my son will from now on. It is not right that that is not being taken into consideration as part of the submissions we are making on greenhouse gas emissions and our carbon footprint. That should be taken into consideration because as a result of REPS we have better control. We have control of our slurry and the way we spread it. We are also reducing emissions in other ways and we are protecting the environment. It is not fair that REPS is not being taken into account when we are making our submissions to the European Union and it is not shown in the figures before us.

I agree with what Deputy Doyle said in his submission about our carbon footprint. We have a global market, the World Trade Organisation talks and other agreements and markets among world traders, but are we taking cognisance of the fact that we are closer to the European market in particular, the number of countries in that market now and our image as a green producer? Food is coming into that market from all over the world. There is a carbon footprint cost associated with transporting it, whether it is New Zealand butter, Australian lamb, Brazilian butter or whatever. We should fight our case in that regard and make Ireland's position stronger, particularly at EU level but also at international level.

On the figures for projected total emissions for 2008-12, agriculture is included with transport in that regard and the two sectors account for 45% of emissions. That is not fair. Agriculture should stand alone. As has been said there is a demand for more and better produced food, and Ireland is ready to meet that demand. The quota system will go from 2015, with a 1% increase every year from 2009 to 2015. Ireland is ideally situated to take advantage of that and produce more milk, butter and whatever else is demanded because we are efficient farmers and better able to handle the demand.

Those are the main points I wanted to make. I am sorry I missed the submission. We should stand up and fight for agriculture. It accounts for 3% of GDP and is worth €3.8 billion in terms of the dairy sector alone. As was said by the two previous speakers, the sector accounts for 1.2% of greenhouse gas emissions globally. That is a strong case that we should be making. Transport and agriculture should not be combined for the purposes of the figures and seen as the bad polluters. We should be separate in that regard and we should fight our own case in agriculture.

Mr. Vincent Gilhawley

I thank members for their comments. What we intended to do today was create awareness of the problem. Senator Bradford made the point that this issue can get a little out of control. Somebody said recently that the green agenda started out as a cause, it rapidly became a business and it is well on its way to being a racket. We would like to keep it in perspective. We recognise that there are responsibilities and the industry is signed up to that. That is the purpose of our presentation today.

To respond to some of the comments, the important point to make is that the Irish dairy industry is a world class industry. It is a highly respected industry internationally. We have some of the best players in the world and they have established tremendous reputations for Irish dairy products. We must always keep that in mind. The industry has a very strong future. There is no doubt that there will be change. There will be fewer milk producers. We only have to look at the age profile of our dairy farmers. There are 21,000 dairy farmers in Ireland today. Teagasc predicts that in the next five to ten years that figure will be down to 15,000. Others would say that if milk prices remain where they are, it will drop even further.

We have some of the best dairy farmers in the world. With the improvements in genetics and other advances, I have no doubt that even if we have fewer producers, we will step up to the mark and produce to the level of whatever increase in quotas is dished out in the run-up to 2015. Land availability, or a milking platform as it is referred to, is a problem for many producers, and it will also be a factor.

Reference was made to promoting Ireland and our green image. While it is driven around grass-based production, it would be ironic if the debate in this area shifted such that grass-based production in a strange way became a negative issue because of the way the measurements of greenhouse gas emissions were carried out.

Mr. Michael Barry

With regard to some of Deputy Aylward's comments, we need to reflect on what was envisaged at the start of this process. There was general recognition that something had to be done around the peripheries of the carbon emissions from society and in regard to climate change. The objective of many of the policies in this area was to do something that would influence a change in our behaviour. Many people have taken up the point we made about whether it is right or wrong to link agriculture and transport simply because they have similar metrics and emissions. There is a simple point to be made in this respect. Taxes and initiatives were introduced to try to influence our behaviour in terms of transport. It may mean that we as consumers have a choice to buy a greener car, that is a car with a lower level of emissions, or to take the train or bus to work.

Deputy Bobby Aylward

One cannot buy a greener cow.

Mr. Michael Barry

That is exactly the point at issue. What is the behavioural change sought in primary agriculture? That is the key point here. The Deputy pointed out what we cannot do. That leads on to Deputy Doyle's point concerning the research on animal digestion. One of the proposals from that research is whether the level of oils in the diet of cows should be increased. That raises two points. We have a minimum intervention system. We feed cows grass. We give them a shake of meal over the winter but we feed them grass. We have a very low input system. We do not have the same opportunities as our Dutch or Danish colleagues to intervene and change the diet of the animals with oils. However, as clearly shown by one of the graphs, if the methane emissions are reduced by tweaking the diet of cows, that will increase the manure handling impact. It will also increase the soil's impact because those oils have to be produced. It might be increased through concentrates or an increase in the volume of soy, which would probably be imported from South America in any event. There is a see-saw effect and all one is doing is balancing one with the other. The figures can be changed but the overall impact will not change. A cow has a carbon footprint. It comes back to the point, on which I hear general agreement, that given that we have the rural environment protection scheme and a sustainable platform, that should be sufficient. We must inform consumers that there is such a thing as natural behaviour. There is a natural emission but there is also a natural benefit from having these animals in the extensive system we have in Ireland. There is a major point. That bit of consumer education is fundamental.

Senator Bradford mentioned the environmental industry that has grown up around this sector. We must be careful of one aspect in this respect. I have heard it said in many sectors that if a carbon label or carbon footprint is put on all products on the shelf, retailers would change their behaviour. I draw a comparison to what has happened with the nutritional labelling of food in the UK in the past two years where there was a row over it, with one side wanting to label the GDAs and the other side wanting to label products with traffic lights, so to speak. The debate was driven by people from two different perspectives. As a result consumers were confused, the end goal was missed and they ended up with something that became a marketing objective. Huge damage will be done if we let the same thing happen to the Irish dairy industry by people trying to introduce a new marketing tool by way of indicating a carbon footprint or putting a carbon label on a product.

In terms of the initial work that has been done, I have seen some analysis done by certain retail sectors, the representatives of which have tried to convince us that importing a tomato from Africa will have a lesser impact from an environmental perspective than a tomato grown in Ireland. That brings us back to a crucial point made by Deputy Sheehan, namely, that there is no international standard. It is important to have such a standard to ensure that we are comparing like with like. We need to adopt a common sense approach. We need to consider what we are examining and measuring and whether everybody is measuring the same thing.

Another point that was made is that while we are talking about greenhouse gas today, the bigger issue is sustainability and the biggest element of sustainability in terms of global food production is water. If we slow the process down at this stage and try to encompass all the elements of sustainability, we will get to a much better place. It means we are not playing with the same targets people are currently thinking of, but we will end up with a system that is more sustainable, ultimately better for the industry, we will retain the focus on sustainable food production and ultimately we will have a better environment.

Deputy Sheehan asked why there is a difference in the figures for methane per animal between New Zealand and Ireland of 78 kg versus 110 kg, respectively. We do not know the reason for that. That illustrates the importance of having an international standard. One would think that the figures would be close because we both have low input extensive farming systems. One would imagine the figures should be in or around the same level. The other side of the equation is that we are both net exporters. We have many animals and we net export a high level of our product around the globe. Therefore, one would imagine that the figures for the two countries would be close. This highlights the reason there should be harmonisation of global standards. That would make a great deal of sense and it is an important point.

The Deputy also asked if the 20% reduction provision applies to everybody. No, it does not. Europe has made an agreement to reduce greenhouse gas emissions by 2020 and the targets were divvied out to countries based on their GDP. Ireland, because of our economic performance in previous years, was given a very ambitious target. We have a higher target relative to our European competitors. Even though New Zealand, the US and Brazil have strong environmental policies in place, they are different and they will have a different cost implication. We are not comparing environmental impacts and environmental savings on a level footing. This brings us back to the need for a single environmental standard.

In terms of reducing the figure for our greenhouse gas emissions, a point mentioned by Deputy Doyle, we must be careful of this aspect. Much of the initial analysis on which that was based was our having a quota-based system. We have been living with standard production output from our dairy industry but that will change. In the current year we will have a 2% increase in production. One would imagine that if market prices turn, we will see an increase in production at some stage. That is the bit we do not know. If the market is strong and the long-term prospects are positive, that figure will increase. If we have more animals, the figures that are currently being used will increase.

I repeat an earlier comment that account is not taken of the impact of REPS, forestry and the positive effects of some crop products, such as maize, on reducing emissions. Maize production results in a huge carbon sequestration or huge carbon sink. The impact of such initiatives should be counted. A basic balance sheet approach should be used. If we did that, we would get to a better and greener place.

Deputy Bobby Aylward

Why was REPS not taken into consideration when the submissions were made? Why was its impact on reducing greenhouse gases excluded in our submissions?

Deputy Andrew Doyle

In the context of climate change and achieving lower targets, a point I had intended to make is that in regard to sustainability and comparing Ireland with New Zealand, energy from methane gas that is trapped and stored is released without being harnessed. The potential to harness such energy should be examined. The research to progress that may be costly initially. I refer to harnessing such energy from slurry and various other systems.

When Mr. Barry cited the example of importing tomatoes, it brought to mind that 60% of the overhead costs of our horticulture industry are energy. There is a potential to develop organic energy from the green residue waste from the production process. A methodology could be developed to harness the energy from that waste. That aspect of the industry has not been considered in the overall analysis of what we are seeking to achieve in agriculture.

Mr. Michael Barry

There are two specific points in that respect. Much work is going on at present in terms of looking at the digester systems, especially combining slurries and dairy wastes. If we make savings on that, the benefit of that will reduce the target for a reduction for the energy sector. When we grow bio-fuels or anything like that, the target does not come off agriculture. It is credited to the energy sector and-or the transportation sector. We lose it from agriculture, so it is another——

Deputy Andrew Doyle

A recommendation has come from the Joint Committee on Climate Change and Energy Security that there would be permeability on that.

Mr. Michael Barry

That is the one point. The other side of it is the question as to why REPS was not included in the initial target. The problem was the target was agreed and everybody worked backwards from it. In one sense, one would imagine that this is the discussion one would have before agreeing targets.

Deputy Bobby Aylward

Slurry is now sold because of the cost of artificial fertiliser. Slurry is an important element of farming in the future. We will not convert it into energy, or I will not anyway. I will use it to grow better grass. I will use it more regularly because of its nutritional content. We will not convert it into energy but will use it on the land because of its value.

Deputy Edward O’Keeffe

I apologise for being late. I had to attend a meeting of the Joint Oireachtas Committee on Enterprise and Employment. I wish to ask a few questions vis-à-vis New Zealand. It produces approximately 15 billion litres of milk and it probably has double the number of cows we have. How will it operate in the new green environment if it is participating in the Kyoto Agreement? I will ask more questions later.

Chairman

The Deputy can ask all his questions now.

Deputy Edward O’Keeffe

I will have questions arising from Mr. Barry's answers. I am coming in mid-stream.

Chairman

We cannot be here all day.

(Interruptions).

Mr. Michael Barry

New Zealand does not have the 20% target we have. The EU climate change is very specific and it is a target used by the Europeans to attain this goal within Europe for its own member states. One of the points I made earlier was that Ireland's target of 20% is higher than that of many other member states because the target was linked to our GDP, or basically the performance of the economy.

The New Zealanders, Canadians and Australians have said that they are participants in the Kyoto Protocol but that they have different ways of implementing it. In other words, they will have a very different cost implication on dairying at factory and at farm levels.

Deputy Edward O’Keeffe

Does that not put us at a very serious disadvantage competition-wise? We hear so much about the World Trade Organisation, the European Union and so on. Why is there not a level playing pitch? I fully support the efforts of the rural community in its anti-WTO stance. At the same time, we cannot ignore the fact that Lisbon has been so important in the financial crisis with the banking system. Why has that gone unnoticed?

At a meeting of the World Trade Organisation in Geneva, the New Zealanders really made a play for a re-run and Pascal Lamy was going along with that. Perhaps we will see a re-run. I know Peter Mandelson has gone and I wish him well. Like any politician, he is not the worst.

We are at a disadvantage. We have not seen this exposure anywhere. It is stated that the industry is in crisis and there has been a global collapse. How is that relevant to the climate crisis?

Chairman

Has the Deputy asked all his questions?

Deputy Edward O’Keeffe

No. I will ask more.

Chairman

We cannot go on like this. Every other member asked their questions——

Deputy Edward O’Keeffe

The dairy industry is the biggest employer.

Chairman

We appreciate that.

Deputy Edward O’Keeffe

Maybe not in north Meath.

Chairman

The Deputy need not think we will be here all day.

Mr. Michael Barry

In regard to the WTO, the Deputy is 100% correct. There needs to be an international standard and, more important, some sort of international policeman. The WTO is about more than just a political agreement at any one time. The WTO serves a very important role as the global trade police person in case there is anything going on which is trade distorting. The WTO will intervene in that.

However, there is no international standard, so we may not be comparing like with like. As I explained earlier, I spoke to Crawford Falconer, the chair of the agriculture committee, two weeks ago. He said that if the WTO was progressing on trade, it would then be possible for it to consider bringing in wider issues such as environment.

Deputy Edward O’Keeffe

Live horse and get grass.

Mr. Michael Barry

It has said that because it cannot get a trade agreement, there is no chance of it broadening the agenda. It is very unlikely that something like this will land on the WTO agenda very soon. There is an agreement in principle and it is felt that it is the right way to go but it has said that if we cannot agree on the basics, it will not complicate it further by bringing in environment and subsequent tariffication of the movement of products coming from countries which do not have similar or equitable carbon charges.

Deputy Edward O’Keeffe

Are people in the North Atlantic more vulnerable than people in the South Atlantic to emissions and climate change?

Deputy Bobby Aylward

The southern hemisphere.

Mr. Michael Barry

I do not believe it is a question of who is worse off. It is a question of who is measuring differently. What is being sold here is a target to reduce by 20%. It is not a question that our cows have different levels from those in New Zealand. It is that at a political level, Europe has said we are going to attain this target and reduce it. People in Europe are doing that without reference or recourse to what the New Zealanders are doing. If they were here, the New Zealanders would say they have a very good environmental policy, that they have their own targets and that they are reducing greenhouse gas emissions in their own way. However, they are not comparable. They must ship it.

Deputy Edward O’Keeffe

My last question was about an industry in crisis and a global collapse. It is extremely serious. The WTO brings me back to all this. The markets into which everybody wants to get are the European and the North American markets. We now hear about China. If China was the excellent market about which we hear so much, why does New Zealand not focus on China and Malaysia? They are all after our market.

There are apes in the dairy industry in Ireland. Down my way, there is a fellow known as "Jerry Rubble". We had wonderful brands around Mitchelstown-Mallow which we now need to give us approximately 2 cent more for a gallon of milk with these collapsing prices. This fellow got his way.

Chairman

Members should not name people outside the House.

Deputy Edward O’Keeffe

If the cap fits, wear it.

Deputy Bobby Aylward

Mr. Michael Barry is very informative. I would like to listen to him for another hour. A 20% reduction is being asked for by the EU. Have we to achieve a 20% reduction in the farming sector or is it a 20% reduction across the board? Do we, in agriculture, have to reduce our carbon footprint or greenhouse gases by 20% by 2011, 2012 or 2020? Does that 20% have to come from agricultural products and farming?

Mr. Michael Barry

There are three targets. The first target of 20% is for what is known as "the non-traded sector" — in other words, the sector which exists without emissions trading. That encompasses our farms, the transportation of the product, the processing of it and the product movement outwards. It stops at the retail level.

The second target we are being asked to achieve is a 21% reduction in the emissions from the processing sites involved in emissions trading. Many of our dairy companies are already involved in that system and they are being asked to reduce by 21%.

The final part of that is where one is looking at carbon labelling of product — perhaps a carbon label on the bottle of milk on the supermarket shelf. That is what is called "the life cycle analysis". It is looking at the feed all the way through to the consumer. That life cycle analysis shows that the consumer contributes anything between 5% and 20% of the carbon footprint of a product. That might be the refrigeration of the milk or it might be the cooking of the product. There are myriad targets there. I hope that answers the question.

Deputy Bobby Aylward

It goes some of the way.

Mr. Vincent Gilhawley

Deputy O'Keeffe raised the question of the industry in crisis. Earlier Senator Bradford made the point that this is a bigger issue and it may merit a full session. We would be very willing to come back to make such a presentation. That is the position. It is a big issue, a source of serious concern.

Deputy Edward O’Keeffe

I am delighted that Mr. Gilhawley recognises there is an issue. Much of this involves the industry and technologists and chief executives within it who know what they are about but who went off empire building, who borrowed money from developers and who cannot pay it back now. We have one of them down my way known as Jerry Rubble. Everyone here knows who he is, Mr. Jerry Henchy.

Deputy Bobby Aylward

No names, please.

Deputy Edward O’Keeffe

De Valera opened internment camps in the 1940s. It may be time to do so again.

Chairman

On behalf of the joint committee, I thank Mr. Barry, Mr. Gilhawley and Mr. Kelly for their informative presentation and answering the questions raised. I am very glad that they are willing to come back at a later stage, if necessary.

I propose that we go into private session to deal with some housekeeping matters. Is that agreed? Agreed.

The joint committee went into private session at 12.50 p.m. and adjourned at 12.55 p.m. until 11.30 a.m. on Wednesday, 12 November 2008.