I was asked twice this week by two dairy farmers what way does the phosphate rights system work in the Netherlands.

The farmers were trying to make a comparison between a situation here in Ireland if greenhouse gases were limited per farm rather than impose a quota, cap or limit, as the Department of Agriculture has been suggesting might happen.

A farmer in the Netherlands can buy phosphate rights if he/she has produced more in the year than they had predicted.

At the moment, the phosphate rights cost in the region of €150/kg. They went as high as €275/kg in 2018, the year they were first introduced.

Tradeable rights

In 2017, the European Commission approved the introduction of tradeable phosphate rights for dairy cattle in the Netherlands. It got approved under EU state aid rules.

The measure aims to improve water quality in the Netherlands by limiting phosphate production from dairy cattle manure and promote a shift to land-based farming.

The situation in the Netherlands was that, given the high density of dairy cattle in the Netherlands, manure represents a significant environmental concern of pollution.

On 1 January 2018, Dutch dairy farms were awarded phosphate rights for free and are only allowed to produce phosphate from dairy cattle manure corresponding to the phosphate production rights they hold.

At the end of each calendar year, farms are required to demonstrate that they have sufficient phosphate rights to justify the amount of phosphate produced by their dairy cattle manure. Dairy farms, including new entrants, can acquire phosphate rights on the market.

Transition

When a transaction occurs, 10% of the traded rights are withheld and kept in a so-called phosphate bank.

This bank will then serve to further encourage the development of more land-based dairy farming by providing temporary, non-tradeable rights to so-called land-based farms.

These are farms that can fully absorb on their land all the phosphate from their own manure production.

In particular for the Netherlands, one of the objectives was to try to develop a system to stimulate land-based farming, so farms could absorb all phosphate from manure they produce on their own land.

Irish thinking

The thinking of the farmers I talked to this week was at least if there was a limit of greenhouse gases per farm, there should be an incentive for farmers to improve or reduce what gases they produce.

Then, at least if a farm was using technology, breeding the most efficient cows and keeping only enough replacements as they had good fertility, they could see positive incentives that they should get rewarded for.

The farmers felt introducing a cap or limit on cows or volume per farm did nothing to incentivise improved greenhouse gas production on farm.