New possibilities for how ETS will hit ag MATTHEW CAWOOD 14/10/2009 3:23:00 PM
LEVIES on sales of nitrogen fertiliser, milk and livestock, and carbon payments on land clearing are among the proposals laid out in a new discussion paper that calls for agriculture to be tightly integrated into a low-carbon economy.
The Climate Institute paper, released today, calls for a package of measures "to send strong and clear price signals to agriculture to invest and innovate, and contribute its fair share to national emissions targets".
"Sooner rather than later, Australia will need to enact a concerted climate strategy for agriculture; to provide certainty, to avoid the costs of delay, to live up to our global responsibilities, to enable adaptation to now-inevitable changes, and, of course, to reduce our emissions," the paper says.
The Institute suggests a range of measures, among them a government-supported "Decade of Climate-Friendly Farming" program starting in 2011 and amendments to the CPRS legislation to allow landholders to be rewarded for any "credible, measurable and internationally compliant" carbon sequestration activity.
More controversially, the Institute suggests that agriculture should be made accountable for its emissions with a package of measures that could include "emissions intensity" levies on sales of nitrogenous fertiliser, milk and livestock; carbon payments and/or bans on land clearing; and widespread adoption of on-farm "carbon forestry".
"It's all about risk management," said Climate Institute chairman, Victorian grazier Mark Wootton.
"If people put their preconceptions about climate change to one side, what are they going to do if climate change is a reality? No farmers in any developed country are more exposed to the effects of climate change than we are here in Australia."
Price signals that encourage innovation will not emerge if farming sits apart from the national emissions trading scheme, Mr Wootton said; hence the discussion paper's emphasis on being somehow engaged with the ETS.
"In the right policy environment, farmers and other landholders who are part of the global solution to global warming will emerge as winners in a low-carbon economy," the paper says.
Alternatively, the costs of global inaction on global warming are potentially severe. The Institute quotes CSIRO studies suggesting that under some climate change scenarios, Australia could become a nett importer of wheat by 2050, with a 26 percent chance that the nation could have no wheat surplus by 2070.
But the Institute acknowledges that there are a raft of challenges to overcome before agriculture can be cost-effectively effectively linked to the CPRS.
The issue of "leakage", in which higher farm costs under the CPRS make overseas products not subject to emissions charges more cost-competitive, is acknowledged.
Ultimately, the Institute argues, the most effective way of reducing leakage is to have international emissions agreements in place.
In the interim, it supports limited assistance for trade-exposed industries "commensurate with the actual risk for an industry, to avoid over-compensation".
Accounting linkages to the CPRS could initially be created under a hybrid model, where upstream processors of products like fertiliser, meat and milk carry the liability for these products, but farms or groups of farms would be allowed to enter emissions trading voluntarily.
"It would see those companies with a low marginal costs of abatement entering the market while providing an incentive for investment in researching and developing new, low-cost abatement measures."
Funds raised from emissions charges on agriculture should be re-invested back into the sector, the paper argues.
It suggests that some of the revenue should be used to create incentives for large-scale private investment in "climate-friendly farming" and new land uses, and to create a pool of funds that farmers can access to develop abatement and adaptation measures.
The Climate Institute wraps up its discussion paper with an extended argument against the "do nothing" approach, quoting a recent ACIL Tasman paper on climate change and agriculture:
"There is no 'do nothing' option on the table ... agriculture, along with the rest of the economy, is looking at a major departure from the status quo in coming years - even if it remains outside a formal emissions market as such."
* The Institute is actively seeking constructive comment and suggestions to build on the ideas outlined in the paper.
Click here to download the paper, Towards Climate-Friendly Farming.
Submissions should be addressed to Corey Watts, Regional Projects Manager, at [email protected]
