Australia farmers to be hit by carbon trade
By Rob Taylor, Reuters in guardian.co.uk, Monday June 1 2009
CANBERRA, June 1 (Reuters) - Australia's farmers will be hit by the introduction the world's broadest carbon trade regime, despite a four-year reprieve from inclusion in the scheme, the country's top agricultural forecaster said on Monday.
Agriculture accounts for 16 percent of Australia's carbon emissions and billions of dollars in exports.
The government will exempt the rural sector from the emissions market when it begins in July 2011, with farming excluded until at least 2015 to help agriculture adjust to the Emissions Trading Scheme (ETS).
But the economic value of broadacre farm production would still decline by 0.3 to 1.9 percent in 2011, as higher costs were passed on, the Australian Bureau of Agricultural and Resource Economics (ABARE) said in a report.
"There is also a possibility that agricultural processors will pass some of their higher costs on to farmers through paying lower prices for inputs from farmers," said ABARE Executive Director Phillip Glyde.
Australia's ETS aims to cover 75 percent of the nation's carbon emissions from 1,000 of the biggest polluters, who will need a permit for every tonne of carbon pollution they produce.
The government wants parliament to endorse the plan by the end of June this year, but the conservative opposition is promising to block a vote in the upper house Senate until after global climate talks in Copenhagen in December.
The government has predicted the ETS will shave only 0.1 percent from real GNP between 2011 and 2050, while farmers expect the regime to severely dent Australian food exports worth $24 billion a year, mainly to Asia and the Middle East.
ABARE's Glyde said the greatest agricultural effects in 2011 would be in dairy farming, with average farm income estimated to fall by 1.9 percent, assuming 100 percent cost pass-through.
But the negative effects of climate change on agricultural productivity in Australia would be lessened if the ETS was introduced in combination with a global climate response, Glyde said, lending weight to conservative political concerns.
Australia is a net agricultural exporter, with around two-thirds of total production shipped overseas. The country in 2006 accounted for 2.3 percent of all world agricultural exports.
The farmgate value of the sector accounts for around 3 percent of GDP, or $25.7 billion, and agriculture accounted for 35 percent of Australia's merchandise exports over the past 5 years.
Previous ABARE reports estimated that 45 percent of crop input costs were energy related, including fuel, electricity, freight and fertilizers, and therefore vulnerable to an ETS.
Australian beef producers have said their farm cash income could fall by 60 percent under a carbon price of A$25 a tonne.
Under the government's recently revised plans for the ETS, the scheme will have a fixed carbon price of A$10 a tonne for the first year, with free-market trading from July 1, 2012.
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