Agriculture’s excluded, so a carbon price won’t add cost. Right?

[Ben]

Agriculture’s excluded, so a carbon price won’t add cost. Right?

Sally Davison
Australian Farm Institute

It’s tempting to put the carbon price in the ‘too hard basket’, especially when it all starts to sound like a spaghetti bowl of what-ifs. But the Australian Government’s much anticipated future carbon policy presents a series of dilemmas for those involved in Australian agriculture.

The Australian Government has proposed to introduce a policy that will impose a cost on greenhouse emissions (a carbon price). The mechanism, intended to start on 1 July 2012, is to commence with a government-fixed carbon price – $23 per tonne CO2-e in 2012–13 increasing by 5% per annum (2.5% in real terms) – which would continue for three years, before being converted into a market-based emissions trading scheme (ETS).

The implementation of this policy will mean that organisations involved in activities that generate greenhouse gas emissions will progressively be required to pay the full cost that those emissions are estimated to impose on the environment. This will create an economic incentive for those organisations to either reduce the volume of emissions they create, or to purchase carbon ‘credits’ or offsets to reduce the net emissions attributed to their organisation. Purchasing offsets involves paying others to undertake actions that are recognised as reducing emissions (mitigation) or sequestering greenhouse gases from the atmosphere (sequestration).

It is proposed that direct agricultural emissions will be excluded from the proposed carbon price mechanism, meaning farms won’t be required to pay for greenhouse gas emissions generated by on-farm activities.

That means agriculture won’t bear any of the cost of a price on carbon, right?

Wrong. The cost of many farm inputs are affected by the cost of energy, because energy is a significant part of many of the goods or services that are used by farm businesses. As the price of carbon increases, the price of energy will rise, and the cost of farm inputs can also be expected to increase.

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