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What's ahead for livestock producers?

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Producers will need to consider decisions in the allocation of land for carbon storage, either in forests or soil.
What’s ahead for livestock producers?

The burning of fossil fuels like coal, oil and natural gas (in which carbon has been stored for millions of years), combined with accelerated land clearance, has led to unprecedented levels of greenhouse gas (GHG) emissions.

Carbon sinks – areas that absorb and hold onto large amounts of carbon dioxide, such as oceans, soil and forests, and bind it into organic compounds – can’t keep up. Subsequently, concentrations of GHGs in the atmosphere continue to rise dramatically and are forecast to lead to an enhanced greenhouse effect.

Taking action...
The possibility of costly disruption to industry from rapid climate change calls for greater attention and precautionary measures. Emissions, or carbon trading is a market-based approach to limiting and potentially reducing GHG emissions in which covered industry sectors will need to obtain allowances for their emissions by acquiring government allocated permits, trading with other covered entities, or purchasing ‘offsets’ from sectors not covered by the system. The actual price of permits is set by the market, ie supply and demand, with the total number of permits determined by the level of the ‘cap’ set by government.

While the Australian government is still deciding agriculture’s role in a carbon trading scheme that will commence in 2010, livestock producers can expect big changes.

Large emitters covered by the scheme must obtain sufficient permits to compensate for their emissions and /or purchase approved offsets, such as carbon sequestered in newly established forests. Participants that reduce their emissions can sell any surplus permits to participants who find emission reduction more expensive or difficult.

Australian agriculture...
The implications of the scheme for the grazing sector will depend on the Australian Government’s decision about including emissions from agriculture, a significant component of which is methane from livestock. Inclusion of agriculture and forestry in the Australian system may be delayed until practical methodologies are available to monitor and verify emissions.

Recently appointed to oversee MLA’s Environment, Sustainability and Climate Change portfolio, one of Australia’s leading climate change and GHG experts, Dr Beverly Henry, said it was difficult in agriculture to monitor emissions because they were scattered over a lot of farmers’ and graziers’ properties with different production and management practices, and emissions also changed naturally, particularly with large seasonal variations of fire.

“Irrespective of how and when agriculture is included in emissions trading as a covered sector, fuel and energy input costs will rise as a result the scheme and will directly (eg diesel) and indirectly (eg fertiliser) affect all agricultural producers,” Dr Henry said. “Commodities with higher energy use, such as grains, are likely to be the most affected by increased input costs. Sectors such as agriculture that may become less competitive with increasing costs due to the introduction of emissions trading will likely receive assistance as ‘Trade-exposed, emissions-intensive’ sectors.”

She said the livestock industry accounted for about 11% of national greenhouse emissions and from that approximately two thirds was due to the livestock methane emissions.

“However the industry has become more greenhouse efficient with the amount of emissions per kilogram of meat falling and MLA is investing in some long-term research to try to find ways to reduce emissions further,” she added.

Decisions and regulations...
MLA is also commissioning new projects to ensure decisions and regulations relating to the livestock industry’s contribution to climate change are based on sound understanding and will consider issues and impacts for the red meat industry and for agriculture more broadly. These issues include the likely costs of achieving reductions in greenhouse gas emissions and impacts on industry competitiveness.

Dr Henry said a carbon trading scheme would create financial incentives to help curb global warming and encourage economically efficient alternatives to reduce emissions over time. “The Australian Government is consulting with agricultural industries to find the best option for agriculture,” she said. “There are several alternatives – for example agriculture could be a covered sector, requiring it to hold emissions permits and enabling it to fully participate in trading, or remain uncovered but able to provide offsets for other sectors such as energy and transport.

“A non-covered sector may be able to sell offsets, such as carbon sequestered in agroforestry, into the emissions trading scheme although the details of methods for monitoring and verifying offsets and managing transaction costs and risks due to loss, for example due to wildfires, have to be fully worked out. One possibility is for the offsets to be pooled and transactions and risks to be managed by an independent ‘pool owner’ rather than sitting with individual farmers.”

The Australian Government is aware that cost effective ways to measure emissions or sequestration at the farm scale are needed, and is taking this into account while planning the design of the carbon trading scheme.

In his recent discussion paper, Professor Ross Garnaut (who is reviewing climate change impacts on the economy for the Australian Government) said there was an argument to allow offsets from the land. The paper proposed that offsets such as new forests could be included sooner, but uncertainty and difficulty in measuring emissions in agriculture, may delay the sector being covered until practical accounting tools are available and the impacts can be assessed.

Kiwi approach...
The proposals for an Australian Emissions Trading System can be compared to the New Zealand system, where forestry offsets are included form 2008 but agriculture would not be covered until 2013. When agriculture is covered in New Zealand, it is not the individual farmers but rather the larger companies like meat processors and fertiliser sellers that would be responsible for reporting emissions and maintaining permits.

There may be opportunities for some farmers to plant trees on properties through agroforestry and sell those as carbon credits. But Dr Henry indicated there was still some uncertainty around employing soil carbon as offsets.

“Practical ways to monitor and verify soil carbon need to be agreed, and we need to understand whether increases in soil carbon can be maintained for long periods. Governments as well as farmers also need to consider decisions to allocated land for carbon storage, either in forests or soil, and the long-term implications for agricultural production of those land use changes.”

She said there were environmental benefits that needed to be reviewed in terms of how land was managed. “There are decisions that farmers can make that will create a win/win situation. If you don’t overgraze your land and improve pasture condition you are likely to build soil carbon, and even if you can’t sell that soil carbon in emissions trading in the near future, you are nonetheless likely to have healthier soils and get better productivity.”

More information visit: www.greenhouse.gov.au
Dr Beverly Henry
Phone: 07 3620 5239
Email: bhenry@mla.com.au