On-farm impacts of an Australian ETS – Economic analysis

Summary

This project will evaluate the onfarm economic impact of an Australian ETS. The study will be based on the CIE's previous analysis for the AFI, specifically, the macroeconomic impacts from the OzCubed simulations and sectoral impacts from agricultural commodity models with necessary modification, such as taking consideration of the NZ ETS. These macro and sectoral impacts will then be combined with the onfarm financial data from the ABARE and other sources to work out the onfarm economic impact of the following sectors: wheat and other crops industry mixed livestockcrops industry sheep industry beef industry sheepbeef industry dairy industry sugar horticulture (if data available) The impacts will be assessed under several scenarios regarding agriculture is covered by or excluded in the ETS no free allocation or 90% free allocation of permits for agriculture carbon prices at different levels CPRS Green Paper recommendations Some other issues will also be addressed including the required productivity improvement in agriculture or other options (eg. planting trees, soil carbon credits) to offset the possible adverse impact of an ETS on agriculture, and the required R&D spending on agricultural emissions reduction programs to realise commecially viable abatement opportunities/technologies.

Program

National Rural Issues

Research Organisation

Centre for International Economics

Objective Summary

To analyse the onfarm financial impacts of an ETS under various scenarios on the following: Input price impacts e.g. fuel, fertiliser, electricity, freight, crop contracting etc; Output price impacts e.g. drop in value of cattle as consumers move to lower emitting forms of protein; Farm profit impacts by sector. Possible scenarios include: Agriculture as a covered sector within an ETS; Agriculture as an uncovered sector within an ETS; No free allocation of permits for agriculture; and 90% free allocation of permits for agriculture. Align scenarios with the CPRS Green Paper options where possible.