Implications of global emission policy scenarios for domestic agriculture: a New Zealand case study

Agricultural GHG mitigation policies are important if ambitious climate change goals are to be achieved, and have the potential to significantly lower global mitigation costs [Reisinger, A., Havlik, P., Riahi, K., van Vliet, O., Obersteiner, M., & Herrero, M. (2013). Implications of alternative metrics for global mitigation costs and greenhouse gas emissions from agriculture. Climatic Change, 117, 677–690]. In the post-Paris world of ‘nationally determined contributions’ to mitigation, the prospects for agricultural mitigation policies may rest on whether they are in the national economic interest of large agricultural producers. New Zealand is a major exporter of livestock products; this article uses New Zealand as a case study to consider the policy implications of three global policy scenarios at the global, national and farm levels. Building on global modelling, a model dairy farm and a model sheep and beef farm are used to estimate the changes in profit when agricultural emissions are priced and mitigated globally or not, and priced domestically or not, in 2020. Related to these scenarios is the metric or GHG exchange rate. Most livestock emissions are non-CO2, with methane being particularly sensitive to the choice of metric. The results provide evidence that farm profitability is more sensitive to differing international policy scenarios than national economic welfare. The impact of the choice of metric is not as great as the impact of whether other countries mitigate agricultural emissions or not. Livestock farmers do best when agricultural emissions are not priced, as livestock commodity prices rise significantly due to competition for land from forestry. However, efficient farmers may still see a rise in profitability when agricultural emissions are fully priced worldwide.Policy relevanceExempting agricultural emissions from mitigation significantly increases the costs of limiting warming to 2 °C, placing the burden on other sectors. However, there may be a large impact on farmers if agricultural emissions are priced domestically when other countries are not doing the same. The impacts of global and national climate policies on farmers need to be better understood in order for climate policies to be politically sustainable. Transitional assistance that is not linked to emission levels could help, as long as the incentives to mitigate are maintained. In the long run, efficient farmers may benefit from climate policy; international efforts should focus on mitigation options and effective domestic policy development, rather than on metrics.