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Simulating a Market for Tradable Greenhouse Gas Emissions Permits amongst Irish Farmers

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  • Breen, James P.

Abstract

Research into Greenhouse Gas (GHG) emissions from Irish agriculture has focused on two main themes (i) projecting future emission levels and (ii) devising abatement strategies at the farm level such as changes in animal diet, better waste management and or changes in farm management practices. These abatement strategies will have costs associated with them some of which, such as capital investment or reducing livestock numbers, may be substantial. However economic theory indicates that market based solutions such as tradable emissions permits (TEP’s) are the least cost means of achieving desired reductions in emissions. To date within Europe a regulatory approach has been favoured when trying to curtail emissions from agriculture, the Nitrates Directive being a recent example. This paper seeks to compare the impact on farm incomes of a regulatory approach to emissions abatement with a TEP’s approach. In order to do this data from the Irish National Farm Survey is used to construct a farm-level Linear Programming (LP) model for each farmer within the dataset. Firstly a baseline scenario with no constraint on emissions is run. We then enforce a 20 percent reduction in emissions and the impact on farm incomes is measured. The LP model is then used to determine each farmers shadow value for a TEP. These shadow values are then weighted up to estimate the supply and demand and used to simulate a market for TEP’s and the farm income is re-estimated. Finally the implications for farm incomes of both abatement strategies are compared with the baseline scenario.

Suggested Citation

  • Breen, James P., 2008. "Simulating a Market for Tradable Greenhouse Gas Emissions Permits amongst Irish Farmers," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36770, Agricultural Economics Society.
    • Handle: RePEc:ags:aes008:36770
    DOI: 10.22004/ag.econ.36770
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    1. Bernd Lengers & Wolfgang Britz, 2012. "The choice of emission indicators in environmental policy design: an analysis of GHG abatement in different dairy farms based on a bio-economic model approach," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(2), pages 117-144.
    2. Phani, Gayatri Yammanuru & Jose, Monish, 2012. "The Impact of Emissions Trading on Rice Production of India," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126322, International Association of Agricultural Economists.
    3. Vermont, Bruno & De Cara, Stéphane, 2010. "How costly is mitigation of non-CO2 greenhouse gas emissions from agriculture?: A meta-analysis," Ecological Economics, Elsevier, vol. 69(7), pages 1373-1386, May.
    4. Emma J. Dillon & Thia Hennessy & Stephen Hynes & Verena Commins, 2008. "Assessing the Sustainability of Irish Agriculture," Working Papers 0809, Rural Economy and Development Programme,Teagasc.
    5. Fellmann, Thomas & Dominguez, Ignacio Perez & Witzke, Heinz Peter & Oudendag, Diti, 2012. "Mitigating GHG emissions from EU agriculture– what difference does the policy make?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126815, International Association of Agricultural Economists.
    6. Lengers, Bernd & Britz, Wolfgang & Holm-Müller, Karin, 2013. "Trade-off of feasibility against accuracy and cost efficiency in choosing indicators for the abatement of GHG-emissions in dairy farming," Discussion Papers 162877, University of Bonn, Institute for Food and Resource Economics.

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