An Illustration of the Potential Impacts and Uncertainties of an Agricultural ‘Carbon Tax’ on Irish Dairy Farms

A tax on agricultural greenhouse gas (GHG) emissions has been suggested as a potential means of reducing the GHG emissions associated with agriculture and improving the emissions intensity of production. One of several difficulties in implementing such a tax is the potential uncertainty in emissions estimates. This paper explores this topic using Irish dairy farm production and economic data from the 2015 Teagasc National Farm Survey. On-farm agricultural emissions were estimated by applying the National Inventory Report methodologies at farm level, and the uncertainties in total emissions and emissions per unit of milk produced were demonstrated using a Monte Carlo Simulation approach. The average GHG emissions footprint per kg fat and protein corrected milk (FPCM) was 1.07 kg CO2e with a relatively small uncertainty range of ± 2.59 %. If taxed at a rate of €20 per tonne of CO2e, a typical farm would have to pay €7141 (± 2.25 %), which could have a significant impact on farm incomes, but is not strongly affected by emissions uncertainties. Therefore, although there would remain a number of difficulties in designing an agricultural emissions tax, the level of uncertainty in emissions does not appear to be a significant barrier in this example.