Mitigating GHG emissions from EU agriculture– what difference does the policy make?

The contribution of the agricultural sector to climate change is gaining more and more visibility and therewith, interest is growing on policy options to induce agricultural GHG mitigation. However, so far only little is known about the different impacts of specific policies on GHG mitigation on the one hand and agricultural production and markets on the other hand. This paper provides an empirical analysis of the impact of three alternative abatement policies (implementing an emission standard, tradable emission permits and a livestock emission tax) to reduce agricultural GHG emissions in the EU. The policy scenarios are designed to achieve a 20% reduction of EU agricultural GHG emissions in 2020 compared to 2004. Projection results show that emission reduction effects per EU Member State in each scenario are quite different from the EU average, depending on the production level and the composition of the agricultural activities. Moreover, the policy instrument chosen makes a considerable difference with regard to effects on production, cost-effectiveness and income redistribution within the agricultural sector. It is also highlighted that an effective emission reduction commitment in the EU would be diminished due to a shift of emissions from the EU to the rest of the world (emission leakage), mainly as a result of higher net imports of feed and animal products. The estimates provided can feed the discussion on the feasibility of integrating the agricultural sector in multi-sectoral emission abatement policies currently in place (e.g. EU emission trading directive) or under consideration.