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The Carbon Challenge for Mixed Enterprise Farms

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  • Kingwell, Ross S.

Abstract

As part of its climate change policy the Australian government has introduced a Mandatory Renewable Energy Target (MRET) scheme and is also attempting to introduce a Carbon Pollution Reduction Scheme (CPRS). Using as a case study a main agricultural region of Australia, this paper examines how farming systems in this region may be affected by the medium term policy settings of these two schemes. A bio-economic model of the region’s farming systems is developed and used to assess the schemes’ impacts on the nature and profitability of the farming systems. Results show a range of profit and enterprise impacts across the range of farming systems. Farms as providers of biomass for electricity generation and small users of electricity are liable to benefit from the MRET scheme, with the extent of benefit depending on the price offered for biomass. By contrast, the CPRS is liable to more profoundly affect farming systems, especially if agriculture is included in the scheme. The impacts of the CPRS on agriculture are mostly conditional on: the amount of free permits allocated to agriculture, the value of trees as carbon sinks, the extent of pass-through of CPRS-related costs onto agriculture and emission permit prices. Dependent on these factors, farm profits can increase by up to 20 percent or decrease by over 30 percent, relative to the ‘no CPRS’ or ‘business-as-usual’ case. If agriculture is covered by the CPRS, and emission permits and tree growth rates are sufficiently high then optimal farm plans typically involve a combination of reduced livestock numbers, the planting of permanent stands of trees on marginal farmland and other changes to the enterprise mix on farms that reduce emissions.

Suggested Citation

  • Kingwell, Ross S., 2009. "The Carbon Challenge for Mixed Enterprise Farms," 2009 Conference, August 27-28, 2009, Nelson, New Zealand 97169, New Zealand Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:nzar09:97169
    DOI: 10.22004/ag.econ.97169
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    References listed on IDEAS

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    1. O'Connell, Michael & Young, John & Kingwell, Ross, 2006. "The economic value of saltland pastures in a mixed farming system in Western Australia," Agricultural Systems, Elsevier, vol. 89(2-3), pages 371-389, September.
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    1. Kragt, Marit E. & Pannell, David J. & Robertson, Michael J. & Thamo, Tas, 2012. "Assessing costs of soil carbon sequestration by crop-livestock farmers in Western Australia," Agricultural Systems, Elsevier, vol. 112(C), pages 27-37.
    2. Tas Thamo & David J. Pannell & Marit E. Kragt & Michael J. Robertson & Maksym Polyakov, 2017. "Dynamics and the economics of carbon sequestration: common oversights and their implications," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(7), pages 1095-1111, October.
    3. Thamo, Tas & Addai, Donkor & Kragt, Marit E. & Kingwell, Ross S. & Pannell, David J. & Robertson, Michael J., 2019. "Climate change reduces the mitigation obtainable from sequestration in an Australian farming system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(4), October.
    4. Kragt, Marit Ellen & Pannell, David J. & Robertson, Michael J., 2011. "Easy winnings? The economics of carbon sequestration in agricultural soils," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100575, Australian Agricultural and Resource Economics Society.
    5. Tas Thamo & Ross S. Kingwell & David J. Pannell, 2013. "Measurement of greenhouse gas emissions from agriculture: economic implications for policy and agricultural producers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 234-252, April.

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