Measurement of greenhouse gas emissions from agriculture: Economic implications for policy and agricultural producers

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Abstract

If agriculture were to be included in Australia's carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on-farm emissions: national accounting methods, an amended version of those methods and use of best-available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on-farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2-e applies then farm profit falls by 14.4-30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On-farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low. © 2013 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.
Original languageEnglish
Pages (from-to)234-252
JournalAustralian Journal of Agricultural and Resource Economics
Volume57
Issue number2
Early online date29 Jan 2013
DOIs
Publication statusPublished - Apr 2013

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economic policy
greenhouse gas emissions
Agriculture
Gases
Economics
agriculture
farms
carbon markets
methodology
profits and margins
Carbon
Western Australia
agricultural economics
Farm
Greenhouse gas emissions
Farms
carbon dioxide
case studies

Cite this

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title = "Measurement of greenhouse gas emissions from agriculture: Economic implications for policy and agricultural producers",
abstract = "If agriculture were to be included in Australia's carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on-farm emissions: national accounting methods, an amended version of those methods and use of best-available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on-farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2-e applies then farm profit falls by 14.4-30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On-farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low. {\circledC} 2013 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.",
author = "Tas Thamo and Kingwell, {Ross S.} and Pannell, {David J.}",
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AU - Thamo, Tas

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AU - Pannell, David J.

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N2 - If agriculture were to be included in Australia's carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on-farm emissions: national accounting methods, an amended version of those methods and use of best-available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on-farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2-e applies then farm profit falls by 14.4-30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On-farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low. © 2013 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.

AB - If agriculture were to be included in Australia's carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on-farm emissions: national accounting methods, an amended version of those methods and use of best-available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on-farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2-e applies then farm profit falls by 14.4-30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On-farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low. © 2013 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.

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