Although agriculture is only about 2 per cent of our GDP, two thirds of its products are exported. In fact agriculture is responsible for 16 per cent of our merchandise exports, reported in great detail by the Australian Bureau of Statistics and totalling $27 billion in 2006-07. The Department of Climate Change has modelled Australia’s greenhouse gas emissions from agriculture and estimated that it is 15 per cent of our total emissions. The certainty of our export statistics is in stark contrast to the unverifiable estimate of the agricultural emissions.
Our agricultural exports are enjoyed by others elsewhere on the planet, yet the government is proposing to draw into an emissions trading scheme a major export activity where any extra cost imposition has little to offer in changing behaviour and much to fear from unintended consequences. The proposal of a carbon tax on agriculture must rank as one of the more stupid aspects of the rush to set up emission trading in carbon dioxide.
Let us begin with the science.
What is rarely mentioned is that the carbon being counted is not “old carbon” from fossil fuels being added to the atmosphere, it is “contemporary carbon” recycled in the atmosphere. It comes from the atmosphere to plants by way of photosynthesis to animals as feed and so through enteric fermentation and metabolism the carbon goes back in part to the atmosphere. The output is to be assessed but no credit is given to the input!
In an interesting paper from the Australia Institute, Agriculture and Emissions Trading: The impossible dream?, Hugh Saddler and Helen King, quote uncertainties in emission estimates for agriculture derived from the National Inventory Report 2006. Livestock are responsible, through enteric fermentation, for about 10 per cent of the estimated total greenhouse gas emissions from all our activities in Australia. This is an unverifiable estimate. It starts with the emissions from the “British Standard Cow” adapted for Australian conditions. Then livestock numbers, age, geographical regions and feed are all mixed together to give the estimate with an accuracy of 5 per cent of emissions. This is as accurate as that for emissions from electricity generation!
So from the science we have no credit for the carbon input but the output is counted against us. We have an estimate of 10 per cent of emissions that must be open to serious doubt as it is modelled and not measured in any comprehensive way. We have the balance of 5 per cent that is related to soil and fertilisers where the uncertainties are of the order of 50 per cent. This is not a good calculation for a general inventory of greenhouse gases. Indeed it is not a good basis from which to develop a tax on individual farms.
Now let us turn to the economy and policy development.
Food is the essential energy supply for us individual humans in the same way that distributed energy is essential for our modern industrialised societies. For policy development there must be great difficulties in modelling the effects of a tax on carbon in food since the tax will have universal reach and unknowable consequences. There are no alternatives to the energy we get from food so how will the community react.
We already have examples of unintended consequences from the financial crisis.
We have a simpler example with the AlcoPops tax where the young drinkers shifted to buying full strength bottled spirits rather than the premixed drinks. This halved the estimated tax revenue increase, increased the sale of spirits and may have thus lost the advantage of a predetermined spirit mix to a highly variable mix from the spirit bottle.
Of course the collapse of petrol prices and the demise of FuelWatch demonstrate that events frequently have powerful effects quite beyond the reach of government. Where is our King Canute to show us that in many areas of policy governments have limited influence?
We are the world’s largest exporter of wool and the second largest exporter of meat, wheat and sugar. We do this into world markets where others receive massive government subsidies. Any increase in the local costs of production will only weaken our trading position. The cost increase also makes food imports more competitive. So it would be better to have a consumption tax, a global emissions tax on goods, a GET, that would pick up onshore and offshore emissions. Then we would pay our GET when we eat meat and could we have GET credits when we eat our greens.
The proposal that emissions trading be extended to include agriculture has not been thought through. It is effectively a tax on a poorly measured by-product of agricultural production, one of our most important economic activities. It is not obvious what incentives it creates for attempting to modify processes where control may be well beyond our reach. Perhaps the government should resort to the old favourite of more money for research. After all they are funding the development of clean coal technologies. What about clean cow technologies? The CSIRO knows all about this! Perhaps we should just settle for the geosequestration of the herd.
So is the government really trying to change our eating habits or is this gestural politics? We already have an example in energy use. If incandescent light bulbs are now forbidden why not make us eat fish once a week.
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Tom Quirk is a director of Sementis Limited a privately
owned biotechnology company. He has been Chairman of the Victorian Rail Track
Corporation, Deputy Chairman of Victorian Energy Networks and Peptech Limited
as well as a director of Biota Holdings Limited He worked in CRA Ltd setting up
new businesses and also for James D. Wolfensohn in a New York based venture
capital fund. He spent 15 years as an experimental research physicist,
university lecturer and Oxford don.