Prepare to feel pinch on carbon

A typical livestock-dominant farm in WA's central Wheatbelt could expect a profit squeeze of 6 to 8 per cent on the back of higher costs associated with carbon emissions pricing under the Federal Government's carbon tax package.

Legislation paving the way for a Carbon Pricing Mechanism that will impose a $23/tonne fixed price on carbon emissions from Australia's 500 biggest polluters from July 1, 2012, was ratified by the House of Representatives last month and is expected to pass through the Senate on November 21.

Farm emissions are not part of this clean energy bill, but some of the costs of emissions control will be passed back to farmers. This is most likely to come from higher farm input and processing expenses.

Department of Agriculture and Food WA chief economist and University of WA School of Agricultural and Resource Economics professor Ross Kingwell has estimated some WA farms could be 6 to 8 per cent worse off under the carbon tax package.

Speaking at a field day at UWA's Ridgefield 'future farm' near Pingelly, he said big carbon emitters would either reduce emissions, purchase credits/offsets or pass on the increased costs of emissions payments to primary producers, who were unlikely to be able to pass these on to their customers.

Professor Kingwell said farmers would not pay for emissions from their farms, even though agriculture was responsible for about 16 per cent of national carbon emissions.

"Agriculture produces most of the country's methane and nitrous oxide emissions - 58 and 76 per cent respectively - and about two-thirds of this comes from livestock industries," he said.

"Australia's emissions are increasing and projected to reach 124 per cent of 2000 levels by 2020."

Professor Kingwell said the Federal Liberal Party had promised to scrap the Carbon Pricing Mechanism if it won government in 2013, but the Greens supported the package. This meant the Opposition might have to wait until the next half Senate meeting in mid-2016 to gain enough support to repeal the carbon laws. He said the Carbon Farming Initiative was another key Government climate change policy that would impact on WA farmers in the short-medium term and this was supported by the Opposition.

"It will allow farmers - at some stage - to potentially generate income using their properties to sequester carbon in the soil or by planting trees," he said.

"In the short term, it doesn't offer much to WA farmers because the price needed for carbon sequestration enterprises is not high enough to compete with other agricultural pursuits.

"For example, tree plantations can only be part of a profitable farm plan at Ridgefield when the carbon price is greater than $60/tonne."

Professor Kingwell said carbon sequestration in the soil was potentially problematic in WA because many soils might not be able to reliably store a lot of carbon over a 15-year period or longer if there was a run of dry seasons or drought.

He said research was continuing in this area, but in the short term it was unlikely to be widely embraced by farmers.

Professor Kingwell said research was also being held at Ridgefield to find ways to reduce methane emissions from livestock.

He said about three-quarters of the farm's total emissions came from sheep and alternative grazing and animal management and genetic strategies were being investigated to reduce these.

"Until we know more, there are no immediate management options for farmers wanting to cut their sheep methane emissions," he said.

Professor Kingwell said if the Federal Government decided the agricultural industry needed to reduce its carbon emissions, the sector would have to find ways to do this. But currently there were no strong commercial incentives to do so.

He said in the meantime, agricultural researchers across the nation were continuing to study efficient and effective methods to reduce farm emissions so the agricultural sector was contributing to overall national reductions in carbon emissions.

"At Ridgefield farm in WA, we are working to find ways to farm in a clean and green manner and demonstrate that farmers can cost effectively reduce emissions from farming," he said.