Levelling the playing field for land-based enterprises in Ireland

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Ireland faces particular challenges in meeting the EU’s 2030 member state climate targets when these are set as part of a new Effort Sharing Decision in the next few years. The overall target agreed at the European Council meeting in October 2014 for the sectors not covered by the EU’s Emissions Trading Scheme is a reduction of 30% by 2030 compared to 2005, with individual member state targets differentiated between reductions of 0% to -40%. Ireland’s 2020 target is a reduction of 20% over 2005 levels.
Ireland’s overall 2030 target for the non-ETS sectors will be set partly on the basis of its relative GDP per capita but also taking account of the high share of agricultural emissions (around 45%) in its non-ETS total. The exact ceiling will not be known until the Commission makes a proposal for new national ceilings under a revised Effort Sharing Decision in 2016 and this is agreed through the legislative process.
Although Ireland will meet its overall commitment for the 2013-2020 compliance period because it could bank unused allowances from the early years, it will end the period with a significant excess of emissions over its allowed level. The latest figures suggest an overshoot of 10% in 2020 due to growing emissions in transport and agriculture, making achievement of the 2030 target from this high baseline even more demanding. Update 18 June 2015: The 10% figure is taken from an EU publication; in May 2015 the Irish Environmental Protection Agency released its latest projections for Irish greenhouse gases and concluded that the overshoot in 2020 could be between 6-11%).
One innovation in the 2030 targets will be the inclusion of the Land Use, Land Use Change and Forestry (LULUCF) sector in the setting of targets. In Ireland, this sector operates as a net carbon sink, and with further afforestation it has the potential to offset some agricultural emissions in the coming compliance period.
However, in an article published in the Farm section of the Irish Independent today, I argue that the absence of any price on the carbon emissions from livestock farming results in an uneven playing field that results in more agricultural emissions and less carbon sequestration than would otherwise be warranted if Ireland were to adopt a least-cost emissions abatement strategy.
The published version of the article was lightly edited and I reproduce the full version below.
Forestry needs a level playing field with livestock

“The production of milk and beef in Ireland also means the joint production of greenhouse gases such as methane and nitrous oxide, both of which are implicated in the gradual warming of our globe.
Until very recently, no attention was paid to these emissions of greenhouse gases from livestock production. But there is now agreement that emissions must be reduced in order to avoid the risks of further global warming.
Ireland has signed up to specific targets to reduce emissions, first as part of the EU’s commitments under the Kyoto Protocol, and currently under the EU’s 2020 climate and energy package. More ambitious reduction commitments are currently being negotiated for the target year 2030 as part of the EU’s new climate and energy package agreed last year.
Irish farmers are increasingly aware of the need to reduce the carbon footprint of their production. The Carbon Navigator tool plays an important role in identifying how farmers can both reduce emissions and improve productivity and profitability. Further measures to encourage farmers to reduce emissions are included in the recently-approved Rural Development Programme for Ireland.
Agricultural emissions have fallen since 1990 because national farm output has not increased. The same level of output has been produced with fewer cows and less use of fertiliser, and thus with less emissions. With the removal of milk quotas this year, agricultural output is projected to increase, thus making compliance with future, stricter emissions targets more difficult.
Agricultural emissions are a cost associated with meat and milk production and should be priced accordingly. Ireland is a carbon-efficient producer of milk and beef, but these commodities are inherently carbon-intensive compared to plant-based foods.
The long-term goal should be to move to a situation where the carbon cost of producing foods is reflected in the price that consumers pay. This would allow the comparative advantage of Irish beef and dairy production to be reflected in the final consumer price.
Ireland has, and will have, an overall emissions ceiling for the sectors not covered by the EU’s Emissions Trading Scheme (ETS). These include agriculture, transport, housing and waste. Agricultural emissions make up around 45% of the total for these non-ETS sectors.
On the other hand, the Land Use, Land Use Change and Forestry (LULUCF) sector on balance is a net carbon sink because it sequesters carbon particularly due to afforestation. Under current EU rules this carbon sink is not allowed as an offset to agricultural emissions, but this will change under new rules to be introduced from 2020.
Our current target is to reduce non-ETS emissions by 20% in 2020 compared to 2005. This might be increased to a reduction of 30% or even more by 2030 in the negotiations now taking place. Given that agriculture contributes nearly half of these emissions, it will need to make its contribution if we are to achieve the eventual target in a cost-effective way.
The agricultural industry argues that Irish production should not be limited by targets because of the challenges in meeting global food demand, because there are relatively few cheap abatement opportunities in livestock production, and because limits on Irish output would simply mean the displacement of, say, beef production to third countries with lower carbon efficiency. This carbon leakage would have the paradoxical effect of actually increasing global greenhouse gas emissions, contrary to the policy’s objective.
These arguments are relevant, and should be made, in the context of setting Ireland’s 2030 non-ETS emissions target. However, once this ceiling is set, the relevant question becomes how to stay within that ceiling in the way that minimises the overall cost to the Irish economy. If we fail to meet the target, the Irish taxpayer must purchase sufficient allowances from other EU countries to cover the excess emissions. The cost of these allowances represents the cost of emitting greenhouse gases.
Government strategy is to reduce the potential over-run due to an expanding agriculture by encouraging afforestation whose offset credits will be counted in the next compliance period (agro-forestry, hedges and other woodlands can also play this role). Very generous afforestation grants and premia are available for planting, which more than compensate farm foresters for the carbon sequestered by the growing trees.
However, planting rates remain below target, in part because farm forestry must compete on an unlevel playing field with drystock farming where the cost of emissions is not recognised and is not priced. This is despite the fact that much Irish beef farming is carried on at an economic loss, and is only maintained because of the EU direct payment.
Pricing the full cost of milk and meat production would give an additional incentive to farmers to consider afforestation. This would help to boost their income at the same time as it would contribute to meeting greenhouse gas emission targets. Making the requirement to lock up land in forestry for all time less rigid would also help.
No country in the world has yet moved to imposing a charge on biological greenhouse gas emissions, although New Zealand has considered it. There would be implications for competitiveness if Ireland were to go it alone. It would be prudent to begin with a lower charge than might be economically justified.
Not only does it make economic sense as a least-cost way to meet our national emission targets; the pay-off in underpinning the credibility of the Origin Ireland brand for sustainable production would be enormous.”
I made this argument at greater length in a recent address to the Institute of International and European Affairs in Dublin. A webcast of this address (36 minutes) and the presentation slides can be viewed on the Institute’s website.
This post was written by Alan Matthews

Picture credit: George Boyle, ‘Cattle grazing near some trees in a meadow’, Oil on canvas, Wikigallery.

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