Finding climate policy for the agricultural sector

Photo: Josie / Fotolia

A trading system for agricultural greenhouse gas emissions results in less leakage than emission caps or a tax on livestock, according to a new report by the EU’s Joint Research Centre (JRC). But the practical difficulties of trading with emissions from diffuse sources such as livestock and arable land are not even mentioned.

Sector-specific policy is an important instrument to achieve overall climate targets and there is a great need for studies that examine different possible ways to cut greenhouse gas (GHG) emissions from the agricultural sector. The report “Agricultural GHG emissions in the EU: an exploratory economic assessment of mitigation policy options”, examines four main theoretical approaches to new policy for 20 per cent emission cuts by 2020. 

Four different approaches are investigated:

• Two of the approaches are based on the adoption of emission caps. In one case reductions are equally shared by all countries
• and in another case emission reductions are shared according to the principles of the EU’s Effort Sharing Decision (ESD).
• The third approach is to introduce a trading system for agricultural greenhouse gas emissions in the EU,
• and the fourth approach is the introduction of a tax on livestock.

In the baseline scenario, which includes existing and already approved legislation, agricultural GHG emissions come down by 3 per cent by 2020. The primary reason for this reduction is that the ongoing transition from coupled payments for beef production to decoupled payments leads to a lower number of cattle and thus lower emissions of methane.

Further reductions in the number of livestock are to be expected under all four approaches. The number of beef cattle is estimated to decrease by almost 30 per cent with the introduction of emissions caps or a trading system and by almost 40 per cent with the introduction of a livestock tax. Beef production, however, would only decrease by 10–12 per cent in the first three cases and by 16 per cent in the latter. With emissions caps or a trading system cereal production would drop by about 10 per cent.

One of the more profitable measures, it turns out is to let histosols (soils with a high organic content) lay fallow. Such soils are found primarily in northern countries, like Finland, Sweden, Ireland and the UK. Relatively big GHG reductions are also achieved by reductions in the application of mineral fertiliser as well as by manure management and application.

Part of the loss of production will be replaced by imports from outside the EU, thus leading to increased emissions elsewhere, a phenomenon known as leakage. An increase in the imports of beef, in particular from Brazil and Argentina, where the emissions of methane per kilogram of product are greater than in Europe, is estimated to result in 25.6 per cent of the intended emission reductions from a livestock tax simply being exported. The two cap approaches would induce a leakage of about 17 per cent while the introduction of a trading system involves the least leakage, 14.6 per cent.

Many of the problems of leakage could however be avoided by instead setting a climate tax on the consumption of agricultural products – an approach that unfortunately is not discussed in the report.

The modelling tool “Common Agri-cultural Policy Regional Impact” (CAPRI), which was used in the study, handles above all changes in production, consumption and varying degrees of management of the existing production systems, but it cannot take into account the introduction of new technologies or alternative ways of management, even though these would be likely responses to all approaches except the livestock tax.

To still get an idea of what new technologies and ways of management could mean, three additional scenarios for specific technology shifts were assessed.

• One with the introduction of a series of ammonia-limiting measures, such as covered manure storage, stable adaptation, etc.
• Another where farms implement more balanced and effective fertiliser management.
• And a third scenario where feed with a lower nitrogen content is introduced.

Of these three additional scenarios, more balanced fertiliser use has the highest potential and can lead to additional GHG emission reductions of 4.3 per cent. Next comes lowering the nitrogen content in the feed, with reductions of 1.6 per cent compared to the reference scenario. The specific ammonia measures were estimated to actually lead to an increase in emission of nitrous oxide, so-called pollution swapping, and therefore to a small increase in greenhouse gas emissions.

The researchers have also combined the two technical scenarios that lead to climate mitigation with the emission trading scenario. When trading is combined with technical measures – which would be a likely reaction to such a measure – leakage is almost halved, to 8.3 per cent of the intended emission reduction. This shows that the initial estimates of the leakage must be seen as a worst case, also for the two cap scenarios, even though it is not possible to fully predict to what extent these approaches will induce the implementation of new technologies and management.

After reading the report, it may appear as if a trading system would be the best option for the EU to reduce agricultural greenhouse gas emissions. But the authors never go as far as discussing how such a trading system could be implemented in practice.

Any trading system requires that emissions can be easily quantified. At the farm level this is however extremely difficult and costly, as methane emissions differ between individual animals and different soils emit varying amounts of nitrous oxide. The model has been built on trading between so-called NUTS2 regions. Although it might be a bit easier to estimate emissions at a regional level, it is still easy to imagine the bureaucracy that would be required to make a trading system actually work.

Unlike sectors such as transport and energy, there is right now no EU policy with the expressed purpose of reducing GHG emissions from the agricultural sector. Agricultural GHG emissions, which represent about 9 per cent of the EU total, are included under the ESD, which aims to reduce these emissions by 20 per cent to 2020. But the ESD contains  no specific sector requirements. So despite the obvious shortcomings in terms of not looking into the practical implementation, the study can be seen as a first important step towards developing actual policy to reduce agricultural greenhouse gas emissions.

Kajsa Lindqvist

Agricultural GHG emissions in the EU: an exploratory economic assessment of mitigation policy options. 2012. JRC. Authors: Ignacio Pérez Domínguez, Thomas Fellmann, Heinz-Peter Witzke, Torbjörn Jansson and Diti Oudendag with the collaboration of Alexander Gocht and David Verhoog

Table: GHG emissions (million tonnes CO₂eq) and emission reductions (%) (2020 compared to the base year (2004).