The Stern Review on the economics of climate change highlighted the fact that
while there is a range of activities that could be undertaken to reduce
agricultural emissions, it is not necessarily the case that they will be adopted
simply by virtue of the fact that they appear to make sense. Farmers are
unlikely to adopt practices that will benefit society as a whole if they alone
have to bear the cost. Even low cost mitigation options will not be adopted if
the farmer must pay to undertake work from which wider society gains most of the
benefit. Government must intervene to overcome this 'market failure' and to
encourage adoption of mitigation options and introduce wider measures to help
There are three broad areas of policy intervention (above the level of
country specific policies): carbon pricing, technology policy and barrier
removal. Carbon pricing is designed to set an overall framework for emissions to
be counted in policy choices. Technology policy and barrier removal are more
directly related to influencing private decision-making in the long-term.
A key issue
relating to GHG emissions in agriculture (but which applies equally to all
sectors) is the fact that all the costs of agricultural activities are not
reflected in the prices for agricultural products. The private costs that a
farmer incurs should be covered by the price they receive for their products,
but the broader costs borne by society (such as the costs resulting from a
changing climate) are not. One way of recognising the wider cost is to create a
price and a market for carbon in the agricultural and land use sectors (similar
to the European Emissions Trading Scheme, which introduces a scheme of priced
tradable emissions entitlements). The potential of such trading schemes in
agriculture is limited, however, because of the large number of small emitters:
the costs of administration limit the cost-effectiveness of undertaking the
Carbon pricing is not, however, restricted to creating a market for
agricultural emissions because the costs associated with GHG emissions can be
built into policy development. The shadow price of carbon (SPC) is an estimate
of the damage cost of one extra unit of carbon equivalent gas. This cost
(approximately £25/tonne/CO2e) is set to become more prevalent in regulatory
decisions that affect agriculture as impact assessments of new polices will use
the figure to help identify good and bad policies in economic terms (Defra
2007). The SPC can also shape policy on new technology and barrier removal by
influencing the development of new agri-environment measures and technologies
that deliver low emissions.
innovation in agriculture tends to be market-led and is directed towards
maximising output, quality and profit. There are potentially, however,
technological innovations that could contribute to the public good and benefit
society at large (such as mitigating GHG emissions). However, since the
potential for making profit from innovations that deliver public goods is
limited, research and development in this area is restricted. Government
intervention is therefore required to direct research and development to those
areas that will help the wider public good. In particular, research is needed on
feedstocks and the types of feedstocks that could reduce emissions; on livestock
and plant genetics to explore the potential of breeding livestock that emit
fewer emissions; and on fertiliser applications and anaerobic digestion.
Government intervention in research in this way could then lead to the
development of lower GHG systems.
Removing other barriers
adoption of mitigation activities could be hindered by the fact that there are
many more immediate concerns in a farm business than tackling climate change.
Current support for agriculture provided through the Common Agricultural Policy,
for example, has a major influence on the day-to-day running of a farm. The
priorities of the CAP therefore have a great influence on farmers and
potentially represent a barrier to undertaking wider climate change mitigation
activity, although current proposals in the 'Health Check' emphasise the
importance of addressing climate change. Reforming the CAP would be one way of
removing barriers to dealing with GHG emissions.
Information is also crucial. A lack of information on best practice in
fertiliser application, slurry storage or the opportunities that they could take
advantage of, represents a barrier to the adoption of mitigation activities.
Governments can intervene to ensure that the appropriate information is
available through the government's own area staff, the network of advisors and
the non-governmental organisations.