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2009: Reducing Greenhouse Gas Emissions in Agriculture

The broad policy options

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 reduce emissions.

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.

Carbon pricing

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 scheme.

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. 

Technology policy

Technological 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

The 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.

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