Mon 15, Feb 2021
Late last year, ABARES releases its Insights Issue Paper No. 10 (https://www.agriculture.gov.au/abares/products/insights). It highlighted the opportunities that Australian agriculture has as a global contributor to food and fibre production in a world where net-zero greenhouse gas emissions will become the norm, which is the purpose of the Paris Agreement. This column draws upon the insights from that report.
The challenge of reducing greenhouse gas emissions is a global one. As countries plan to meet this challenge, the emissions intensity of products will increasingly become part of global trading rules. This creates opportunities for Australia’s agricultural exports. The Paris Agreement provides a framework for all countries to lowering greenhouse gas emissions. It aims to limit the increase in the average global temperature to well below 2°C, and ideally to 1.5°C, to avoid more significant climate change risks from rising greenhouse gas emissions.
What should be of interest to professionals in Australian agriculture is the growing number of countries that are setting net-zero targets (as part of their commitment to the Paris Agreement). Some jurisdictions have already legislated or proposed legislation for these commitments, including the EU, the UK and New Zealand. Importantly, three of Australia’s largest trading partners, China, Japan and Korea, have recently announced carbon-neutral goals. And for several countries, the transition to lower emissions is forming part of their plans for economic recovery after COVID-19. Net-zero goals are also being set by sub-national governments, including all Australian states and territories, as well as by individual companies.
As economies transition, new rules and preferences will emerge. As economies transition towards lower emissions, opportunities may emerge for sectors that can demonstrate more emissions-efficient production systems or even carbon neutrality. Conversely, slower-moving sectors may become exposed and less competitive under changing regulatory and market structures. This becomes important when talking about export-dependent countries such as Australia.
For example, the EU has already stated it expects free trade agreement partners to respect and implement Paris Agreement targets. The EU and UK are also considering the use of carbon border adjustments to ensure that actions taken in their economies are not offset by the effect of imported products. If and when countries implement such measures, their domestic emission standards would effectively be imposed on exporting countries, like Australia. For agriculture, emissions intensity would become another factor influencing the sector’s export competitiveness. Emissions intensity may also influence competitiveness at the more micro level; with some consumers and food companies.
This opportunity has not been lost on the innovators and leaders, and as expected, parts of Australian agriculture are already responding. The Australian red meat industry for example has a goal to be carbon neutral by 2030. The industry is establishing pathways to the target, including the use of existing and prospective livestock and land management practices. It is also reporting regularly on emissions as part of an overall sustainability framework. GrainGrowers supports a net-zero goal for agriculture by 2050 and is aiming to release a grain-specific target for 2030. Other sectors are also acting, and the sector’s national body, the National Farmers’ Federation, has endorsed a goal for the Australian economy to reach net-zero emissions by 2050 of which the Ag Institute has been supportive of. Individual businesses are also responding. For example, the Northern Australian Pastoral Company (NAPCo) has obtained a carbon neutral product certification under the Australian Government’s ‘Climate Active’ scheme.
Analysis reported in the ABARES publication suggests a potential natural advantage for Australian producers, with wheat and grass-fed beef farms below the global median in terms of emissions intensity. FAO data on emissions also suggests that Australian beef producers are more efficient (in emissions per unit of production) than many of the world’s large exporting nations with whom we compete in world markets. However, Australia’s emissions intensity is higher than domestic industry levels in many of the world’s major beef importing nations. These countries may seek to leverage their lower emissions intensity via trade rules. The EU’s stated intention to impose a carbon border tax to ensure that EU companies can compete on a level playing field is relevant in this context. For cereals, Australia is above the weighted average for exporting nations, and below the weighted average for importing nations.
The message for Australian producers is that improvements in emissions intensity could increase the sector’s competitiveness in some markets. The challenge for industry and governments is to ensure that Australian producers have access to technologies and practices that enable them to continually improve their emissions performance at the lowest cost possible to remain competitive.
It is not practical to think that all emissions will be eliminated from agriculture given the natural system within which the sector operates. Emission reduction policies should aim to incentivise the most economically efficient options available across the economy, and many of these would not be in agriculture in the first instance. However there are a range of existing options available to Australian farmers which would improve emissions intensity and productivity. They include reducing or changing farm input use, capturing emissions (most relevant to intensive production) or changing stock management to increase growth rates. Looking to the future, there is a need for cost-effective options which more significantly decouple emissions from production, particularly for livestock. Earlier research has identified possible areas for further work, including feed supplements, genetics, vaccination and early life programming of livestock. Some of these are more prospective than others, but those with the highest mitigation and productivity potential also generally require the highest investment.
As the report points out, a proactive approach to market rules and certification will benefit the sector. The challenge of reducing emissions in agriculture, as mentioned previously, is a global one. For exporters like Australia, the influence of policies in trading partners and our market exposure may prove significant. There are likely to be opportunities for those primary producers that can demonstrate more emissions-efficient production. From the report, Australian producers appear relatively well placed to compete on this basis. The challenge is to ensure that trade arrangements and certification systems are evidence-based and suit Australian production systems. There are options for Australian producers to differentiate their product in markets based on emissions intensity of production. Examples include the Australian Government’s Climate Active (formerly National Carbon Offset Standard). The report goes on to state that given agriculture’s export reliance, a more systematic approach to market access and global trading rules would be in agriculture’s interest, particularly for the meat and livestock sectors.
Improving emissions intensity will be an important part of the competitiveness strategy of Australian agriculture. In the longer term, cost effective new options, technologies and innovations will be needed which allow emissions and food and fibre production to be decoupled in a more substantial way. This provides both a challenge and opportunity for agricultural scientists to help ensure emissions intensity of production is and remains part of the RD&E agenda.