Does carbon farming provide a cost‐effective option to mitigate GHG emissions? Evidence from China

In this study, we apply a whole farm bioeconomic analysis to explore the changes in land use, farm practices and on‐farm greenhouse gas (GHG) emission under varying levels of agricultural greenhouse gas abatement incentives in the form of a carbon tax for a semi‐arid crop‐livestock farming system in China's Loess Plateau. Our results show that the optimised agricultural enterprises move towards being cropping‐dominated reducing on‐farm emission since livestock perform is the major source of emission. Farmers employ less oats‐based and rapeseed‐based rotations but more dry pea‐based rotations in the optimal enterprise mix. A substantial reduction in on‐farm greenhouse gas emission can be achieved at low cost with a small increase in carbon incentives. Our estimates indicate that crop‐livestock farmers in China's Loess Plateau may reduce their on‐farm GHG emission between 16.6 and 33 per cent with marginal abatement costs <￥100/t CO₂e and ￥150/t CO₂e in 2015 Chinese Yuan. The analysis implies that reducing greenhouse gas emission in China's semi‐arid crop‐livestock agriculture is potentially a low‐cost option.     

Developing farm-specific marginal abatement cost curves: Cost-effective greenhouse gas mitigation opportunities in sheep farming systems

Growing demand for agricultural produce, coupled with ambitious targets for greenhouse gas emissions reduction present the scientific, policy and agricultural sectors with a substantial mitigation challenge. Identification and implementation of suitable mitigation measures is driven by both the measures’ effectiveness and cost of implementation. Marginal abatement cost curves (MACCs) provide a simple graphical representation of the abatement potential and cost-effectiveness of mitigation measures to aid policy decision-making. Accounting for heterogeneity in farm conditions and subsequent abatement potentials in mitigation policy is problematic, and may be aided by the development of tailored MACCs. Robust MACC development is currently lacking for mitigation measures appropriate to sheep systems. This study constructed farm-specific MACCs for a lowland, upland and hill sheep farm in the UK. The stand-alone mitigation potential of six measures was modelled, against real farm baselines, according to assumed impacts on emissions and productivity. The MACCs revealed the potential for negative cost emissions’ abatement in the sheep industry. Improving ewe nutrition to increase lamb survival offered considerable abatement potential at a negative cost to the farmers across all farms while, lambing as yearlings offered negative cost abatement potential on lowland and upland farms. The results broadly advocate maximising lamb output from existing inputs on all farm categories, and highlight the importance of productivity and efficiency as influential drivers of emissions abatement in the sector. The abatement potentials and marginal costs of other measures (e.g. reducing mineral fertiliser use and selecting pasture plants bred to minimise dietary nitrogen losses) varied between farms, and this heterogeneity was more frequently attributable to differences in individual farm management than land classification. This has important implications for the high level policy sector as no two farms are likely to benefit from a generic one size fits all approach to mitigation. The construction of further case-study farm MACCs under varying farm conditions is required to define the biophysical and management conditions that each measure is most suited to, generating a more tailored set of sector-specific mitigation parameters.     

An economic analysis of sheep flock structures for mixed enterprise Australian farm businesses

A strategic question facing many mixed enterprise broadacre farm businesses in Australia is, ‘What sheep flock size and structure is most profitable to complement the farm’s cropping enterprises?' This study answers this question for a typical large mixed enterprise farm business in a key production region of Australia. Whole‐farm bioeconomic modelling, combined with broad‐ranging sensitivity analysis, is used to examine the profitability of different sheep flock structures and sizes. We find the most profitable flock structure is to run Merino ewes and turn off finished Merino or first‐cross lambs. The profitable selection of these flocks is robust to commodity price variation but does require the farmer to give more attention to sheep management. The correct choice of flock structure greatly adds to farm profit. A farm based on cropping and a self‐replacing Merino flock using surplus ewes for first‐cross, meat lamb production earns 33 per cent more profit than a similar farm that runs a traditional self‐replacing Merino flock that emphasises wool production. Of far less importance than flock structure, as a source of additional profit, is to increase flock size or adjust cropping intensity.     

Managing complexity in modern farming*

Modern farming in Australia is no longer simple. Farms are large, multi‐enterprise businesses underpinned by expensive capital investments, changing production technologies, volatile markets and social challenges. The complexity of modern broadacre farming leads to the question: what is the nature of the relationship between farm business complexity and farm profitability? This study uses bioeconomic farm modelling and employs eight measures of complexity to examine the profitability and complexity of a wide range of broadacre farming systems in Australia. Rank order correlations between farm profitability and each measure of complexity show inconsistent relationships, although the most profitable farming systems are found to be reasonably complex on several criteria. Among the set of highly profitable systems are found some characterised by less complexity. A commonly acknowledged feature of farm business complexity is the annual workload of the farmer, yet the trade‐off between farm profit and this workload is found not to be large. A case is outlined where the farmer’s annual hours worked could be reduced by 9 per cent for a 3 per cent reduction in farm profit. If farmers’ workloads are proving problematic now, and in the future, then agricultural R&D, service delivery and policy development will need to focus more on being highly attractive to increasingly time‐poor farm managers.     

Climate Change and the Economics of Farm Management in the Face of Land Degradation: Dryland Salinity in Western Australia

Projected changes in climate would affect not only the profitability of agriculture, but also the way it is managed, including the way issues of land conservation are managed. This study provides a detailed analysis of these effects for an extensive dryland farming system in south-west Australia. Using a whole-farm linear programming model, with discrete stochastic programming to represent climate risk, we explore the consequences of several climate scenarios. Climate change may reduce farm profitability in the study region by 50% or more compared to historical climate. Results suggest a decline in the area of crop on farms, due to greater probability of poor seasons and lower probability of very good seasons. The reduced profitability of farms would likely affect the capacity of farmers to adopt some practices that have been recommended to farmers to prevent land degradation through dryland salinization. In particular, establishment of perennial pastures (lucerne or alfalfa, Medicago sativa ), woody perennials ("oil mallees", Eucalyptus spp.), and salt-tolerant shrubs for grazing ("saltland pastures", Atriplex spp.) may become slightly more attractive in the long run (i.e., relative to other enterprises) but harder to adopt due to their high establishment costs in the context of lower disposable income.     

Climate change reduces the mitigation obtainable from sequestration in an Australian farming system

Agricultural research on climate change generally follows two themes: (i) impact and adaptation or (ii) mitigation and emissions. Despite both being simultaneously relevant to future agricultural systems, the two are usually studied separately. By contrast, this study jointly compares the potential impacts of climate change and the effects of mitigation policy on farming systems in the central region of Western Australia’s grainbelt, using the results of several biophysical models integrated into a whole‐farm bioeconomic model. In particular, we focus on the potential for interactions between climate impacts and mitigation activities. Results suggest that, in the study area, farm profitability is much more sensitive to changes in climate than to a mitigation policy involving a carbon price on agricultural emissions. Climate change reduces the profitability of agricultural production and, as a result, reduces the opportunity cost of reforesting land for carbon sequestration. Nonetheless, the financial attractiveness of reforestation does not necessarily improve because climate change also reduces tree growth and, therefore, the income from sequestration. Consequently, at least for the study area, climate change has the potential to reduce the amount of abatement obtainable from sequestration – a result potentially relevant to the debate about the desirability of sequestration as a mitigation option.     

Net Greenhouse Gas Emissions and the Economics of Annual Crop Management Systems

The aim of this study was to evaluate the relative economic profitability and net greenhouse gas (GHG) abatement potential of alternative tillage and cropping systems. A simulation model was parameterized using biophysical and economic data representing different crop rotations under conventional, minimum, and zero tillage cropping systems, in the Black soil zone of Saskatchewan. This model was used to estimate the relative potential of each of the management practices to sequester carbon and to emit GHG including, nitrous oxide and carbon dioxide. The model also provided estimates of the relative profitability of each of the management practices over time horizons of 30 years. These simulation results were used to develop trade-off functions reflecting net income and net GHG abatement for each cropping system. An income risk measure was incorporated to facilitate an analysis of the relative economic attractiveness of the simulated cropping systems. Furthermore, sensitivity analysis was performed on nitrous oxide emission coefficients (an area of significant uncertainty in the literature) and on weather patterns to reflect uncertain future climate change impacts. Results indicated that net GHG emissions were relatively lower for reduced tillage management, while conventional tillage may be relatively more attractive from an economic perspective. However, results also indicated that such economic factors as risk and economies of size may have a significant influence on this latter result.     

What Drives Marginal Abatement Costs of Greenhouse Gases on Dairy Farms? A Meta‐modelling Approach

This paper examines the relationships between the marginal abatement costs (MAC) of greenhouse gas (GHG) emissions on dairy farms and factors such as herd size, milk yield and available farm labour, on the one hand, and prices, GHG indicators and GHG reduction levels, on the other. A two‐stage Heckman procedure is used to estimate these relationships from a systematically designed set of simulations with a highly detailed mixed integer bio‐economic farm‐level model. The resulting meta‐models are then used to analyse how MAC vary across farm‐level conditions and GHG measures. We find that simpler GHG indicators lead to significantly higher MAC, and that MAC strongly increase beyond a 1–5% emission reduction, depending on farm attributes and the chosen indicator. MAC decrease rapidly with increasing farm size, but the effect levels off beyond a herd size of 40 cows. As expected, the main factors driving gross margins per dairy cow also significantly influence mitigation costs. Our results indicate high variability of MAC on real life farms. In contrast to time consuming simulations with the complex mixed integer bio‐economic programming model, the meta‐models allow the distribution of MAC in a farm population to be efficiently derived and thus could be used to upscale to regional or sector level.     

Marginal abatement costs of greenhouse gas emissions: broadacre farming in the Great Southern Region of Western Australia

Broadacre agriculture is a major emitter of greenhouse gases (GHG). To improve efficiency of climate change policies, we need to know the marginal abatement costs of agricultural GHG. This article combines calculations of on‐farm GHG emissions with an input‐based distance function approach to estimate the marginal abatement costs for a broadacre farming system in the Great Southern Region of Western Australia. The results show that, in the study region, the average marginal abatement cost for the 1998–2005 periods was $29.3 per tonne CO₂‐e. Farms with higher crop output shares were found to have higher marginal abatement costs. Overall, our results indicate that broadacre agriculture is among the lowest cost sources of GHG mitigation.     

Agriculture's Likely Role in Meeting Canada's Kyoto Commitments*

Voluntary adoption of beneficial management practices will be the primary means by which farmers cut net greenhouse gas (GHG) emissions. The offset system will not be a major driver due to (a) the relatively low prices likely to be offered by large final emitters facing an emission cap, (b) discounts applied to those prices for temporary sequestration, (c) the transaction costs and risk premiums associated with signing carbon contracts, and (d) the low elasticity of supply of CO₂ abatement. Although Canadian farmers are likely to participate to only a limited extent in the carbon‐offset market, many will find it profitable to adopt one or more of the BMPs for reducing net GHG emissions. Canadian agriculture is likely to contribute significantly to net emission reductions by voluntarily sequestering carbon due to the adoption of zero till in the last decade, and possibly by cutting fertilizer levels in the next decade. The contribution will be mainly a response to meeting personal economic objectives rather than being induced by direct incentives through the offset program.     

Measurement of greenhouse gas emissions from agriculture: economic implications for policy and agricultural producers*

If agriculture were to be included in Australia’s carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on‐farm emissions: national accounting methods, an amended version of those methods and use of best‐available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on‐farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2‐e applies then farm profit falls by 14.4–30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On‐farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low.     

The carbon footprints of food crop production

The agriculture sector contributes significantly to global carbon emissions from diverse sources such as product and machinery manufacture, transport of materials and direct and indirect soil greenhouse gas emissions. In this article, we use farm survey data from the east of Scotland combined with published estimates of emissions for individual farm operations to quantify the relative contribution of a range of farming operations and determine the carbon footprint of different crops (e.g. legumes, winter and spring cereals, oilseed rape, potato) and farming practices (conventional, integrated and organic). Over all crops and farm types, 75% of the total emissions result from nitrogen fertilizer use (both organic and inorganic)—from production, application, and direct nitrous oxide emissions from the soil resulting from application. Once nitrogen is accounted for, there are no major differences between organic, integrated or conventional farming practices. These data highlight opportunities for carbon mitigation and will be of value for inclusion in full life cycle analyses of arable production systems and in calculations of greenhouse gas balance associated with land-use change.     

Marginal Abatement Cost Curves for UK Agricultural Greenhouse Gas Emissions

This article addresses the challenge of developing a ‘bottom‐up’ marginal abatement cost curve (MACC) for greenhouse gas (GHG) emissions from UK agriculture. An MACC illustrates the costs of specific crop, soil and livestock abatement measures against a ‘business as usual’ scenario. The results indicate that in 2022 under a specific policy scenario, around 5.38 Mt CO₂ equivalent (e) could be abated at negative or zero cost. A further 17% of agricultural GHG emissions (7.85 Mt CO₂e) could be abated at a lower unit cost than the UK Government’s 2022 shadow price of carbon [£34 (tCO₂e)^?1]. The article discusses a range of methodological hurdles that complicate cost‐effectiveness appraisal of abatement in agriculture relative to other sectors.     

Smallholder farms’ adaptation to the impacts of climate change: Evidence from China’s Loess Plateau

The impacts of climate change on agriculture in developing countries will depend on the extent to which agricultural production in those regions adapts to climate change’s influences. This study uses a whole-farm land use optimisation approach to explore climate change impacts, when including adaptation, on farm profitability, production and associated greenhouse gas (GHG) emissions in the Loess Plateau of northern China. The results show that with adaptation activities, the losses in smallholder farm profitability caused by the climate change could be moderate. Declining rainfall results in land use changes that generate higher on-farm GHG emissions with the most economically beneficial adaptations. With 5 % or 10 % decline in annual rainfall, the introduction of agricultural carbon tax would generate substantial reduction in on-farm GHG emissions. With 30 % rainfall reduction, agricultural carbon tax is not likely to bring about considerable emission reduction. The economically optimised land uses are generally sensitive to potential changes. When rainfall reductions appear, there is a clear trend toward reducing cropping area and transiting to pasture. With 5–10% rainfall reductions, increasing agricultural carbon tax with same rainfall reduction leads to the expansion in cropping enterprises. However, with 30 % rainfall reduction, land allocations are not sensitive to agricultural carbon tax. When with declining annual rainfall, in the optimal enterprises more oats-pasture rotations are employed to reduce wheat dominated rotations. Besides land use patterns, adaptations through altering farm management practices are also necessary. The economically optimised sheep flock would be increased considerably with declining rainfall. Overall, policymakers are suggested to initial more educational schemes to tell smallholder farmers how to make the best use of available adaptation strategies and consider changes in climate when design and implement agricultural policy.     

Addressing Uncertainty in Efficient Mitigation of Agricultural Greenhouse Gas Emissions

The agricultural sector, as an important source of greenhouse gas (GHG) emissions, is under pressure to reduce its contribution to climate change. Decisions on financing and regulating agricultural GHG mitigation are often informed by cost‐effectiveness analysis of the potential GHG reduction in the sector. A commonly used tool for such analysis is the bottom‐up marginal abatement cost curve (MACC) which assesses mitigation options and calculates their cumulative cost‐effective mitigation potential. MACCs are largely deterministic, typically not reflecting uncertainties in underlying input variables. We analyse the uncertainty of GHG mitigation estimates in a bottom‐up MACC for agriculture, for those uncertainties capable of quantitative assessment. Our analysis identifies the sources and types of uncertainties in the cost‐effectiveness analysis and estimates the statistical uncertainty of the results by propagating uncertainty through the MACC via Monte Carlo analysis. For the case of Scottish agriculture, the uncertainty of the cost‐effective abatement potential from agricultural land, as expressed by the coefficient of variation, was between 9.6% and 107.3% across scenarios. This means that the probability of the actual abatement being less than half of the estimated abatement ranged from <1% (in the scenario with lowest uncertainty) to 32% (in the scenario with highest uncertainty). The main contributors to uncertainty are the adoption rate and abatement rate. While most mitigation options appear to be ‘win–win’ under some scenarios, many have a high probability of switching between being cost‐ineffective and cost‐effective.     

Quantifying the impact of farmers' social networks on the effectiveness of climate change mitigation policies in agriculture

To reduce agricultural greenhouse gas (GHG) emissions, farmers need to change current farming practices. However, farmers' climate change mitigation behaviour and particularly the role of social and individual characteristics remains poorly understood. Using an agent-based modelling approach, we investigate how knowledge exchange within farmers' social networks affects the adoption of mitigation measures and the effectiveness of a payment per ton of GHG emissions abated. Our simulations are based on census, survey and interview data for 49 Swiss dairy and cattle farms to simulate the effect of social networks on overall GHG reduction and marginal abatement costs. We find that considering social networks increases overall reduction of GHG emissions by 45% at a given payment of 120 Swiss Francs (CHF) per ton of reduced GHG emissions. The per ton payment would have to increase by 380 CHF (i.e., 500 CHF/tCO₂eq) to reach the same overall GHG reduction level without any social network effects. Moreover, marginal abatement costs for emissions are lower when farmers exchange relevant knowledge through social networks. The effectiveness of policy incentives aiming at agricultural climate change mitigation can hence be improved by simultaneously supporting knowledge exchange and opportunities of social learning in farming communities.     

Fiddling while carbon burns: why climate policy needs pervasive emission pricing as well as technology promotion*

Effective climate policy requires global emissions of greenhouse gases to be cut substantially, which can be achieved by energy supply technologies with lower emissions, greater energy use efficiency and substitution in demand. For policy to be efficient requires at least fairly uniform, fairly pervasive emission pricing from taxes, permit trading or combinations of the two; and significant government support for low‐emission technologies. We compare the technology‐focused climate policies adopted by Australia and the ‘Asia–Pacific Partnership on Clean Development and Climate’ (AP6), against this policy yardstick. We find that such policies omit the need for emission pricing to achieve abatement effectively and efficiently; they over‐prescribe which abatement actions should be used most; they make unrealistic assumptions about how much progress can be achieved by voluntarism and cooperation, in the absence of either adequate funding or mandatory policies; and they unjustifiably contrast technology‐focused policy and the Kyoto Protocol approach as the only two policies worth considering, and thus ignore important policy combinations.     

Agrobiodiversity,farm profits and land fragmentation: Evidence from Bulgaria

This paper presents an empirical analysis of the role of land fragmentation, crop biodiversity and their interplay with farm profitability. Original primary data are drawn from a survey conducted in the Plodiv region of Bulgaria. The econometric results stress the ambiguous role of land fragmentation on farm profitability. On one hand, land fragmentation reduces farm profitability. On the other hand, land fragmentation fosters crop diversification. We also find that crop biodiversity plays a beneficial role in farm profitability. Policies that aim to increase land consolidation and reduce fragmentation may overlook the positive link between diversity and plot heterogeneity. Policies that encourage land consolidation should, therefore, consider the crucial role that this has on other variables such as farm biodiversity.     

Trade liberalisation and greenhouse gas emissions: the case of dairying in the European Union and New Zealand*

The link between trade and the environment has aroused considerable interest both in terms of the impact of trade liberalisation on the environment, and also the impact of environmental policy on production and trade. Of key environmental concern at present is global warming and its association with greenhouse gas emissions. Agriculture is a sector of the economy that both contributes to, and will be affected by, climate change. This paper models the impact of agricultural trade liberalisation on greenhouse gas emissions from agriculture around the world, focusing particularly on the effects on New Zealand, a small economy highly dependent on agricultural trade. A partial equilibrium agricultural multicountry, multicommodity trade model is used for the analysis, extended to include physical production systems and their greenhouse gas emissions. Two simulations are performed: removal of agricultural policies in the EU and in all OECD countries. The results indicate that although producer returns in New Zealand increase, greenhouse gas emissions also increase significantly. EU producers face lower returns but also lower greenhouse gas emissions.     

Crop Price and Risk Effects on Farm Abatement Costs

Potential leaching losses of nitrogen depend in large part on the crops grown. Since crop selection is a major means of abatement for nitrates in groundwater, it follows that the compliance costs to producers for reducing excess nitrogen is influenced by crop prices. This paper demonstrates the role that crop prices play in determining the level of on-farm abatement costs and even the necessity for regulatory policies to deal with the nitrate problem. Government support programs, specifically the Gross Revenue Insurance Program (GRIP), have increased the relative support for corn, which has higher leachate potential than other crops, and thereby requires increased abatement effort. The required level of abatement is less when risk aversion is considered than under risk neutrality, since the variability in returns among rotations is related to the degree of emissions generated. Changes in the mean and variance of relative output prices can significantly alter the optimal crop mix, leachate potential and on-farm abatement efforts. Subsequently, there is an effect on abatement costs associated with alternative environmental control instruments, which in turn affects policy design through issues such as political feasibility and equity considerations.