A paper delivered to the Lavoisier Group Conference, May 2000

Greenhouse and Agriculture

Donald McGauchie

Good morning and thank you for asking me to join you.

Today's subject is challenging in both scope and scale ... as a nation, we are currently in the midst of a complex set of negotiations in a field that is subject to significant uncertainty.

Yet greenhouse has become a major political issue---one that is inescapable for the agricultural sector.

This is because agriculture has been targeted as a significant contributor to greenhouse. In fact, we are told that agriculture is the largest source of Australia's methane and nitrous oxide emissions.

Estimates prepared for the 1997 National Greenhouse Gas Inventory, argued that agricultural and forestry activities contributed 22 per cent, or 94 million tonnes, of Australia's total net greenhouse gas emissions of 431 million tonnes of carbon dioxide equivalents (not including land clearing).

The bulk of this comes from livestock emissions, totalling 67 million tonnes or 15 per cent of total national net emissions.

While the reduction of ruminant emissions is the subject of serious study into developing and commercialising a vaccine---the practicalities, costs and effectiveness of this are yet to be proven.

Emissions from agriculture are said to have been 1.4 per cent higher in 1997 than in 1996, and 2.3 per cent higher than in 1990.

Emissions from livestock peaked in 1991 and have been declining since, primarily due to the large reduction in sheep numbers associated with drought and the wool price crash.

Emissions from agricultural soils and burning savannas, together accounted for 27.5 million tonnes or seven per cent of the national total in 1997. There was an 11 per cent increase from 1990 to 1997 from agricultural soils and burn offs.

In comparison, the energy sector including transport, is said to account for 79 per cent or 339 million tonnes in 1997, an increase of 15 per cent between 1990 to 1997.

All these statistics are included in the National Greenhouse Gas Inventory, which provides an indication of Australia's contribution to global greenhouse gas emissions and the relative contribution of key industry sectors.

But how does this compare to the worth of our agricultural sector.

These are the facts:

• Australia's primary production of agriculture, including forestry and fish products, has continued to grow in both volume and value of production generally, and exports in particular.
• Over the seven years from 1990/91 to 1997/98 the value of primary production according to the Australian Bureau of Statistics---rose from A$24.1 billion to A$31.8 billion. An average growth of about A$1. 1 billion per year over the seven years, and a seven year growth of 32 per cent.
• The past 20 years have been characterised by spurts of export growth and then periods of stability---the value of exports of primary products was stable at about A$8 billion from 1979/80 to 1983/84, then grew for three years to reach about A$14 billion; remained static 'til about 1990/91 and has grown each year since then to $25.1 billion (nearly 25 per cent of our export income), making the 1990s one of the fastest real growth periods for primary production exports in the last 35 years.

I should point out that this growth occurred despite drought, major problems in the wool industry, a downturn in beef prices and the Asian economic crisis. We have been able to achieve this result because of productivity increases.

With this in mind, you can see why the rural sector is very concerned about just this short list of agricultural practices causing greenhouse emissions---they include nearly everything we do as farmers to make a living.

As you will be aware, the Greenhouse Gas Inventory is compiled under the Framework Convention on Climate Change, and covers emissions and sinks of greenhouse gases arising from human-induced activities---for all sectors, and nearly all greenhouse gases.

But the reports do not actually represent our performance against the Kyoto Protocol ... those guidelines, including the 1990 baseline, are still being negotiated.

Worse---the outcomes of those complex negotiations will be influenced by groups within the community whose arguments are often not governed by rational debate, and who could become the unwitting pawns of global interests totally disinterested in how it all affects Australian business and the Australian community generally. These are groups of people who do not have to bear any of the costs involved.

We will have to wait until this November, when the unresolved issues associated with the Kyoto Protocol will be discussed at the international COP6 (Conference of the Parties) meeting, to find out how successful our campaign to address this challenge has been.

A high degree of uncertainty continues for Australia and agriculture about the outcome of the Kyoto Protocol:

• global (Australia produces only 1.4 per cent of total emissions);
• political (if the US does not sign the Protocol then it's unlikely that it will be ratified and so targets will not be enforced);
• scientific (considerable uncertainty is still attached to measurements in the agriculture and land use sector); and
• carbon trading (how---if at all will it be done, and will it offer returns for small players. Will they end up bearing the costs and not reaping the appropriate benefits).

For a sector like agriculture, made up of many small players (approximately 120,000), it's difficult to go forward when we are confronted by so much that is ill-defined.

For example, the uncertainty associated with emissions from the agriculture sector is thought to be between 20 and 80 per cent. And that's admitted to by the Government's own agency.

We are still having some difficulty working out precisely what is and what is not included in the term 'land use change and forestry'.

With this and other unresolved issues, and given that the people who make up the sector are already dubious about them---it's unlikely that farmers will be quick to embrace any response strategies to greenhouse that do not have some other hip pocket benefit.

However, although there is considerable uncertainty and the return to agriculture from any commitment of resources in response to greenhouse is questionable, it must be recognised that our Federal Government is investing significant resources in Australia's response to the Kyoto Protocol.

At a workshop on greenhouse and agriculture held earlier this year, Agriculture Minister Warren Truss said: "It is now internationally accepted---including by Australia---that global warming is taking place as a result of greenhouse gases entering the atmosphere."

Overall, the Federal Government has committed almost $1 billion to a wide range of initiatives designed to address Australia's greenhouse gas emissions.

That has not prevented senior Federal Cabinet Ministers reportedly disagreeing about whether to pull the greenhouse trigger that would require major industry proposals to gain government approval under the Environment Protection and Biodiversity Conservation Act for any project that emits 500,000 tonnes or more of carbon dioxide equivalent emissions.

On the one hand, Environment Minister Robert Hill says the trigger is in response to our commitments under Kyoto.

On the other, National Party leader John Anderson, says pulling the trigger will add another layer of complexity; delaying economic development proposals; therefore causing business to think twice about investing in Australia.

I imagine that if the measurement and accounting principles could be resolved, some larger agricultural enterprises could also be caught under that provision.

So what can the individual farmer do to respond to this ... well. there is now a strong push in the agricultural sector toward more sustainable production and repairing the resource base, which in effect will restore carbon back into the landscape.

No-regrets measures, particularly incentives to protect vegetation, which enhance greenhouse sinks and have biodiversity spin offs, will encourage sustainable agriculture practices such as:

• minimum tillage used increasingly by Australian farmers reduces soil disturbance and retains organic matter in soil ... it will also lead to a steady reduction in emissions;
• farm forestry, which not only acts as a carbon sink, but has multiple benefits, such as land degradation amelioration, diversification of farm income and biodiversity benefits; and
• conservation of remnant vegetation---fencing off remnants and allowing managed regrowth to act as carbon sinks and, again, produce biodiversity benefits.

Further measures might come from the CSIRO, which is not only working on a vaccine to inhibit the production of methane from livestock, but is also undertaking a feasibility study into a system combining solar and fossil fuels energy to slash greenhouse emissions.

The opportunity for 'carbon farming' and the sinks' capacity that rural areas could offer is agriculture's primary opportunity from the greenhouse response.

If there is to be considerable investment in reducing the emission of carbon into the atmosphere, Australia as a country has a strategic opportunity to drive that investment into the restoration of rural areas.

This could help secure a sustainable future for our natural resource base, and help protect our international position on climate change and hence the economy.

This will probably include a system of emissions trading, if one can be developed and implemented.

Under the Kyoto Protocol, farmers may be able to enter into contracts with carbon producing companies to plant trees---a system of carbon credits that may well capture benefits for companies and farmers.

There's considerable interest in this, as there's a view that it offers one of the least-cost alternatives for Australia in its response to Greenhouse. The jury remains out however, as to how a sector such as agriculture---with its large number of small, dispersed and diverse enterprises---could participate profitably in such a regime.

Further, the prospect that farm forestry could represent real returns for farmers through carbon trading remains in doubt.

There's considerable uncertainty about accounting processes, transaction costs, and other impediments, that would need to be resolved if individual farming enterprises were to be included.

These include high up-front costs. There's a high initial capital cost in fencing and planting of trees for farm forestry, as well as a long lead-time---in some cases at least 20 years---before any direct financial return is obtained.

Farmers planning farm forestry schemes also face anomalies in taxation arrangements and a lack of certainty about future environmental controls.

These impediments must be addressed at State and Federal Government level for farmers to actively engage in the battle against emissions.

Some positive actions that Governments can take are to improve the linkages and complementarity with other existing environmental programs, particularly Landcare, with greenhouse initiatives.

This would appear to be a suitable task for the Commonwealth Greenhouse Office, which will be responsible for the delivery of greenhouse programs and provide a central point of contact for industry and other stakeholder groups.

On a pragmatic note, it should be understood that significant tree sinks will require thousands of hectares to be planted under trees, in areas where there is sufficient rainfall and the climate is suitable.

Large-scale plantation forestry is also likely to have a significant impact on rural communities and their economies. In New Zealand, some rural communities have experienced a shift from agricultural production of sheep and cattle to forestry, and we could expect to see a similar shift here.

There also continues to be the unresolved issue of the immediate accounting of the emission of carbon as soon as a forest is felled. If this remains the case, the ability of small-scale farm forestry enterprises to earn a return on carbon sinks, if they also pay the carbon penalty when the crop is harvested looks highly improbable.

With scientific evidence showing that much of our landscape must be revegetated, barriers such as this one must be seriously addressed at a policy level.

Despite all the efforts directed at trying to quantify land clearing and vegetation re-growth in Australia over the past few years, there are still considerable uncertainties about rates of clearing and rates of re-growth.

Even to take part in discussing this issue implies acceptance of an agenda that has less than adequate scientific rationale.

The Kyoto Protocol also acknowledged changing land use and decreasing land clearing in rural Australia, and the Federal Government appears confident that existing State Government controls aimed at reducing land clearing will be sufficient to meet the Kyoto target.

However, other steps need to be taken to address the problem.

They include a need to assess the potential impacts of greenhouse gases on agriculture.

There's also an obvious need to improve fuel efficiency in all sectors.

All of us concerned about the environment need to pressure governments to encourage transition to cleaner fuel where appropriate and where it's feasible.

It will be important to ensure that greenhouse responses have minimal impact on farmers' competitiveness, especially in terms of transport and other costs of production.

As I have said, the key outcomes of the Kyoto Protocol for us---the inclusion of land use change and re-planting programs, and the agreement to treat emissions from land use change and revegetation programs in the same way as other sectors (like energy)---could allow Australia to take into account changes in net emissions from the land clearing sector.

In 1990 land clearing accounted for 24 per cent of Australia's emissions, but more recent figures, especially in Queensland, show a substantial reduction in land clearing.

The Queensland Department of Natural Resources now estimates that the average annual tree clearing rate for Queensland between 1991 and 1995 has been revised downwards from around 308,000 hectares a year to 262,000 hectares a year.

Those figures also show that 53 per cent of all clearing in Queensland takes place in the brigalow belt region (some sectors of the community would have us believe that all tree clearing involves old growth 30-metre tall red gums), with around 55 per cent occurring on leasehold land, 42 per cent taking place on freehold land and three per cent on Crown land.

Preliminary figures from the Department show the rate of tree clearing has declined by around 21 per cent in the 1991--95 period, compared with the 1988--91 period. (Ironically, the recent threat of regulation of land clearing in Queensland, led to reported significant increases in the practice.)

It is clear---regardless of the directions we take---that greenhouse raises some significant issues for agriculture's future competitiveness.

Under-estimation of greenhouse impacts and agriculture's responses to this could have profound implications, as would acceptance of the currently proposed scenarios.

Our limited experience to date shows that the impact of today's greenhouse policies will affect individuals, communities and businesses engaged in agriculture, and will have differential effects across those groups. Policies driving in other directions are equally likely to have different, but significant, differential impacts.

By the Australian Greenhouse Office's own admission, our greenhouse policy decisions are based upon an extraordinary level of scientific uncertainty.

This not only applies to the 'big' greenhouse issues, but also the little 'greenhouse issues. For example, decisions made by the individual farmer.

While science is always an issue of probabilities, the confidence levels around those probabilities need to be significantly narrowed, at least so we can have a better handle on whether some of our current evidence is a result of normal weather variations, or is a result of greenhouse phenomena.

For individual farmers, it may be an enormous challenge to get the balance right between adopting pro-greenhouse policies and business as usual.

Currently, our greenhouse policies are being driven more by politics than by science.

For the future of agriculture, and those people involved in the sector, we need to resolve the science urgently.