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TAS Country : November 18th 2010
8 Tasmanian Country Friday, November 19, 2010 Opinion www.tfga.com.au Carbon credits could be costly DILEMMA: A bean crop grown on a farm where carbon has been stored in the soil. Farmers face additional costs unless they gain recognition for carbon credits. TFGA matters with Jan Davis A COUPLE of weeks ago I discussed the Federal Government's Carbon Farming Initiative, due to be introduced into Parliament in the first half of next year, which will set the parameters for landholders to claim carbon credits. In effect, they are offsets for the negative greenhouse gases created when farmers go about their normal business of raising cattle, growing crops and so on. The credits will be tradable, once we know the nature of the emissions trading scheme. The debate about pricing carbon has moved on a lot in recent times and it is now mainstream, with some of Australia's largest businesses saying it is time for us to come to some sort of resolution on the issue. For example, BHP went on the record recently supporting the establishment of a price for carbon. So where do farming organisations stand on this issue? There is clearly a fundamental difference between the capacity of Australian mining companies such as BHP to deal with a carbon price and the ability of farmers to. Miners are price makers while we are price takers. Miners can factor increased costs, such as carbon, into their prices while we can't. A price on carbon means higher costs for energy and energy- dependent inputs such as fuel, electricity and fertiliser. They are inputs that Tasmanian farmers and our supply chains depend on. It is this perspective that causes us most concern if there is a price on carbon. If farmers add the price of carbon to their input costs, there is no avenue for increasing returns to compensate unless they gain international recognition for their carbon credits through mechanisms such as biosequestration (which means carbon stored in the soil and in vegetation) and reforestation. It not only jeopardises their competitive position internationally, but also puts them at a disadvantage in their own domestic markets in which they compete with imports that may not be subject to any carbon costing in the countries in which they are produced. Our view is that because there is inequity built into the current international accounting rules for carbon as they pertain to Australian farmers, our ability to claim carbon offsets is limited and would not outweigh any of the costs emerging from the emissions side of the ledger. In fact, the design of the Kyoto Protocol rules would actively penalise farmers who have been husbanding their soils carefully in favour of those who have focused on yields in the short term. Therefore, it is not about the price of carbon itself, but the design of the mechanism that will impose a price on carbon. So far, we have only seen the Carbon Pollution Reduction Scheme and that was unacceptable because it worked against our ability to compete internationally. Whatever the next version looks like, it must recognise the unique position of farming and our specific operating and business environments. The National Farmers Federation is actively engaged in shaping this debate and the TFGA is working with them to ensure that the outcomes are ones farmers can live with. Drought assistance payments attacked DROUGHT aid to Australian farmers should be slashed, according to the Organ- isation for Economic Co-operation and Development. In its Economic Survey of Australia 2010, the organisation slammed assistance given to farmers in drought. ''A large share of these subsidies could be eliminated with beneficial effects for the budget and the economy alike,'' the report said. The call has been slammed by National Farmers Federation president David Crombie, who said the OECD's own figures showed Australian farmers re- ceived one of the lowest rates of assistance. ''Drought assistance in Australia is really just maintaining our productive capacity through the worst drought in living memory,'' Mr Crombie said. OECD figures showed Australia and New Zealand had the lowest rates of assistance in their agriculture sectors, excluding forestry, at about 3 per cent of gross farm production. Mr Crombie conceded the inclusion of the forestry sector in the agriculture figures would raise the percentage. He said the NFF had long called for a review of managed investment schemes, a mechanism used to assist the forestry industry. ''Let's find better ways to invest in agriculture generally, not a one-off skewed system that supports forestry in a way that distorts [markets] for the rest of agriculture,'' Mr Crombie said. A 2010 paper by Australian National University forestry economist, Dr Judith Ajani, found forestry had an effective assistance rate of 41.8 per cent. The National Association of Forest Industries responded by distributing a graph that suggested dairy farming was the most highly subsidised industry and that forestry effectively received just 4 per cent. Dr Ajani claimed NAFI had ignored estimates of assistance delivered via MIS. 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