Climate Change Economics and Policy

This report analyzes the impact of carbon policies on the agriculture sector in Australia, including risks and opportunities in a carbon-constrained world. It also provides adaptation strategies for the sector.

Climate Change Economics and Policy

Climate Change Economics and Policy 1
Contents
Introduction......................................................................................................................................2
Overview of the sector.....................................................................................................................3
Predicted climate impacts on the sector...........................................................................................3
Rise in temperatures....................................................................................................................4
Impacts of carbon policies (C tax, DA comparison).......................................................................4
Risks and opportunities in a C constrained world...........................................................................6
Adaptation strategies.......................................................................................................................7
Conclusion and recommendation....................................................................................................9
References......................................................................................................................................10

Climate Change Economics and Policy 2
Introduction
The aim of the report is to compare and contrast the 2 policies and analyze the possible impact of
both the strategies on the certain business circumstance or a sector by applying the information.
The policy on which the comparison is based is related to the Carbon Tax which is recently by
Australia in the year 2012. The report is based on the Carbon Tax of Australia and the sector that
has been selected for the analysis is Agriculture. It also includes the impacts of carbon policies
on the sector. The risks and opportunities in a C constrained world related to the Agricultural
sector will be discussed in the report. Along with this, the report includes the adaptation
strategies for the agriculture sector in Australia.

Climate Change Economics and Policy 3
Overview of the sector
Australia is a country which is largely dependent on its agricultural sector. The country is
commonly known as the major agricultural producer and exporter of forestry and fishing. This
sector provides the employment to approx. 325,300. Agriculture in the today’s world is very
sophisticated and highly technical industry. The technology has contributed a lot to make the
industry most innovative and effective industries of Australia. The farmers in Australia produce
approx. 91% of the daily domestic food. On average the farmer of Australia exports 60% of their
crop to the other nations (Export, 2017). This shows that this sector of Australia contributes to
the economy of Australia. The country produces enough food to feed more than 60 million
people. This shows that this sector is one of the important sectors for the government of the
country.
Predicted climate impacts on the sector
A recent study by the Australia Bureau of Agriculture and Resource Economics and Sciences
(ABARES) confirms that the changes in the climate lead to the adverse effect on the
productivities of cropping farms basically in south-western Australia and South-eastern Australia
(Gary, 2017). The climate change includes the change in the hotter and drier areas of the country
that leads to the issues. Australia witnesses the average temperature rises more than 1.5 degrees
Fahrenheit since the last century. Considering the data from CSIRO, Australia's national science
agency the rise in the global emissions continue to be a challenge for the sector (Patterson,
2015). The farmers need good rainfall for some crops and less for other and they want the
temperature to be marinated for growing the crops in Australia. Though, the change in the

Climate Change Economics and Policy 4
climate of the country leads to the major impact on the agriculture sector. The expected impact
on the Australia agriculture due to climate include: -
 Reduce rainfall, less runoff, smaller irrigation storage volumes.
 The rise in temperature, increase in the evaporation and the greater evapotranspiration
(Smalley, 2018).
 More Variable and less predictable with the more intense events.
Rise in temperatures
The IPCC (Intergovernmental Panel on Climate change) shows that the change in the climate is
unequivocal. Along with these human activities, particular emissions of carbon dioxide is leading
cause which leads to the impact on the agriculture (Patterson, 2015). The changes in the climate
are observed in all the geographical regions as the climate and oceans are warming, level of the
sea is increasing with the change in climate weather patterns and the extent along with the
volume of ice and snow are diminishing. All these changes in the climate will continue under the
range of the possible greenhouse gas emissions that took place in the 21st century.
The major projected impact on the agriculture is the extreme climate events which include heat
waves, floods, droughts and the wildfires which get combine with the long-term trends which
include the rise in the temperature and the changes in the predicated patterns with the deep
applications for the Australia agriculture sector (Havlík, et al 2015).
Impacts of carbon policies (C tax, DA comparison)
The carbon policies lead to the influence on the agricultural sector because the change in the
policies of the country leads to the change in climate. This section of the report includes the

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comparison of the direct action plan and Carbon Tax. The carbon tax is a tax on the energy
sources which emit the carbon dioxide. The administration of Australian initiated a carbon
pricing scheme or carbon tax through the Clean Energy Act 2011. The scheme was proposed to
regulate the emission in Australia (Parliament of Australia, 2010). This initiative also supports
the growth of the economy with the help of the progress of the clean energy equipment. This
initiative was managed by the Climate change Authority and the Clean Energy Controller. This
carbon tax was introduced on 1st July 2012. The government wants to regulate emissions in the
nation with the motive that the polluters who make use of the high amount of the carbon and
release in the atmosphere will pay a huge amount as a tax (Burke, 2016).
On the other hand, In July 2014, the association administration cancelled the carbon tax by
substituting it with the Direct Action Plan (DA plan) which works mainly to offer the funds to
the business to incentivize the emission reduction activities (Australian Government, 2018). The
government of Australia has spent approx. A$1.7 billion on 143 million tons of emissions at an
average cost of A$12 a tonne. DA plan is defined as the climate change policy to decrease
Australia's greenhouse gas releases that were released in 2010 while the Coalition was in
Opposition. The motive behind the introduction of the DA plan was to reduce the emission in
country by 5% by the year 2020 compared to the 1990 levels (Parliament of Australia, 2018).
The research found that the DA plan was not as in effect as a carbon tax in driving the
corporations to act immediately and manage the emissions of country (Pears, 2013). In addition,
it was found that the carbon tax creates not only the monetary pressure but also a status threat for
the great emitting corporations. This will make them reduce the use of the carbon emission and if
they continue using the carbon they will pay a high amount for the same. The positive side of the

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DA plan indicated that it leads to the less damage to the Australian economy comparing it with
the carbon tax (Kumarasiri, Jubb, and Houghton, 2016).
Risks and opportunities in a C constrained world
The carbon-constrained world will lead to the opportunities as well as the risk for the Agriculture
sector in Australia. Carbon Constrained world means the control on the carbon that is available
in the atmosphere. The carbon-constrained world is an opportunity for the sector as there will be
fewer fluctuations in the climate. The climate directly affects the agricultural sector due to which
the production of the crops doesn’t take place effectively (Klein, et al 2014). The less fluctuation
in the climate takes place when the level of carbon in the atmosphere decreases. The agriculture
sector will get the benefit of growing the crop in the less constrained world as the production of
goods will be done in an effective way. In addition, the farmers will be able to grow the existing
crops ineffective way which leads to the high productivity of existing crops (Lipper, et al 2014).
The carbon-constrained world leads to the risks for the agriculture sector in Australia. The
overcontrolled of the carbon within the atmosphere leads to the risk for the framers because the
crops need sufficient amount of carbon to grow crops in the atmosphere. The less amount of
carbon in the atmosphere will lead to the risk for the farmers in the agriculture sector as the
productivity of the crops will decrease and the crops don't remain fresh in quality (Frank, et al
2017).
The less amount of carbon leads to the less ripped crops which are not healthy to be consumed
by the customers. The low carbon crops must be specialized probable to be raising trend in the
conversion to the low carbon economy. In addition, the effective presence of the LDCs and the
low-income agricultural exports in the carbon labeling schemes could provide the major

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occasions for the global carbon emissions. Around the 1/3rd of the entire carbon mitigation
efforts need to escape the hazardous climate change (Keana, 2009).
Adaptation strategies
Australian agriculture needs to adapt the strategies to overcome the carbon effect on the sector
by the farmers. The farmed need to manage the several risks to sustainable agriculture in an
environment of the climate change and some of the strategies that are required to adopt are
discussed below: -
 The adaptation to build the resilience into the agriculture system. This resilience takes
place in the agriculture with the help of the mitigation and the adaptation. These aspects
are discussed below: -
I. Mitigation: - In the agriculture sector the farmers need to take steps for the
mitigation. These steps include the improvement in feeding and dietary additives
for the livestock’s, enhancing the management of the cereals, building the agro-
forestry systems, replacing the fossil fuels by biofuels and the integration of
bioenergy. Along with this, there is need to reduce the overconsumption in the
regions where it is prevalent. In addition, there is need to reduce the loss and food
wastage in the supply chains (European Climate Foundation, 2018).
II. Adaptation: - The adaptation is highly context-specific and no particular
approach for decreasing the risk. The steps that the company make use include
livestock options, policy options, and the crop options. In the livestock options,
the farmers can manage the quality of livestock diet, match the stocking rates with
the posture production and many others. In the policy options; it includes the

Climate Change Economics and Policy 8
index-weather insurance and the improving the resource pricing. At last, the crop
options in which the farmers should ensure to bring the improvement in the crops
to high temperature, improving the crop rotations systems and others (European
Climate Foundation, 2018).
 The mitigation leads to a reduction in the greenhouse gas emissions.
 R&D is essential for the agricultural sector in Australia to improve the capacity to
respond to the climate change.
 The effective communication is required because the awareness and communication to
inform the decisions that are taken by the farmers for the primary producers and the rural
communities.

Climate Change Economics and Policy 9
Conclusion and recommendation
In the end, it can be concluded that the climate has a direct influence on the agricultural sector of
Australia. The climate is one of the important factors which are considered by the Australian
farmers. The climate majorly leads to the impact on the agriculture sector such as a rise in
temperature, rainfall, and other factors. Moreover, the carbon policies that are a carbon tax and
DA plan are discussed and compared in the report. The report also includes the risks and
opportunities in the carbon Constrained world for the agriculture sector in the Australian market.
In the end, it includes the strategies that are required to be considered by the farmers of Australia
in the Agriculture sector. It is recommended to the farmers to bring the use of the technology in
their activities performed at fields.

Climate Change Economics and Policy 10
References
Australian Government (2018) Repealing the Carbon Tax [Online]. Available from:
http://www.environment.gov.au/climate-change/government/repealing-carbon-tax [Accessed on
5th June 2018]
Burke, P.J. (2016) Undermined by adverse selection: Australia's direct action abatement
subsidies. Economic Papers: A journal of applied economics and policy, 35(3), pp.216-229.
European Climate Foundation (2018) Climate Change: Implications for Agriculture [Online].
Available from: https://europeanclimate.org/climate-change-implications-for-agriculture/
[Accessed on 5th June 2018]
Export. gov. (2017) Australia - Agricultural Sector [Online]. Available from:
https://www.export.gov/article?id=Australia-agricultural-sector [Accessed on 5th June 2018]
Frank, S., Havlík, P., Soussana, J.F., Levesque, A., Valin, H., Wollenberg, E., Kleinwechter, U.,
Fricko, O., Gusti, M., Herrero, M. and Smith, P. (2017) Reducing greenhouse gas emissions in
agriculture without compromising food security?. Environmental Research Letters, 12(10),
p.105004.
Gary, D. (2017) Australian farmers are adapting to climate change [Online]. Available from:
https://theconversation.com/australian-farmers-are-adapting-to-climate-change-76939 [Accessed
on 5th June 2018]

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Havlík, P., Valin, H., Gusti, M., Schmid, E., Leclère, D., Forsell, N., Herrero, M., Khabarov, N.,
Mosnier, A., Cantele, M. and Obersteiner, M. (2015) Climate change impacts and mitigation in
the developing world: an integrated assessment of the agriculture and forestry sectors.
Keana, J. (2009) Trade in a carbon-constrained world: adapting to climate change and the
changing global trade environment [Online]. Available from:
https://www.odi.org/comment/4577-trade-carbon-constrained-world-adapting-climate-change-
and-changing-global-trade-environment [Accessed on 5th June 2018]
Klein, D., Humpenöder, F., Bauer, N., Dietrich, J.P., Popp, A., Bodirsky, B.L., Bonsch, M. and
Lotze-Campen, H. (2014) The global economic long-term potential of modern biomass in a
climate-constrained world. Environmental Research Letters, 9(7), p.074017.
Kumarasiri, J., Jubb, C. and Houghton, K. (2016) Direct Action Plan not as motivating as the
Carbon Tax [Online]. Available from:
http://www.swinburne.edu.au/news/latest-news/2016/09/direct-action-plan-not-as-motivating-as-
the-carbon-tax.php [Accessed on 5th June 2018]
Lipper, L., Thornton, P., Campbell, B.M., Baedeker, T., Braimoh, A., Bwalya, M., Caron, P.,
Cattaneo, A., Garrity, D., Henry, K. and Hottle, R. (2014) Climate-smart agriculture for food
security. Nature Climate Change, 4(12), p.1068.
Parliament of Australia (2010) Carbon taxes [Online]. Available from:
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/Browse_by_Topic/ClimateChangeold/responses/economic/carbontax
[Accessed on 5th June 2018]

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Parliament of Australia (2018) Direct Action Plan [Online]. Available from:
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Commu
nications/Direct_Action_Plan/Report/c05 [Accessed on 5th June 2018]
Patterson, B. (2015) Australia's Farmers Challenged by Climate Change [Online]. Available
from: https://www.scientificamerican.com/article/australia-s-farmers-challenged-by-climate-
change/ [Accessed on 5th June 2018]
Pears, A. (2013) Direct action vs carbon pricing: we can have it all [Online]. Available from:
https://theconversation.com/direct-action-vs-carbon-pricing-we-can-have-it-all-20095 [Accessed
on 5th June 2018]
Smalley, S. (2018) Australian agriculture & climate change [Online]. Available from:
http://www.oecd.org/tad/sustainable-agriculture/41713130.pdf [Accessed on 5th June 2018]