BSB113 Economics Assessment 2: Research Essay on Livestock Emissions

This research essay, prepared for BSB113 Economics, examines the significant contribution of the livestock industry, particularly in Australia, to greenhouse gas emissions, focusing on carbon dioxide and methane. It delves into the economic consequences of these emissions, highlighting market failures caused by negative externalities and the resulting welfare losses. The essay analyzes various policies aimed at reducing the livestock industry's carbon footprint, including livestock methane taxes, non-price policies promoting technological advancements, and strategies to increase the consumption of meat substitutes. It evaluates the costs and benefits of each policy, offering insights into their potential effectiveness in mitigating environmental damage and improving economic efficiency. The report concludes by emphasizing the need for government intervention to address the environmental and economic challenges posed by the livestock sector.

Page 1 of 9
BSB113 ECONOMICS SEMESTER 1 2018
ASSESSMENT 2: RESEARCH ESSAY

Page 2 of 9
Table of contents
1.0 Introduction..........................................................................................................................3
2.0 Contribution of livestock digestion on the greenhouse gas emission..................................3
3.0 The impacts of livestock digestion, emission of greenhouse gas on the economic
efficiency of the market.............................................................................................................4
4.0 Analysis of the policies to reduce the livestock industry’s carbon emission.......................6
4.1 A livestock methane tax on producers..............................................................................6
4.2 A non- price policy on the producers...............................................................................6
4.3 The increase in the preferences for substitutes for meats.................................................6
5.0 Conclusion............................................................................................................................7
Reference....................................................................................................................................8

Page 3 of 9
1.0 Introduction
Australia is one of the most successful and efficient producers of livestock products. In terms
of export of red meat, this country is the largest. Livestock industry also contributes to a
significant portion of the overall GDP of the country. However, one of the main problems
associated with the livestock industry is the digestion and the wastes which create pressure on
the absorption capacity of the environment. Each year, the global livestock industry emits
more than 7 gigatonnes of carbon dioxide (Beavan, 2018). Carbon Dioxide is one of the
harmful greenhouse gases that influence the global climate as well. Again, the excessive
emission of carbon dioxide is not only bad for the environment; it also disrupts the efficiency
of the economy as well. Therefore, this has become a serious concern for governments and
concerned authorities. The aim of this paper is to examine the contribution of the livestock on
the emission level, the impact it has on the economy and the policies that government may
take in order to mitigate the problems.
2.0 Contribution of livestock digestion on the greenhouse gas emission
The contribution of livestock on the emission level of carbon dioxide is immense. Misra &
Verma (2017) stated that globally 7.1 gigatonnes of carbon dioxide, which is known as a
harmful greenhouse gas is produced from this sector. The case is also same for Australia,
which is considered a big and successful exporter of livestock and meat products. Ganendra
et al. (2015) stated that out of all the greenhouse gas emission in the country, emission from
the livestock industry is around 14.5%. It is important to note in this case that, cattle account
for most of the emissions in the case of Australia. Globally, the cattle, both for the milk and
beef production contributed to 65% of the overall greenhouse gas emission (Dangal et al.
2017). The activities of the livestock such as the feed production and the food processing
contribute to 49% and 35% of overall emission of carbon dioxide.

Page 4 of 9
Figure 1: the emission from different types of livestock
(Source: Rong et al. (2017)
Gardiner et al. (2015) highlighted that the enteric fermentation and food storage produces the
gas that harms the overall environment. In addition to that, the packaging and transpiration of
the meat also have its contribution to the rising carbon dioxide as well. The most emitted
greenhouse gas in case of Australia is methane which accounts for 44% of the overall
emissions. Apart from that, the emissions also include nitrous oxide and carbon dioxide as
well which accounts for 29% and 27% respectively. The emission entities vary from product
to product as well. James & Harrison (2016) highlighted that the most emission of
greenhouse gas comes from beef. This is followed by milk and the meat of small ruminants.
Although the emission from cow milk and chicken is lower, the demand for the chicken
products is low compared to the beef in the case of Australia.
3.0 The impacts of livestock digestion, emission of greenhouse gas on the economic
efficiency of the market
Ideally, an efficient market, as per the market theory of economics, is bound to allocate the
resources of the market in the best possible way. However, market failure leads to improper
allocation of the resources leading to a deadweight loss. The production of livestock industry
emits greenhouse gasses which in turn pollutes the environment. This is called the negative
externality of the market which influences the economic outcome as well (Zheng et al.2015).
Theoretically, the producers of livestock industry only consider the private costs and the

Page 5 of 9
benefits. However, due to the existence of the externality, the avoidance of social cost
changes the outcome of the market leading to a loss of social welfare.
Figure 2: The existence of a negative externality
(Source: Dangal et al. 2017)
In figure 2, the downward sloping curve is the demand for the livestock product and PMC is
the private marginal cost which is the marginal cost of producing the output. However, the
producer does not consider the cost associated with the negative effects of the greenhouse on
the environment and the humans. According to the theory of externality and market failure,
the inclusion of the social cost from the side of the producers is important in case of the
existence of externality (Hernandez-De Lira et al. 2015). The social cost which is the addition
of the private cost and the cost of externality reduces the supply of the product in the market.
The leftward shift in the supply curve due to the inclusion of the social cost reduces the
output of the product and increases the price as well. Thus, the non-inclusion of the social
cost results in the deadweight loss which is shown in figure 1. The aim of the social planners
or the government is to reduce the deadweight loss by compelling the producers to pay for the
externalities.
4.0 Analysis of the policies to reduce the livestock industry’s carbon emission
There are a number of steps that can be taken against the producers of the livestock industry
in order to persuade them to internalize the cost of externality. Three of the widely used

Page 6 of 9
policies of the governments to curb negative externality in the case of livestock industry are
discussed below with the consideration of the cost and the benefits each of the policies have.
4.1 A livestock methane tax on producers
Livestock methane taxes are levied on the production of the sellers of the livestock industry.
For extra productions, they are liable to pay taxes to the government. The main objective of
the tax design is to discourage the sellers to produce more. In this way, the production level
of the livestock product can be kept under control and the emission can be lowered. However,
Ghahramani & Moore (2015) pointed out that, there is a huge cost that the government needs
to incur in order to collect proper taxes from the sellers of the market. Against that, the result
may not be seen as well, the sellers can keep on producing a high amount of product,
transferring the cost to the customers of the market as the livestock products can be
considered as an inelastic product.
4.2 A non- price policy on the producers
This is another method that can be used by the government and the other related authority to
curb the negative externality associated with the industry. Under this policy, the government
may discuss with the sellers of the market regarding the use of new technology in the
production so that emission can be controlled (Beavan, 2018). Although the introduction of
new technology can be costly for the companies and the industry as a whole, the resulting
benefits would make them better off in the long run. Based on the cost-benefit analysis this
policy is the most preferred as this will also encourage the producers to continue the
innovation as well.
4.3 The increase in the preferences for substitutes for meats
Again the government can also increase awareness among the people regarding the
consumption of nonlivestock meats as well. The substitute for the livestock meat can be tofu,
eggplants, and lentils as they can meet the protein needs of the people. The reduction in the
demand for the livestock meat can reduce both the quantity produced and the price of the
market. Therefore, the less production will automatically bring down the contribution of this
sector on the greenhouse gas emission. The benefit of this policy is that it can reduce the
carbon dioxide and methane gas production in the environment. However Gerber et al.
(2013) noted that the government has to spend a high cost in order to make the awareness
programme a success. One of the interesting points regarding this policy is that it will take
time for the customers to switch from livestock meat to a nonlivestock meat. Comparing the
cost and the benefits analysis, it can be said that, this policy can be effective in a long time.

Page 7 of 9
5.0 Conclusion
Thus, the livestock production in Australia is a major concern for the government and the
environmentalists. The digestion of the cattle gives rise to the production of harmful gasses in
the environment. Apart from that, the waste and the transpiration of the meat products also
contribute significantly to the production of the harmful gasses. With the high demand for the
meat and the milk product from this industry, the production is increasing in an exponential
way. Australia, being the largest producer of livestock product is also affecting the other
countries as well. As per the study, the negative effects not only harm the environment, but it
also influences the economic functions as well. The presence of negative externality in the
industry is also giving rise to the welfare loss. The government can take three actions in order
to mitigate the problem and fix the issues of inefficiencies of the market economy.

Page 8 of 9
Reference
Beavan, K. (2018). Australian red meat sector sets 2030 carbon neutral target. Retrieved from
http://www.abc.net.au/news/rural/2017-11-22/meat-livestockaustralia- sets-cattle-
industry-carbon-target/9180902
Dangal, S. R., Tian, H., Zhang, B., Pan, S., Lu, C., & Yang, J. (2017). Methane emission
from global livestock sector during 1890–2014: Magnitude, trends and spatiotemporal
patterns. Global change biology, 23(10), 4147-4161.
Ganendra, G., Mercado-Garcia, D., Hernandez-Sanabria, E., Peiren, N., De Campeneere, S.,
Ho, A., & Boon, N. (2015). Biofiltration of methane from ruminants gas effluent
using Autoclaved Aerated Concrete as the carrier material. Chemical Engineering
Journal, 277, 318-323.
Gardiner, T. D., Coleman, M. D., Innocenti, F., Tompkins, J., Connor, A., Garnsworthy, P.
C., ... & Wills, D. (2015). Determination of the absolute accuracy of UK chamber
facilities used in measuring methane emissions from livestock. Measurement, 66,
272-279.
Gerber, P. J., Steinfeld, H., Henderson, B., Mottet, A., Opio, C., Dijkman, J., ... & Tempio, G.
(2013). Tackling climate change through livestock: a global assessment of emissions
and mitigation opportunities. Food and Agriculture Organization of the United
Nations (FAO).
Ghahramani, A., & Moore, A. D. (2015). Systemic adaptations to climate change in southern
Australian grasslands and livestock: Production, profitability, methane emission and
ecosystem function. Agricultural Systems, 133, 158-166.
Hernandez-De Lira, I. O., Huber, D. H., Espinosa-Solares, T., & Balagurusamy, N. (2015).
Methane emission and bioenergy potential from livestock manures in
Mexico. Journal of Renewable and Sustainable Energy, 7(5), 053117.
James, A. R., & Harrison, M. T. (2016). Adoptability and effectiveness of livestock emission
reduction techniques in Australia’s temperate high-rainfall zone. Animal Production
Science, 56(3), 393-401.

Page 9 of 9
Misra, A. K., & Verma, M. (2017). Modeling the impact of mitigation options on abatement
of methane emission from livestock. NONLINEAR ANALYSIS-MODELLING AND
CONTROL, 22(2), 210-229.
Rong, X., Dai, C., Deng, Y., & Qin, P. (2017). Distribution characteristics of ammonia
emission from the livestock farming industry in Hunan Province. CIVIL,
ARCHITECTURE AND ENVIRONMENTAL ENGINEERING.
Zheng, C., Liu, Y., Bluemling, B., Mol, A. P., & Chen, J. (2015). Environmental potentials of
policy instruments to mitigate nutrient emissions in Chinese livestock
production. Science of the Total Environment, 502, 149-156