SAC Rural Policy Centre

Introduction

Agriculture produces a significant proportion of Scottish greenhouse gas (GHG) emissions, with estimates varying between 12% (Scottish Executive 2006) and 25% (Agriculture and Climate Change Stakeholder Group 2008). Although there have been significant reductions in emissions from agriculture in recent years, further reductions will be expected because governments have set challenging targets for long-term emission reductions. At the UK level, the Climate Change Act 2008 requires a CO2 reduction of 80% (from 1990 levels) by 2050. At the Scottish level, the proposal is for a similar reduction of 80% by 2050. For such targets to be met the potential mechanisms through which emissions can be reduced in each sector (e.g. transport, electricity generation, agriculture) will have to be examined and the best options adopted and promoted.

The broad policy options

The Stern Review on the economics of climate change highlighted the fact that while there is a range of activities that could be undertaken to reduce agricultural emissions, it is not necessarily the case that they will be adopted simply by virtue of the fact that they appear to make sense. Farmers are unlikely to adopt practices that will benefit society as a whole if they alone have to bear the cost. Even low cost mitigation options will not be adopted if the farmer must pay to undertake work from which wider society gains most of the benefit. Government must intervene to overcome this 'market failure' and to encourage adoption of mitigation options and introduce wider measures to help reduce emissions.

There are three broad areas of policy intervention (above the level of country specific policies): carbon pricing, technology policy and barrier removal. Carbon pricing is designed to set an overall framework for emissions to be counted in policy choices. Technology policy and barrier removal are more directly related to influencing private decision-making in the long-term.

Carbon pricing
A key issue relating to GHG emissions in agriculture (but which applies equally to all sectors) is the fact that all the costs of agricultural activities are not reflected in the prices for agricultural products. The private costs that a farmer incurs should be covered by the price they receive for their products, but the broader costs borne by society (such as the costs resulting from a changing climate) are not. One way of recognising the wider cost is to create a price and a market for carbon in the agricultural and land use sectors (similar to the European Emissions Trading Scheme, which introduces a scheme of priced tradable emissions entitlements). The potential of such trading schemes in agriculture is limited, however, because of the large number of small emitters: the costs of administration limit the cost-effectiveness of undertaking the scheme.

Carbon pricing is not, however, restricted to creating a market for agricultural emissions because the costs associated with GHG emissions can be built into policy development. The shadow price of carbon (SPC) is an estimate of the damage cost of one extra unit of carbon equivalent gas. This cost (approximately £25/tonne/CO2e) is set to become more prevalent in regulatory decisions that affect agriculture as impact assessments of new polices will use the figure to help identify good and bad policies in economic terms (Defra 2007). The SPC can also shape policy on new technology and barrier removal by influencing the development of new agri-environment measures and technologies that deliver low emissions. 

Technology policy
Technological innovation in agriculture tends to be market-led and is directed towards maximising output, quality and profit. There are potentially, however, technological innovations that could contribute to the public good and benefit society at large (such as mitigating GHG emissions). However, since the potential for making profit from innovations that deliver public goods is limited, research and development in this area is restricted. Government intervention is therefore required to direct research and development to those areas that will help the wider public good. In particular, research is needed on feedstocks and the types of feedstocks that could reduce emissions; on livestock and plant genetics to explore the potential of breeding livestock that emit fewer emissions; and on fertiliser applications and anaerobic digestion. Government intervention in research in this way could then lead to the development of lower GHG systems.

Removing other barriers
The adoption of mitigation activities could be hindered by the fact that there are many more immediate concerns in a farm business than tackling climate change. Current support for agriculture provided through the Common Agricultural Policy, for example, has a major influence on the day-to-day running of a farm. The priorities of the CAP therefore have a great influence on farmers and potentially represent a barrier to undertaking wider climate change mitigation activity, although current proposals in the 'Health Check' emphasise the importance of addressing climate change. Reforming the CAP would be one way of removing barriers to dealing with GHG emissions.

Information is also crucial. A lack of information on best practice in fertiliser application, slurry storage or the opportunities that they could take advantage of, represents a barrier to the adoption of mitigation activities. Governments can intervene to ensure that the appropriate information is available through the government's own area staff, the network of advisors and the non-governmental organisations.

Adaptation and mitigation

Debate about climate change has moved on from discussions about whether change is happening and whether humans have caused it, to what we should do about it. Two sorts of response are common. First, if we accept that climate change is happening, we must also accept that it will have an impact on current agricultural practices and that we must find ways of adapting to a changing situation. A changing climate is likely to mean altered weather regimes and the emergence of new pests and diseases. Such changes may require the adoption of new crop cultivars and livestock breeds that can cope with the new situation and may present new opportunities as previously untenable enterprises become viable.

Much adaptation will take place without policy intervention. As farmers recognise the impact of climate change on yields, they will alter their practices to maximise yields in a new situation. Farmers may change the timing of operations, the choice of crops or livestock breed or the mix of their enterprises. Policy intervention may be required, however, to ensure that farmers can respond when they need to and that support is available as farmers consider their options. Support for research will also be required to ensure that we have the knowledge required to deal with new pests and diseases.

The second response to climate change focuses on mitigation. If we accept that current climate change is primarily caused by human activities, we have to find ways of mitigating, or lessening, the negative contribution that agriculture makes.

Mitigating agricultural emissions

SAC is actively involved in research that aims to identify the magnitude of greenhouse gas reductions that can be achieved by a range of mitigation options. At a practical level there is a range of technically feasible ways of reducing emissions:

• Adopting energy saving practices on farms, not least by replacing older machinery/buildings with more modern and usually more efficient items;
• Improving efficiency of nutrient use (fertilisers and manure/slurry) by matching use with need and reducing wastage/needless emissions;
• Changing livestock diet to reduce emissions of methane (CH4) and nitrous oxide (N20);
• Use of slow release fertilisers and nitrification inhibitors
• Improving manure and slurry storage;
• Reducing disturbance of soils; and
• Enhancing carbon storage in biomass by creating new woodlands.

Yet while there is a range of possible options for reducing emissions, it is not immediately apparent which options would be best to pursue. Given that there is a large amount of variability in emissions from place to place, there is an argument for targeting mitigation in areas with highest emissions (Ball et al. 2008). Also, some options will deliver greater reductions than others, but they may also be more expensive to undertake. A process for evaluating the options is required.

Selecting the best mitigation options

The Committee on Climate Change (CCC) has been established to advise on the best way to share out national targets. As an input to this task, Defra commissioned SAC to research the cost-effectiveness of various mitigation options in the agriculture, land use, land use change and forestry sectors (see Moran et. al. 2008). Cost-effectiveness is crucial because while there are many potential mitigation measures, some will be more attractive than others. The challenge is to stabilise GHG concentrations at a level that avoids the worst climate change risks for least cost – maximising emissions reductions without damaging the UK economy.

The research started from the recognition that each potential measure for reducing agricultural GHG emissions will deliver a certain level of benefit (reduction in emissions) for a specific cost. This relationship between costs and benefits can be represented on a Marginal Abatement Cost Curve (see attached briefing). Some measures, such as adopting energy saving practices on farms, may be able to reduce emissions and save money. Other measures may reduce emissions more, but incur a positive cost. Generally speaking, the greater the level of mitigation sought, the higher the cost. The present task is to identify which measures will give most greenhouse gas mitigation for negative or least cost.

SAC's research on the cost-effectiveness of mitigation measures in the agriculture, forestry, land-use and land-use change sectors allows a comparison of the different options. This and similar work will provide insight into the best options to pursue. More broadly, similar work in different sectors can be integrated and used as the basis for determining national carbon budgets and for identifying where effort should be applied.

Recent research findings

Assuming a policy environment that allows or promotes the adoption of emissions mitigation measures, our analysis suggests that by 2012 ALULUCF could be mitigating around 6% of current greenhouse gas emissions. By 2022 this rises to nearer 25%. In other words, by 2022 the ALULUCF sectors could reduce their emissions by 25% (table 1). Estimation of abatement potentials is, however, clearly influenced by the policy environment and the expected levels of adoption of these measures.

Table 1: Estimates of total emissions reductions for 2012, 2017 and 2022.

Our results suggest that all three sub-sectors (agriculture, land use and forestry) offer measures capable of delivering abatement at zero or low cost. Indeed around 6.34 MtCO2e could possibly be abated at negative or zero cost. If land managers adopted some of the measures, they would actually save money whilst mitigating greenhouse gas emissions.

Wider issues

Ancillary benefits
Straightforward calculations of cost-effectiveness, made with reference to the shadow price of carbon, will not necessarily capture the wider benefits: a mitigation option to reduce GHG emissions, for example, may also benefit biodiversity or landscape, but this would not be included in the calculation. Of these wider ancillary benefits the most significant is likely to relate to the value of avoided damages from diffuse pollution to water. Accounting for these benefits is important because achieving multiple policy goals at once may significantly alter the cost. Measures that are apparently low-cost may be viewed less favourably if they also have a negative impact on landscape or biodiversity or water quality. High cost measures may become more effective if they also deliver ancillary benefits. 

A changing situation
Calculations of cost-effectiveness balance the costs of mitigation measures and the shadow price of carbon. Thus the cost-effectiveness of any particular option can change as the costs of undertaking the measure fall or as the SPC rises. The SPC – currently £25/tonne/CO2e – is likely to rise as our understanding of the impact of climate change improves. Measures that are currently cost-ineffective may become worthwhile as the SPC grows.

Acknowledging wider net effects
Beyond the ancillary effects, potential implementation of mitigation options in the UK (and thus their implicit cost-effectiveness) must also take into account the wider changes that these options might bring about. It is not clear, for example, that reducing emissions from UK agriculture would actually deliver a reduction in emissions globally. Although emissions in the UK could be reduced by cutting the number of livestock, unless the demand for livestock products also falls the demand would simply be satisfied by supplies from elsewhere. Displacing production activities into other countries does not address the global emissions objective.  Such displacement and life cycle costs are also relevant to the accurate portrayal of the UK Marginal Abatement Cost Curve potential.

References

Ball, B. C., Rees, R. M. and Sinclair, A., 2008, Mitigation of nitrous oxide and methane emissions from agricultural soils – a summary of Scottish experience. SAC/SEPA conference, Edinburgh.

Defra, 2007, The Social Cost of Carbon and the Shadow Price Of Carbon: What They Are and How To Use them in Economic Appraisal in the UK. London: Defra. 

Moran, D., Barnes, A., McVittie, A., 2007, The rationale for Defra investment in R&D underpinning the genetic improvement of crops and animals. Research Report for Defra.

Moran, D., MacLeod, M., Wall, E., Eory, V., Pajot, G., Matthews, R., McVittie, A., Barnes, A., Rees, R., Moxey, A., Williams, A., Smith, P., 2008, UK Marginal Abatement Cost Curves for the Agriculture and Land Use, Land-Use Change and Forestry Sectors out to 2022, with Qualitative Analysis of Options to 2050. London: Committee on Climate Change. Scottish Government, 2006, Changing our Ways: Scotland’s Climate Change Programme. Edinburgh: Scottish Executive.
Agriculture and Climate Change Stakeholder Group, 2008, Climate Change and Scottish Agriculture: Report and Recommendations of the Agriculture and Climate Change Stakeholder Group (ACCSG).  Edinburgh: Scottish Government.

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