Carbon tax casts a shadow
After the Budget in December, every Irish farmer may be talking about carbon tax, our plan to lower emissions.
In the US, farmers fear that cap and trade will reduce already slim tillage profits, primarily because fuel will be more expensive. Here, farmers do not know what to expect, because carbon tax is completely new.
A commission on taxation was asked to advise the Government on how to lower carbon emissions on a revenue-neutral basis, while keeping the overall tax burden low.
Finance Minister Brian Lenihan said the Government is committed to introducing a carbon tax, but emphasised that the tax burden in general was already high enough.
The objective may be to hurt nobody with the new tax. How that can be done remains to be seen — while also saving money on the carbon credits the Government must buy, if we do not come within Kyoto Protocol and EU targets for carbon emissions.
EU targets of a 20% reduction in emissions, relative to 2005, are the more recent, and the more challenging for Ireland, which is in the unusual position of agriculture accounting for 27% of all emissions.
Environment Minister John Gormley has said all sectors will have to cut emissions, but Agriculture Minister Brendan Smith said making significant cuts from agriculture will be very difficult.
So there will be interesting discussion in the Cabinet on the carbon tax, which is seen by many experts as the cheapest way to reduce emissions.
A tax of €20 per tonne of carbon dioxide might amount to two or three cent per litre of petrol, for example.
There has been talk here of a €5 per tonne levy on carbon dioxide equivalent emissions from agriculture. That could cost €13 per dairy cow, €7 per non-dairy cow, and €1 per sheep, if applied at farm level.
There is also a strong European Commission view in this area. Agriculture Commissioner Mariann Fischer Boel has said a tax on livestock, because they cause carbon emissions, would only drive agricultural production out of the EU.
Importing foods like beef, which we are already short of in the EU — and which is Ireland’s main agricultural product — would create higher global carbon emissions, while reducing EU food security, and preventing the 100% growth in food production which the world needs by 2050 to keep up with expected population and diet trends.
With the Government keen to keep down the tax burden in general — and to broaden the tax base — taxing the food consumer is unlikely.
However, increasing the shop price for milk and beef, for example, would spread a carbon tax on food production evenly over imported, exported and domestic production.
In Denmark, where agriculture is also an unusually large producer of carbon, there has been talk of a tax as high as €80 per cow to offset the cost of not meeting EU emission targets.
Next December Denmark will get just as much attention as our finance minister, because major decisions on carbon emissions are likely at the United Nations climate change conference in Copenhagen, early in the month.
Global leaders at the conference may introduce incentives for carbon-conscious management of farmland and forests.
After Copenhagen, EU member states may be permitted to take into account land and forestry uses in calculating their carbon emissions.
Afforestation, in particular, could be given a crucial role in keeping within carbon limits.
The Copenhagen conference may also bring incentives to increase minimum tillage.
Compared to ploughing, this cultivation technique saves tens of thousands of tonnes of carbon emission — which is why farmers in Spain, Portugal and Switzerland already get incentive payments to use minimum tillage.
It is hard to see our Government putting a carbon tax in agriculture in place before Copenhagen. Even without that complication, there are so many complex issues involved that our government — already wrestling with NAMA — will need to make a superhuman effort to devise a fair and effective carbon tax for agriculture.
