Climate Change Economics and Policy

Answer

Introduction

Agriculture has always been and will still remain an important pillar in the Australian economy. Agriculture employs over three hundred thousand Australians and produce food to feed over eighty million people. The farmers not only feed close to ninety five percent of the Australian population, but they also produce export products that account to A$41 billion annually (Barange et al., 2014). Agriculture and fisheries highly depend on climatic conditions for survival. Climatic changes such as increased temperatures are a threat to the marine life which results in fishes’ habitat shifts to cooler waters. These changes make it difficult for crops to grow normally and prevents animals from maturing at the expected rate. This paper covers physical impacts and policy changes due to climatic changes in Australia.

Predicted Climate Change Impacts on Agriculture and Fisheries

Agriculture and fisheries are highly depend on the climatic conditions. Future climatic change components include increase in carbon dioxide and temperatures which may be beneficial to some agricultural activities. However, for the changes to be positively realized in the sector, soil moisture, high nutrient levels, and water availability must be met (Barange et al., 2014). Changes in the severity of droughts and their frequencies may pose an increased threat to ranchers and farmers, thus affecting food security. The impact of climatic change on agriculture is dived into effects on crops, fisheries and livestock.

Crops grown in Australia are critical for food security in the country and its neighboring countries. For any given crop grown, the effects of increased temperature will be determined by the crop’s optimal growth and reproduction temperatures. Warming will benefit the types of crops currently grown in the tropics. Additionally, it will allow farmers to shift into planting crops that are currently produced under hot conditions (Pecl et al., 2017). Nevertheless, if the increased temperature exceeds the optimum temperatures for the crop, then production will automatically decline.

The increased carbon dioxide levels is predicted to increase crops’ yields. This is in accordance with laboratory experiments that indicated that increased levels of carbon dioxide increases the rate of plant’s growth (Iglesias et al., 2012). However other critical factors that may counteract this effect include nutrient constraint, water unavailability, changing ozone layer and temperatures. Increased carbon dioxide is also associated with reduced protein and nitrogen content in certain crops such as soy beans. This reduces the crops’ quality. The expected increase in temperatures and carbon dioxide depicts an elevated number of pests, weeds and fungi (Iglesias et al., 2012). Therefore, the ranges and distribution of pests and weeds are likely to increase with predicted climatic change.

Climate change will also impact livestock department of the agricultural sector. Heat waves are projected to increase with the changing climatic conditions. This will directly threaten livestock. Exposure of livestock to high temperature normally lead to devastating losses to livestock farmers. This is because heat stress increases the vulnerability of livestock to diseases and reduces their milk production as well as fertility (Stokes et al., 2010). Projected increase in drought frequency and severity will threaten feed supplies and pastures for the animals. Additionally, drought will reduce the quality and amount of forage that is available for grazing.

Thirdly, climate change may lead to increased prevalence of diseases and parasites that affect animals. Warmer winters and early onset of spring will allow most pathogens and parasites to survive more easily (Stokes et al., 2010). Increase in the amount of carbon dioxide may increase pasture productivity but reduces its quality in the process. The livestock will, thus, have to eat more to attain the required amount of nutrients needed for their quality production.

Predicted climatic changes may force other fish species to migrate to colder areas of the lakes and oceans. Moving into these new areas will increase competition for food amongst the other existing fish species thus reducing their reproduction. The changing climate is also linked to breakout of fish diseases. Higher estuarine salinity and water temperatures have enable oyster parasite to spread widely in the Atlantic Ocean (Barange et al., 2014). In the Arctic, winter warming currently cause salmon diseases within the Bering Sea.  This shows that changes in the seasons and temperature will affect the migration and reproduction of fish. The climatic changes are thus expected to drastically decrease the population of most fish varieties.

Policies

The former Labor Government’s Carbon Tax

Carbon tax refers to the tax on energy resources that emit carbon dioxide. This tax helped address the negative externalities in Australia. Externalities normally arise when consumption or production activities impose costs to others. Placing a cost on the negative externalities help in reducing carbon emission thereby slowing the rate of global warming. The Australian government implemented carbon tax by taxing the burning of its fossil fuels such as petroleum and coal in proportion to the component carbon they contained (Freebairn, 2016). During its application, there was a political divide in its support in Australia. The labor party favored the initiative as an important step to reducing Australian carbon emissions. However, Howard government’s task force which examined the options for reducing climate change in 2014 rejected the carbon taxes and supported a direct action on the emission trading scheme.

The carbon tax scheme was abolished by the Australian parliament based on the fact that it had a declining relevance around the world. This is because, the incoming government viewed that the tax policy had failed to reduce carbon emission. The government then incorporated a direct action policy which works primarily by funding companies to incentivize the carbon emission reduction activities (Freebairn, 2016). Most companies however, noted that the direct action is not as effective as the carbon tax approach earlier used. The reason is that carbon tax placed a lot of financial pressure and reputation threat that prompted the companies to act proactively and manage their carbon emission.

The Emissions Reduction Fund

Election of the Coalition party into the Australian government oversaw the abolition of carbon tax and adoption of Emission Reduction Fund (ERF) in 2013 (Burke, 2016). The objective of this scheme was to achieve reduction of carbon emission at the lowest cost possible through auction mechanism. Under ERF firms are required to submit sealed bids to the Clean Energy Regulator which is a department of the government.

The Clean Energy Regulator department quotes the cost associated with reduced emission of greenhouse gas beyond the pre-determined levels. These quotes are then ranked according to their cost per unit of carbon reduced. The proposals with best values are funded based on the financial capability of the government. The sealed auction ensures that the specific bench-marks set by the firms are commercial-in-confidence. Determination of the baseline also take into consideration the temporal variation. This makes the scheme to achieve the highest baseline for carbon emission ever reported (Burke, 2016).

The removal of carbon tax and replacing it with auction type scheme has born a number of controversies. The ERF eliminates the relevance of Polluter Pays Principle in setting carbon reduction targets. The scheme, however, introduces pollution subsidies aimed at inducing polluters to reduce their emission. This scheme therefore embraces the Provider Gets Principle to deal with carbon reduction (Clark et al., 2014). In principle, the tax and subsidy schemes could be regarded as equivalent in that they were aimed at achieving the same level of abatement. However, design for the implementation of the two policies gave rise to wide differences between them. For instance, carbon tax was designed to be sealed up progressively while subsidy scheme is designed to last for five years only.

Risks of Climate Change Policies to Agriculture and Fisheries

Evidently the main risk that Agricultural sector is likely to encounter with climate change in Australia is policy instability. This can be summed up as regulatory risk. As the issue of climate change gathers increased pace, the country’s policy environment becomes even more uncertain. The international climate regulation will also have an increased impact on Australia and its agricultural sector. Beyond the carbon tax policy, the situation in Australia is unclear. However, implementation of more regulatory policies in dealing with greenhouse gas emission is inevitable. The agricultural sector will suffer from physical impacts of the climate change policies including changing markets, negative effects of energy price changes, shareholder activism, increased competition and increased investment (Crowley, 2017).

The financial pressure that carbon tax exerted on companies acted as a strong motivation for the industries to manage their carbon emission as compared to direct action scheme (Nong & Siriwardana, 2017). Abolition of tax policy will reduce this pressure and as such, the companies will not take active responsibilities for their carbon emissions as they used to. Additionally, a number of benefits that were realized during the time of its implementation will be lost. For instance, carbon tax policy created a revenue source for the government. This revenue was allocated to agriculture and other sectors of the economy thus improving productivity.

In addition, the tax from carbon tax policy ensured that other taxes were reduced by the central government. Agriculture would be the most affected sector due to pollution and as such, it was supposed to receive the largest share of the taxes from carbon emission. With this policy scrapped off, the agricultural sector has been left vulnerable and in the hands of the multibillion dollar firms’ mercies. Changes in the policy development has led to lack of consistent regulatory framework in the country. This leaves different levels of government exposed to pursuing changing policies that end up complicating climate change mitigation (Nong & Siriwardana, 2017). This backfires mostly on the agricultural sector.

Opportunities of Climate Change Policies to Agriculture and Fisheries

            Although climate change possess threat to agricultural sector, the move to establish a carbon constrained economy is welcoming new opportunities across all sectors, particularly, the agricultural sector. Taking concerted action in response to climate change is seen to give rise to unlimited opportunities. Some of these opportunities include building of new markets, competitive advantage and improving regulatory intelligence (Eady et al., 2016). These opportunities directly impact the agricultural department.

Regulatory framework on climate change will also lead to efficiency, cost and value creation within various economic sectors (Evans & Phelan, 2016). Action on sustainability at any level always involve improving production efficiency. This presents opportunities to the agricultural sectors which currently has tight margins in Australia. The most significant motivator is the introduction of transformative changes across the agricultural supply chain. Energy efficiency for instance, would ensure that the natural resources are widely used thus reducing the pressure on mining activities. This directly influence both crop and livestock production. This is because energy efficiency reduces environmental pollution thus promoting quality of the agricultural products.

Adaptation Strategies

The continuously changing climatic condition in the world has prompted most countries to start up adaptation strategies to ensure that existing systems are not negatively affected in the future. One of the most critical sectors where the adaptation strategies are directed to is agriculture. There are a number of adaptation strategies that the Australian government can implement to sustain agricultural sector in the future.

Cropping system strategy

The first strategy here is altering inputs for instance varieties and species with more appropriate vernalization requirement and thermal time. Also, fertilizer rates can be altered to conform to product quality that is consistent with projected atmospheric and climatic changes. The second strategy is altering the timing and amounts of irrigation of the crops. Thirdly, there should be a wider use of integrated pest and diseases management. The crops planted should be those that are more resistant to disease and pests (Crowley, 2017). Lastly, the stakeholders should diversify income through integrating multiple farming activities.

Livestock System Strategy

Adaptation strategies in this area include modified grazing times, care of continuously matching pasture production with stock rates, timing of production practices, alteration of animal species and forage and altered integration within agricultural systems (Evans & Phelan, 2016). The additional adaptations include reassessing application of fertilizers, use of appropriate concentrate and supplementary feeds, and laying out water management strategies to boost production.

Fisheries System Strategy

The first strategy is to identify and protect water bodies that are considered valuable for fish acquisition. These valuable areas will be affected by climatic changes and as such should be protected to ensure constant flow of fish in the future. Secondly, fisheries and aquaculture should be mainstreamed into food security policies at the national level (Barange et al., 2014). This will ensure that the sector is incorporated in the broader development planning. Lastly, capacity building of the fishery department will help ensure that the department is continuously improved to adhere with the climatic changes.

Conclusion

Agriculture has always been and will still remain an important pillar in the Australian economy. Agriculture and fisheries are highly depend on the climatic conditions. Future climatic change components include increase in carbon dioxide and temperatures which may be beneficial to some agricultural activities. These may be mitigated by various adaptation strategies and regulatory policies set by the government of Australia.