Make ETS permits free for farmers, says NFF

Age
Monday 22/9/2008 Page: 3

MOST permits under the Federal Government's proposed emissions trading scheme (ETS) should be allocated free, especially for agriculture, says Australia's peak farming body. The National Farmers' Federation said free permits for agriculture would be justified as action by farmers had cut greenhouse emissions from agriculture, forestry and fishing by 41.7% between 1990 and 2005. More than 90% of carbon permits should be free.

"Free allocation with an efficiently working secondary market will deliver the same outcome and efficient price discovery as an auction system," the NFF said in its submission on the Government's Carbon Pollution Reduction Scheme (CPRS) green paper. This would minimise the revenue shock from implementing the CPRS. "This process has been adopted in Europe and New Zealand," the NFF said. The green paper ruled out bringing agriculture into the CPRS until at least 2015, with a decision likely to be made in 2013.

The NFF disagreed with the green paper's assertion that companies could pass on the cost of carbon. "Agriculture's capacity to pass on costs is notoriously poor, meaning that many farmers will be forced to absorb the vast majority of the cost of these permits," the NFF said. The sector would also be hit by other price increases caused by the CPRS, such as fuel and energy, which would hurt farmers' global competitiveness from 2010.

"It would be perverse if agriculture was more adversely treated in the Australian CPRS than in any other ETS in the world," the federation said. The NFF said forestry could make a valuable contribution, but had the potential for perverse outcomes. These included less water run-off, affecting ground-water hydrology on neighbouring farms, biodiversity losses and reductions in land available for food.

The CPRS should also not bolster managed investment schemes, which "do not promote sound investment decisions in rural Australia". The NFF said it supported small-scale, on-farm forestry as a complement to agriculture while helping to sequester carbon. But the provision requiring trees on continuous land of 0.2 hectares or more should be abolished.