Concerns about impact of ETS on food production and business

Posted by Editorial on 9th July 2008

Even though agriculture cannot be covered by an Emissions Trading Scheme (ETS), the Australian Government must take steps to ensure consumers can still afford basic food items, the National Farmers’ Federation (NFF) warned today.

“Any ETS will cause pain to businesses and households… people are slowly coming to grips with that reality,” NFF President David Crombie said. “But it could be crippling for Australia’s food production, threatening to damage our national self-sufficient food supply and slashing at our international competitiveness if we get it wrong. We need assurances and tangible recognition that our farmers’ competitiveness – both exporters and those exposed to cheaper imports – will not be sacrificed at an ETS altar.”

“As Ross Garnaut and the Productivity Commission have both highlighted, even while it is impractical for agriculture to be covered by an ETS, the farm sector will bear the brunt of massive price hikes to up to half of its cost base,” Mr Crombie added.

For example, the NFF point to Australian Bureau of Agriculture and Resource Economics data which reveals that for sectors like cropping, 45% of their input costs are energy dependent and impacted by the ETS. “All of these costs will rise dramatically under an ETS,” Mr Crombie said. “Assuming those costs are passed on, as is the intention, Australians will pay a premium for essential foods.”

The other fear is that exports will struggle to compete as other countries fail to commit to similar schemes to reduce their carbon footprint. “Meanwhile, our $30 billion-a-year agricultural export market will struggle to maintain customers – a disturbing and ironic twist, in that, our trade partners will source cheaper food from countries with polluting farm systems and who do not have an ETS or its cost pressures,” Mr Crombie suggested.

“Australian agriculture accounts for 12% of GDP, underpins 1.6 million Australian jobs and produces 93% of Australia’s daily domestic food supply. Our local food production and our overseas customers must not be compromised by an ETS,” Mr Crombie concluded.

Leading business representative the Australian Chamber of Commerce and Industry (ACCI) has also highlighted their worries about the scheme. The ACCI (and Federal Opposition) believe that, while it is good for Australia to show initiative, it could undermine competitiveness given a lack of commitment by some of the world’s largest emitters. The ACCI is calling for careful consideration of the ETS to ensure it is not too quickly phased in, nor does it provide unrealistic goals for businesses to meet.

A recent survey has indicated that Australian businesses are also lacking understanding and awareness about the ETS. The Australian Institute of Management last month surveyed 268 senior executives and found that only 36 per cent were aware it would start in 2010, with about 80 per cent knowing very little about the ETS and yet to begin planning for its introduction.