Billions of euro at stake in carbon emission ceilings negotiations

Negotiations are under way at Government level to agree emissions reduction targets to 2030 for agriculture and other sectors.

The final agreed targets for the agriculture sector may result in multibillion euro economic losses and significant job cuts. Ireland has committed to reducing emissions by 51% on 2018 levels by 2030 and to climate neutrality by 2050.

The targets are legally binding and ambitious. However, they appear even more so given the realities that the economy and society are now faced with.

Of course, the business case for reducing emissions and in particular reliance on fossil fuels has increased with Russia’s war on Ukraine, but the path to decarbonising has likely become more challenging too.

Ireland’s ambitions are aligned to a wider global ambition of limiting global temperature increase to between 1.5% and 2% this century under the Paris Agreement.

Agriculture accounts for 37% of Ireland’s emissions according to the Environmental Protection Agency.

While emissions per unit of production have been decreasing and are some of the most efficient in the world, total emissions attributable to the sector have been increasing largely as a result of increased dairy production.

Significant investment, both from the public and private sectors is required for the transition across all sectors and in society as a whole. The Climate Change Advisory Council estimates an average up-front investment of €5bn per annum to 2030.

However, agriculture was the only sector envisaged to incur a reduction in economic output. Teagasc economic analysis for the Climate Change Advisory Committee estimated a reduction in output for primary agriculture of €719m from a 20% reduction in emissions and a loss of €1,894m from a 33% reduction in emissions. The economic loss outside of the farm gate wasn’t quantified.

Economic loss of €3.8bn from 30% emissions reduction

KPMG analysis commissioned by the Irish Farmers Journal indicates that in the absence of new technologies, achieving a 30% reduction in emissions compared to 2018 levels requires deep cuts to livestock numbers.

Declining average farm income would result in an overall loss of €2.12bn (14%) in economic output at farm level by 2030. The combined reduction from farming and processing and the wider supply chain would be €3.8bn (20%). Applying economic multipliers, the analysis points to job losses in the region of 56,000 from farm level across the supply chain.

Reducing dairy stock by 18% is forecast to result in a reduction in income of €17,500 (25%) on the average dairy farm by 2030. This is based on a 16% (€35,500) reduction in farm revenue offset by a reduction in variable costs of €15,900, mainly for feed and fertiliser.

The average beef farmer would see a €2,800 (31%) reduction in farm income. Farm revenue would fall by €5,200 (14%) which is again offset by a reduction in variable costs of €2,800.

Economic loss of €1.1bn from 21% emissions reduction

A 21% emissions reduction, similar to the bottom level of the range of the proposed emissions ceiling for agriculture, would see an annual economic loss of €1.1bn in the agri-food sector.

KPMG’s economic analysis estimated a loss of 10,000 jobs in the sector resulting from a 6% cut in the beef herd and a 5% cut in the dairy herd. The consequences of what may appear as a relatively small reduction in cattle numbers is still dramatic.

A 5% cut in the dairy herd is forecast to reduce income by almost €10,000 on the average dairy farm. When reduced input costs are accounted for, average profit would fall by €4,300 or 7%. On beef farms, a 6% cut in the herd would mean a drop in income of €1,400 and when a €200 reduction in input costs is factored in, profitability will fall by €1,200 on the average beef producing farm, a 13% decrease.

Farmers will be asked to cut emissions by 22% to 30% by 2030 to contribute to the overall national target of a 51% reduction by 2030 relative to 2018. It is often said that farmers are not being asked to do as much as other sectors in meeting the 51% and that is correct.

However, in terms of the impact of Ireland’s emissions on global warming, farmers are being asked to do far more than other sectors. And this comes at a significant economic cost.

Some 60% of Irish agricultural emissions are methane, emanating from biological processes in livestock. Methane is a short-lived gas with a lifetime of 12 years in the atmosphere, unlike carbon dioxide which has a lifetime of 100 years.

Once methane emissions are stabilised, their impact on global warming is neutralised. Deep cuts to methane emissions provide a cooling effect and could be employed where other sectors cannot meet their targets or if indeed the Government’s ambition was to undo Ireland’s historical contribution to warming which no other government has undertaken to do.

Scientists agree that the manner in which greenhouse gases are currently accounted for internationally understates the impact of any change in methane emissions rate on warming while at the same time overstating the impact of constant methane emissions.

According to Prof Myles Allen, Professor of Geosystem Science at Oxford University, for Ireland’s farmers this is a double-whammy: it exaggerates their recent contribution, while belittling the impact of any cuts.

He points to the IPCC 6th Assessment Report, which put it very explicitly: “Expressing methane emissions as CO2-equivalent using GWP100 overstates the effect of constant methane emissions on global surface temperature by a factor of three to four, while understating the effect of any new methane emissions source by a factor of four to five over the 20 years following the introduction of the new source.”

Essentially, to achieve a 51% reduction in Ireland’s emissions by 2030 agriculture is likely to be asked to do substantially more than is required to halt the sector’s contribution to global warming.

It would actually have a cooling effect, going beyond the impact of other sectors and incur substantial economic losses in doing so.

That cooling impact would in fact be compensating for at least some of the warming caused by other sectors like transport, according to Prof Allen.

If that is the political will, farmers should be compensated accordingly in recognition of that fact.

None of this is to suggest that agriculture should have an easy ride. Forty per cent of emissions in the sector are from long-life gases, the reduction of which must be aggressively pursued. Cutting livestock numbers would have a beneficial effect in reducing these emissions too, but other solutions do exist.

Policy-makers may also see wider environmental benefits in terms of addressing water quality issues, air pollution and forcing land use change to activities, such as forestry, that remove carbon from the atmosphere.

The sector can be ambitious in reducing methane emissions, and indeed the wider environmental challenges without incurring the level of losses that have been estimated.

In any event it requires major transformation in farming, some of which will be uncomfortable and even unpalatable at times.

It is only in the pursuit of Ireland’s emissions targets and not the impact on warming that deep cuts to agriculture emissions, specifically methane, are required.