Fighting the COVID-19 pandemic dominates politics and public attention, sucking the oxygen from any discussion of other challenges which will re-assert themselves quickly whenever the health crisis comes under control.

Two such challenges are especially important for farming and the food industry.

The first is climate change, at the centre of the Government’s programme for government and the second is Brexit, an accomplished reality to which the sector is having to make costly adjustments. For the broader economy, the public finances will have to be re-balanced at some stage. People ask, constantly, where is the money coming from?

The EU had adopted ambitious targets for emission reduction, which imply sharp increases in carbon charges in Europe or measures of equivalent effect

Policy changes

The European Union is considering major changes to the framework of climate policy, as is the new US administration. A new international accord could involve border carbon adjustments, or BCAs. The EU had adopted ambitious targets for emission reduction, which imply sharp increases in carbon charges in Europe or measures of equivalent effect. These could take the form of straight increases in the carbon tax or more expensive emission permits in those sectors covered by the EU’s Emissions Trading Scheme. In either case, costs will rise for European producers. So far so good if the climate targets are serious. But what about unfair competition unless other countries follow Europe’s lead?

European exports would become more costly and imports would have an advantage in Europe’s home market.

Ideally everyone would agree to follow similar policies but there has been no success, for the last 30 years, in forging meaningful worldwide agreements, beyond aspirational targets which have not been met.

Tariffs

The European Commission has begun to consider a BCA regime, where imports would face a tariff designed to even things up – countries with poor climate policies would see an extra charge on entry into the European single market.

US president Joe Biden’s new administration might even agree to something along these lines. His predecessor, a climate change denier, would never have done so, but Biden is far more likely to accept the logic of climate action and has signed afresh the Paris agreement on emission targets on which Donald Trump had reneged.

The mismeasurement of agricultural emissions, by production rather than consumption and which exaggerates Ireland’s figures, would have to be reviewed in a BCA system.

UK commitments

The United Kingdom is outside the EU of course but has commitments on climate which it has taken seriously. Once the Brexit fever passes, the UK might even forge an alignment with the EU on the new policy. It is possible that these developments, as they are negotiated in the years ahead, could trigger the inclusion of international trade in food, currently outside the reach of carbon taxes and of the EU’s Emissions Trading Scheme.

This could see extra charges on consumers of food products but with a relative bias towards carbon-efficiency, on which Irish produce would score. The mismeasurement of agricultural emissions, by production rather than consumption and which exaggerates Ireland’s figures, would have to be reviewed in a BCA system.

Consequences

The full consequences of Brexit are finally being played out, to the immediate detriment of the Scottish shellfish industry and, as is now being realised, to many other economic sectors. Since Northern Ireland has retained access to the single market, under the provisions of the special protocol to the UK’s withdrawal agreement, Northern Ireland farming should be spared some of the worst consequences of the hard Brexit chosen by the UK government. But there have been problems for trade between Northern Ireland and Great Britain, with much political fall-out.

Under the scheme proposed by Theresa May’s government and undermined by Johnson, the UK’s entire territory would have stayed inside the EU’s customs union and some of the disruption at Northern Ireland's ports would have been avoided.

Instead, the choice was made to depart both the single market and the customs union when less damaging arrangements were on offer from the EU. Predictable problems have quickly emerged. The 2016 referendum neither sought nor delivered a mandate for this extreme version of departure from the EU and responsibility lies with those who insisted on a hard Brexit.

Lockdown

It now appears unlikely that there will be an early easing of lockdown measures in Ireland – case numbers are not falling quickly enough, and vaccination will not have a big impact in the short term. That means the financial cost of support measures will continue, both the pandemic unemployment payment (PUP)to those out of work and the various schemes to support businesses.

The Government will be borrowing huge sums for longer than has been provided in the 2021 budget. Since the EU budget ceiling on borrowing will eventually be restored, there will be a reckoning and it will involve tighter controls on spending and higher taxes.

It would be foolish to commence this process until economic recovery is in sight, but it is reckless to pretend, through regular commitments to new permanent expenditures, that the magic money tree is in bloom.