Earlier this week, the Climate Change Advisory Council (CCAC) signed off on Ireland’s first carbon budgets, covering the periods 2021-2025 and 2026-2030. Once adopted by the Oireachtas, Minister for the Environment, Climate and Communications Eamon Ryan will prepare sectoral emissions ceilings. These will form the basis of a legally binding pathway to reducing national emissions by 51% by 2030.

Along with publishing the carbon budgets, the CCAC produced a carbon budget technical report. The report lays bare both the scale of the challenge in terms of reducing emissions by 51% within the next eight years and the multibillion euro price tag associated with various mitigation strategies. Caitriona Morrissey goes into detail in this week's edition. It is remarkable that this economic analysis comes after and not before Government committed to a legally binding emissions reduction targets under the Climate Act.

Impact on farming

Also in this week’s edition, we carry the findings from a KPMG economic impact assessment into emissions reduction targets on the agriculture sector. The report was commissioned by the Irish Farmers Journal to ensure both policymakers and farmers were aware of the financial implications of emissions ceilings on farm incomes, rural communities and rural jobs.

Minister Charlie McConalogue at Kilkenny Mart where farmers gather early to protest the CAP announcements.

Along with a range of scenarios, detailed in this week's edition, the KPMG report specifically looks at the economic impact of an emissions reduction target within the range of 21-30%, currently being indicated by the Government.

If agriculture is forced to reduce emissions by 30% over the next eight years, KPMG identifies the impact on economic output at farm level to be €2.12bn per annum, a decline of 14%. This translates into a decline in dairy farm incomes of €17,500 per annum or 25%, with beef farm incomes declining by €2,800 per annum or 31%.

Government must not be allowed to achieve climate objectives for agriculture by developing CAP policy that forces farmers out of production

Overall, the loss to the wider rural economy will be €3.9bn per annum, hitting economic activity by 20% and leading to the loss of over 50,000 jobs. Even assuming the full rollout of both existing and new emissions reduction technologies, an 18-22% reduction in cattle numbers will be required to deliver a 30% reduction in emissions.

KPMG points to the fact that even at an emissions reduction target of 21%, herd numbers would have to be reduced by 5-6%, assuming all emissions reduction technologies were deployed across all farms. The economic consequences would be a reduction in farm profitability of €4,300 or 7% for the average dairy farm and €1,200 or 13% for the average beef farm.

Incentivise new technologies

The report identifies that based on the rollout of existing and emerging emissions reduction technologies, there is the potential to reduce emissions from agriculture within a target range of 13-18% over the next eight years. This can be achieved while contributing positively to farm income and without any need to reduce the national herd. Clearly, the adoption of these environmental emissions reduction technologies should therefore be heavily incentivised within the new eco-schemes measures and new agri-environment schemes under the next CAP.

Ultimately, the findings of the KPMG report put in front of Government the economic impact of the policy choices it is going to make in the weeks ahead. Going beyond an emissions reduction target in the 13-18% range will come at a huge costs to farmers, the rural economy and rural jobs.

Under the Climate Act, the Government is required to deliver a just transition to a climate-neutral economy that “supports persons and communities that may be negatively affected by the transition”. Therefore, any move to set a target beyond what can be delivered with the existing and newly emerging technology must come in tandem with a detailed breakdown of how farm incomes and rural communities will be supported.

In assessing the impact that de-carbonisation will have on the economic viability of the various sectors, it is important that agriculture is viewed through a different lens. As we see currently playing out in the case of energy prices, other sectors can immediately pass the costs of de-carbonisation on to the end consumer. Farmers are not in a position to do this. Therefore, in the context of respecting “climate justice”, the green transition of agriculture is completely dependent on financial support. Worryingly, as Anne Finnegan reports, instead of recognising the need for additional green transition funding, in the same way it does for the energy sector, the CCAC points to CAP funding as the main vehicle to compensate farmers for their income loss.

National herd

The role of negative subsidies in “engineering” a reduction in the national herd to achieve emissions reduction targets is highlighted as an option in the CCAC report. What this effectively means is forcing farmers out of production by undermining the economic viability of the sector through policy design. It is clear that the CCAC sees the suckler sector as the most exposed to this strategy given its heavy income reliance on CAP supports.

Under the carbon budget scenarios where emission reductions are required to reduce by more than 30%, the CCAC model is built around an assumption that the suckler herd will fall to just 200,000 head by 2030. Achieving such an outcome is seen as facilitating the rewetting of over 100,000 ha of grassland.

\ Jim Cogan

If we look at the funding proposals for the next CAP, announced by Minister for Agriculture Charlie McConalogue last week, there is some evidence to suggest that such a policy approach is being adopted by this Government. The absence of any unused commitment to target direct supports to the suckler herd, though coupled with a surge in support for much more extensive organic farming, is akin to “engineering” a reduction in the national herd – by designing a policy landscape that will undermine the economic viability of the sector and force farmers out of production.

In the face of such a policy objective, the notion of any direct coupled payment for suckler cows was only ever a pipe dream. Also, the design of new agri-environment schemes must be watched closely to ensure that farmers are not forced out of production in order to access funding.

High-risk strategy

It is a high-risk strategy for all farmers if the agriculture sector stands back and allows the Government to achieve national objectives through the “engineering of negative subsidies” within agricultural policy. While the suckler sector may be the current target, other sectors could quickly be subject to the same approach when we move beyond 2030 emissions reduction targets.

As Anne Finnegan highlights, it is completely reasonable for farmers to ask why they are being treated differently to other sectors – such as energy in the current context and fisheries in the past – where the need to decommission was appropriately compensated.

Government must not be allowed to achieve climate objectives for agriculture by developing a CAP policy that forces farmers out of production by making their business unviable. Instead, it must face up to the financial reality of its green ambition and put in place transition funding beyond CAP that reflects whatever the financial ask is made of farmers and rural communities.