Potential Impact of a Carbon Charge on Profit of a Western District Cropping and Grazing Farm

One policy response to climate change in Australia is to create a price for carbon to reduce emissions through the introduction of a policy of emissions trading. The federal government indicated that agriculture would not initially be covered by an emissions trading scheme (ETS), however, it is the sector would be affected indirectly by an ETS even if it was not covered by such a scheme. This report examines the impacts an ETS and associated climatic changes may have on a mixed farming enterprise’s operating profit. Using a case study farm in the Western District of Victoria, the impacts of an ETS and climatic change on the profitability of the enterprise are modelled under twelve scenarios. These scenarios were constructed using: various emission prices; climatic changes; changes to enterprise mixes; and degrees to which free emissions permits are allocated. The report illustrates that farm productivity growth is crucial for the future viability of the farm enterprise. It also demonstrates the complexities around reducing emissions whilst continuing to meet world food demand