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Abstract
If agriculture were to be included in Australia’s carbon price scheme, a key decision
for government would be how to estimate greenhouse gas emissions. We explore the
consequences of three different methods for measuring on-farm emissions: national
accounting methods, an amended version of those methods and use of best-available
local data. Estimated emissions under the three methods can vary widely; for example,
on a case study farm in Western Australia, local data indicated 44 per cent lower emissions
than did the national accounts method. If on-farm emissions are subject to an
emissions price, the impact on farm profit is large and varies considerably with different
measurement methods. For instance, if a price of $23/t of CO2-e applies then farm
profit falls by 14.4–30.8 per cent depending on the measurement method. Thus, the
choice of measurement method can have large distributional consequences. On the
other hand, inaccurate measurement results in relatively minor deadweight losses.
On-farm sequestration through reafforestation may lessen the impact of an emissions
price on farm businesses, although it will require a high carbon price to be viable,
especially if sequestration rates are underestimated or low.