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Abstract

This paper focuses on the impact of mitigating greenhouse gases (GHG) on agricultural trade. In particular, the paper assesses the impact on New Zealand (NZ), which is highly reliant on agricultural trade, with a high percentage of its total GHG emissions are originating in the agricultural sector. The paper also analyses the impact of mitigation strategies in the European Union (EU), which has a low proportion of GHG coming from agriculture, a highly protected agriculture sector, and is a major market and competitor for NZ. Results from a partial equilibrium trade model, the LTEM, show clearly that while these mitigation strategies achieve the goal of GHG reduction, producer returns are also negatively affected. The value of these changes in emissions are then calculated, based on US$15/tonne of carbon dioxide (CO2), and producer returns adjusted for this. Although this value of CO2 goes some way towards offsetting the reduction in producer returns, it would need to be considerably greater in order to provide any significant compensation.

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