A comprehensive emissions trading scheme (ETS) is Australia’s principal climate change policy instrument. There are undoubtedly benefits of full ETS coverage. However, if emissions that cannot be affordably, reasonably and accurately measured are included, these must be balanced against potential costs. This report explores why agriculture is different from other sectors. Agriculture’s diffuse and diverse emissions are inherently difficult to measure. They also fluctuate in response to environmental factors such as climate and biophysical characteristics. It is problematic to include the agriculture sector in the ETS, at reasonable cost and with incentives for behaviour change at the emission source. This is because of the climate and biophysical characteristics combined with the scale of over 130,000 farm enterprises. Worse, the emphasis on including agricultural emissions in the ETS is a disincentive for early abatement action. Alternative abatement policies are considered in this report which concludes that a ‘carrot and stick’ approach, using a range of policy instruments, is the best way to deliver cost effective abatement for agriculture.


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