Agriculture is a sector that is particularly sensitive to changes in climate because crops need the best possible weather to reach maximal yield. Meat production is also keyed to the weather, particularly in areas that use grazing land rather than processed cattle or other animal feed (Thornton et al., 2014). As a country, Australia is vulnerable to climate change due to its location and significant variability in regional climate (Raffan et al., 2016). The purpose of this paper is to examine the impacts of climate change on dairy production in Australia and to compare the carbon tax (which has been repealed) with the Direct Action Plan. Also, the paper will consider risks and opportunities inherent in the effects of climate change on this sector, as well as ways that dairy farms can adapt to extreme climatic events in the future.
Climate change impacts
Gradual climate change has minor impact on agriculture compared to ECEs. Increased frequencies of ECEs affect crop and pasture production to a greater extent. The main focus of the studies is on draught and heat stress. Harrison and colleagues (2016) evaluated a low-impact model and a high-impact model to evaluate the impacts of climate change. The results agreed with the parameters set forth by the IPCC, which predicted a “virtually certain reduction in the frequency and magnitude of unusually cold days and nights, a very likely increase in the length, frequency and/or intensity of heat waves, a likely increase in the frequency of heavy precipitation events, and medium confidence in projected increases in the duration and intensity of droughts” (IPCC, 2012; Thornton et al., 2014).
The dairy industry is the third largest food sector in Australia, after grains and meat production. Impacts of climate change on dairy production can occur based on gradual changes or variable change, as discussed above. Extreme climatic events (ECEs) such as drought and heat waves can destroy grazing lands, causing producers to use more processed feed, which often results in higher prices for dairy products. Heat waves or flash flood-producing precipitation events can harm and even kill dairy cattle, decreasing production (Harrison et al., 2016).
When considering the relation between climate change and agricultural sector, it is important to recognize that the impacts go both ways. In other words, climate change affects the success of the food industry, but certain aspects of the food industry also affect climate change. For example, dairy production has a considerable impact on climate change due to the emission of methane, a greenhouse gas (GHG), by all cattle. According to Moate et al. (2016), more than 93% of the dairy cattle in Australia are fed by grazed pasture, usually perennial ryegrass, with processed feed or silage only when required. The carbon footprint of the dairy sector in Australia is approximately 1.1 kg of carbon dioxide equivalent for every kg of milk. More than half of that footprint is due to methane emissions from dairy cattle (Moate et al., 2016). Other sources of GHGs from dairy production include energy for milking machines and storing milk, transportation of milk, and processing of raw milk to form cheese, yogurt, and other dairy products (Gerber, 2010).
The Carbon Tax Versus the Direct Action Plan
The Carbon Tax was introduced by the Labour government to the Australian Parliament in February 2011. It had little support from the public and other politicians outside the government. Nevertheless, the plan passed and became law. The theory behind the Clean Energy Legislative Package (CELP), aka Carbon Tax, was to incentivize reduction of GHGs by charging companies according to the amounts of GHGs they produced. CELP would address more than half of the overall emissions in Australia. This plan was intended to transition to an Emissions Trading Scheme (ETS), or cap-and-trade programme, in 2015. The ETS would be similar to the ETS in the European Union. According to the Institute for Energy Research (Robson, 2013), the tax was implemented on July 1, 2012. It required more than 300 of the most polluting companies in the country (“liable entities”) to pay a fee for every tonne of GHGs produced by their businesses. Liable entities included energy, mining, steel, and other firms, but excluded agriculture, land, and forestry. The tax began at $23 per tonne but increased to $24.15 by 2013. It was expected that the tax would be added to consumer prices, and this did occur. Household electricity prices made a sharp increase when the tax was implemented. The unemployment rate went up as well, and, surprisingly, the amount of CO2 emissions increased, too (Robson, 2013).
Although the agriculture industry itself was protected from the Carbon Tax, indirect effects still occurred. For example, many of the liable entities provided goods or services that a dairy farm would need, especially electric, coal, and gas energy, along with petroleum products for transportation and packaging, steel and aluminium for dairy product factories, and fertilisers and water for grazing pasture. The biggest and most polluting companies in all of these industries were on the Carbon Tax list, and they would pass along their costs to the dairy farmers (LEPID, 2013). Thus, the immediate outcome of the Carbon Tax for the dairy industry would be increased costs.
The Carbon Tax scheme was repealed by the Liberal-National Party coalition on July 1, 2014, so that it was only in effect for two years. It was replaced with a Direct Action Plan which rewards companies who reduce carbon emissions, rather than penalizing those who do not (Dreyer et al., 2015). It is a voluntary programme in which businesses or individuals register their GHG-abatement projects, participate in an auction for a contract, and claim Australian carbon credit units (ACCUs) for the successful reduction in emissions. The Emissions Reduction Fund, administered by the Clean Energy Regulator, also has a scheme to prevent the reduced carbon emissions of one business from being offset by increased carbon emissions of another business. This scheme causes any entity that produces more than 100,000 tonnes of carbon dioxide equivalent per year to keep its emissions below a certain baseline, usually based on historical levels. These companies can then purchase ACCUs from others who received them through the Emissions Reduction Fund (Clean Energy Regulator).
There are many types of projects (also called methods) which are available under the Emissions Reductions Fund, and several of them would be available for dairy farmers. For example, because the dairy industry may involve transporting raw milk and milk products, any increase in energy efficiency or change to a less polluting energy source would be eligible for an ERF contract. Carbon sequestration (through plants) and carbon storage (underground) could be feasible in some areas. There are also two methods that are specific to dairy farms: (1) combusting or using the methane produced by manure in digesters or covered ponds, and (2) feeding certain supplements to cattle giving milk. Since the Australian Dairy Industry Council intends to reduce its GHG production by 30% by 2020, it is obvious that there is no way to do this other than having many strategies in use (Christie et al., 2016).
Cows produce large amounts of manure, and as it degrades, it creates methane gas. When one considers the fact that natural gas is primarily methane, it seems surprising that dairy farmers would allow that resource to be released into the air but pay for natural gas to heat their houses and their water, or buy it indirectly as electricity produced by natural gas. It would be difficult to capture the methane produced by the cows, but if the manure is placed in an anaerobic covered pond or a digester, the methane can be collected and used to heat buildings or even sold to a power plant. It can also be combusted in a flare, but that would be wasteful (Christie et al., 2016).
According to Moate and colleagues (2016), dairy cows that are fed high-lipid supplements such as canola, cottonseed, hominy meal, and brewers grains produce less methane. These supplements are plant by-products that are left over after production of cotton, canola oil, and so forth. The Australian Federal Government has calculated that each increase of 1% in dietary lipids results in about a 3.5% decrease in methane production (Moate et al., 2016). Another abatement method that is still being studied is increasing the ratio of wheat to pasture consumed by milk cows. Finally, Christie and colleagues (2016) reported that earlier mating of replacement heifers resulted in increased lifetime milk production while decreasing the amount of time that a cow is emitting methane without giving milk.
Risks and Opportunities
For the dairy industry, the risks in a carbon-constrained world are less than the opportunities. As indicated above, the Carbon Tax would have been harder on dairies, due to companies passing along their fees, but it has been repealed, and there are many worthwhile projects available from the Emission Reduction Fund. By collecting and using manure methane, dairies can not only meet ERF guidelines but also lower their energy costs. The high-fat supplements to reduce methane are plant by-products that serve no purpose otherwise – again, dairies receive carbon units via the ERF which they can then sell to large polluters. However, it is important to remember the hidden costs. For example, there may be no factories nearby that produce the high-lipid supplements, so transportation costs must be considered. Many well-managed dairies are already at peak efficiency, so they may not have much room to improve. Carbon policies should be carefully examined to make sure that the effort to gain the carbon credits will be worthwhile.
To adapt to climate change, dairy farmers can change calving times to match the seasonal pasture growth in their areas, as well as the increasing frequency of summer heat waves. As suggested earlier, the ratio of pasture and forage versus supplemental feeding may require adjustment. Growing and cutting silage on the farm can be more economical and provides a food source in case of extreme weather (Harrison et al., 2016). Agriculture is severely affected by climate change. Any sharp deviations have short- and long-term consequences. In order to develop the area and make it sustainable in terms of a changing climate new solutions must be elaborated. The managers of the industry face the dual problem: the effect of climate on the agriculture and vice versa. The current policies already take into account the threats that the industry experiences. More studies and innovative solutions must not only help the agricultural sector adapt to the climate change but also create a positive impact on climate.
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