Climate Change Impacts, Mitigation Policy & their Interaction in West Australian Mixed Crop- Livestock Farming Systems

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1 Climate Change Impacts, Mitigation Policy & their Interaction in West Australian Mixed Crop- Livestock Farming Systems Tas Thamo, Donkor Addai, David Pannell School of Agricultural & Resource Economics, UWA Mike Robertson CSIRO Ecosystem Sciences

2 Introduction Research on climate change and agriculture generally falls into two categories: - Impact (and adaptation) - Mitigation policy (and emissions) Usually studied in isolation

3 Our analysis... Compare the relative effect of, and interactions between, impacts and mitigation policy Findings for WA farms Climate change impacts may be considerable Potentially have a much bigger effect than mitigation policy Climate change may reduce the potential to sequester carbon on farm land

4 A Modelling Analysis Bioeconomic model: MIDAS (Model of an Integrated Dry Land Agricultural System) Objective: maximise farm profit o By selecting from a range of cropping & livestock activities o Subject to constraints such as machinery capacity, the availability of land, labour... These activities and constraints typical for farms in the study area

5 Study Central Wheatbelt Region of WA around the town of Cunderdin Large farms (MIDAS is based on a typical 3,200 ha farm) Cropping the dominant enterprise (cereals, canola and lupin) Annual pastures Self-replacing Merino flock Climate Change Projections for Study Trend of projections is unanimous: hotter and drier But the extent of these changes varying depending on the climate model (& expectations about future emissions)

6 Climate Scenarios Scenario Name Temp Rainfall Atmospheric CO 2 Basecase Weather Observed from ppm Four climate change scenarios were then created...

7 Climate Scenarios Scenario Name Temp Rainfall Atmospheric CO 2 Basecase Weather Observed from ppm Low-Med CC C -10% 450 ppm Med CC +2 C -15% 475 ppm High CC +2.5 C -20% 525 ppm Very High CC +4 C -30% 575 ppm CC scenarios represented by: Scaling all min max temp observations in historical basecase dataset Scaling rainfall observations in historical basecase dataset (changing the intensity but not frequency rainfall events) Changing atmospheric CO 2 level in the biophysical models

8 The biophysical impact of climate change was predicted with simulation models APSIM crop yields GrassGro pasture growth 3PG tree growth Predictions of biophysical simulation models incorporated into MIDAS...

9 Biophysical simulation models calibrated to MIDAS soil types and study area conditions Models then run for: Basecase Climate Scenarios -crop yield -pasture growth -tree growth -crop yield -pasture growth -tree growth Difference MIDAS has parameters for: - crop yields - pasture growth - tree growth typical for the soil types and conditions of study area Based on these MIDAS selects the optimum management and land uses

10 Biophysical simulation models calibrated to MIDAS soil types and study area conditions Models then run for: Basecase Climate Scenarios -crop yield -pasture growth -tree growth -crop yield -pasture growth -tree growth Difference MIDAS has parameters for: - scaled crop yields - scaled pasture growth - scaled tree growth typical for the soil types and conditions of study area Based on these MIDAS selects the optimum management and land uses

11 Biophysical simulation models calibrated to MIDAS soil types and study area conditions Models then run for: Basecase Climate Scenarios -crop yield -pasture growth -tree growth -crop yield -pasture growth -tree growth Difference MIDAS has parameters for: - scaled crop yields - scaled pasture growth - scaled tree growth typical for the soil types and conditions of study area Based on these MIDAS selects the optimum management and land uses

12 Results

13 Results: optimal farming systems Farm with: Predominantly light soils Predominantly heavy soils Climate Scenario Crop Pasture Sheep Flock (head) Annual Profit Crop Pasture Sheep Flock (head) Annual Profit Basecase 2, ,554 $128K 2, ,278 $115K

14 Results: optimal farming systems Farm with: Predominantly light soils Predominantly heavy soils Climate Scenario Crop Pasture Sheep Flock (head) Annual Profit Crop Pasture Sheep Flock (head) Annual Profit Basecase 2, ,554 $128K 2, ,278 $115K Impact of climate change (percent change) Low-Med CC 1% -5% -50% -73% -1% 3% -18% -81% Med CC 1% -5% -67% -128% -1% 6% -38% -145% High CC 2% -10% -83% -150% 2% -8% -74% -174% Very High CC 3% -13% -89% -250% 5% -22% -90% -283% Reduction in optimal pasture area

15 Results: optimal farming systems Farm with: Predominantly light soils Predominantly heavy soils Climate Scenario Crop Pasture Sheep Flock (head) Annual Profit Crop Pasture Sheep Flock (head) Annual Profit Basecase 2, ,554 $128K 2, ,278 $115K Impact of climate change (percent change) Low-Med CC 1% -5% -50% -73% -1% 3% -18% -81% Med CC 1% -5% -67% -128% -1% 6% -38% -145% High CC 2% -10% -83% -150% 2% -8% -74% -174% Very High CC 3% -13% -89% -250% 5% -22% -90% -283% Reduction in optimal pasture area even larger reduction in livestock Total Pasture Growth Grazable Soil Cover Total Pasture Growth With Climate Change Grazable Soil Cover

16 Results: optimal farming systems Farm with: Predominantly light soils Predominantly heavy soils Climate Scenario Crop Pasture Sheep Flock (head) Annual Profit Crop Pasture Sheep Flock (head) Annual Profit Basecase 2, ,554 $128K 2, ,278 $115K Impact of climate change (percent change) Low-Med CC 1% -5% -50% -73% -1% 3% -18% -81% Med CC 1% -5% -67% -128% -1% 6% -38% -145% High CC 2% -10% -83% -150% 2% -8% -74% -174% Very High CC 3% -13% -89% -250% 5% -22% -90% -283% Reduction in optimal pasture area even larger reduction in livestock Farm with heavier soil types more affected Overall affect on farm profit is large

17 Mitigation Policy: Sequestration Under current policy, farmers can voluntarily revegetate, obtaining sequestration credits that can be sold at the carbon price Represented in MIDAS with block plantings of Mallee (Eucalyptus Spp.) Sequestration credits estimated using Emissions Reduction Fund methodologies

18 Results: Sequestration Optimal area planted to trees Basecase Low-Med CC Med CC High CC Very High CC $0 $20 $40 $60 $80 $100 Carbon Price ($/tco 2 -e) If traditional agricultural pursuits are less profitable, does revegetating for sequestration become more attractive? Not really... Why not?

19 Impact on sequestration rates 3,000 2,500 Tonnes of CO 2 sequestered on farm (equiv. annual rate) 2,000 1,500 1, % 10% 20% 30% 40% 50% 60% 70% Percent of farm planted to trees Basecase Low-Med CC Med CC High CC Very High CC Climate change also reduces tree growth Reduced tree growth means: lower sequestration rates less income from sequestration Implications for attractiveness of sequestration to land owners?

20 Supply of abatement for given C price Tonnes of CO 2 sequestered on farm (equiv. annual rate) Basecase Low-Med CC Med CC High CC Very High CC 0 $0 $20 $40 $60 $80 $100 Carbon Price ($/tco 2 -e) Supply of abatement from sequestration obtainable for a given carbon price potentially greatly reduced

21 Compulsory Mitigation Policy a future possibility... Only considered the voluntary participation of agriculture in mitigation policy e.g., sequestration However agricultural emissions emissions that occur on-farm can be significant CH 4 from enteric fermentation & manure N 2 O from fertiliser applications & nitrogenous animal wastes CO 2 from fuel used by farm machinery 17% of Australia s emissions What if a carbon price was applied to agricultural emissions that occur on-farm (can also still voluntarily sequester)?

22 CC Impacts Vs Policy to Mitigate CC Basecase Low-Med CC Med CC High CC Very High CC Farm Profit ($ '000) $20 $40 $60 $80 $100 Carbon Price ($/tco 2 -e) Climate change appears to have a much bigger effect than a carbon price on agricultural emissions!

23 Limitations Adaptation limited to known options Only considered changes in average weather, not in extremes or variability Did not consider the possibility of feedback changes in agricultural prices One study area

24 Conclusions Effect of climate change on profitability could be significant; heavy soils and pastures most affected Climate change impacts may reduce the amount of abatement achievable by revegetating farm land to sequester carbon Climate change impacts may potentially have a much bigger effect on West Australian farms than mitigation policy (a carbon price on agricultural emissions)