From the moment that emissions trading goes live in Australia, dairy farmers supplying the Murray-Goulburn Co-operative (MGC) will lose an estimated $5000-$10,000 a year from their business, according to an MGC executive.
Robert Poole, MGC's general manager for sustainable growth, said that dairy farmers will pay a hefty emissions cost from the outset of the CPRS because of the energy used in dairy processing, and that the losses will mount if major trade imbalances arising from the scheme aren’t addressed.
Arguing over research and development funding will only result in agriculture “spending heaps and getting a few crumbs back off the table”, Mr Poole told the Australian Farm Institute’s Agriculture, Greenhouse and Emissions Trading conference in Maroochydore.
“Just give us free emissions permits until the rest of the world catches up,” Mr Poole said.
“That’s not an anti-environmental debate: Garnaut didn’t recommend free permits for economic reasons, he recommended them for environmental reasons. If we don’t have free permits, it’s a recipe for carbon leakage.”
As the rules currently stand, MGC and its 2700 shareholders are caught in an emissions trading no-mans-land.
The business is among the top 750 Australian companies for energy use and produces an estimated 690,000 tonnes of CO2 equivalents (CO2-e) from its consumption of electricity, gas and diesel.
At the same time, it doesn’t produce enough emissions per sales revenue to qualify as “energy intensive, trade exposed” (EITE), and so get free permits to assist its international competitiveness.
“We’ve got moderate emissions, and we’re highly trade exposed. We’re in the worst possible position.”
At a carbon price of $23 a tonne, MGC will pay about $15 million a year to the CPRS, half in its own permits, half in increased “pass-through” costs like electricity.
Pass-through costs on its energy use are going to hit the co-operative’s bottom line from the moment the CPRS goes live.
Because most of the products MGC produces are freely imported from other countries, or exported into other hotly-contested markets, passing on emissions cost to consumers would be business suicide.
“All we can do is reduce the price we pay our farmers,” Mr Poole said.
“This dollar a day that Kevin Rudd talks about isn’t true for dairy farmers. In the first year, dairy farmers are going to pay $5000-$10,000 a farm. This isn’t even talking about the farm direct emissions.”
MGC’s emissions trading problems are compounded by the “unlevel playing field” shaping up for international trade between companies operating under different emissions trading rules.
MGC’s biggest competitor, New Zealand dairy giant Fonterra, looks like being handed a big competitive advantage through differences in emissions trading schemes.
Currently, Fonterra can opt-in to the New Zealand trading scheme and get 90 per cent of its emissions permits free, benchmarked against NZ’s 2005 emissions.
Because of the EITE criteria, MGC gets no free permits, and will be working with a scheme that benchmarks against 2000 level emissions, Mr Poole said.
Even if the EITE criteria is relaxed, the government’s current position is that it will hand out only 20 per cent of permits for free, or 30 per cent if agriculture is included in the CPRS.
“For us it’s inconceivable that our government would put us at such a big competitive disadvantage to our biggest competitor just across the Tasman,” Mr Poole said.
“The CPRS is going to be a trade issue, but it’s not being considered like that.
“We can’t even get too see people about it.”
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