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CARBON TAX OR OFFSETS – POSITION OF AGRI SA.

In this discussion I deviated from providing R & D results of research in South Africa, since I think it is important for the dairy industry to know what the position of Agri SA is on carbon tax, but also to take cognisance of what dairy farmers’ responsibility is to limit the carbon footprint.  The report is a summary of a lengthy document compiled for Agri SA by a task team chaired by the author.

Background: The Department of Environmental Affairs has the responsibility to report greenhouse gas (GHG) emissions to the United Nations Framework Convention on Climate Change (UNFCCC), as part of the obligation of national government to reduce GHG emissions in South Africa. According to the National Development Plan, the commitment is to reduce emissions by 34% by 2020 and 42% by 2025. This target applies to all sectors of the economy. This clearly is a formidable target and therefore government was of the opinion that this will not be achieved voluntarily but that some form of pressure will have to be implemented. Since a modelling study by a contracted international group suggested that a carbon tax system is unlikely to harm the economy and gross domestic product significantly, government opted for a carbon tax system which already has been introduced in this year, applying to most sectors apart from Agriculture, Forestry and other Land Use options (AFOLU). The reason for the delay for AFOLU is incomplete and unreliable statistics, and the absence of a suitable monitoring methodology. The sector was therefore exempted from direct carbon tax until 2020 to enable further investigations; it will however be taxed indirectly through the energy tax and fuel levy imposed respectively on the Energy and Transport sector, if the threshold values are exceeded.

Agri SA supports all efforts to reduce GHG emissions and accumulation in the atmosphere and is keen to meet its responsibility, in order to delay climate change and support sustainability. The target can be met by at the same time reducing GHG emissions and increasing carbon storage and sequestration. In this regard AFOLU is unique because no other sector has the ability to increase carbon storage and sequestration. To attain these goals, the position of Agri SA is as follows:

Position on carbon tax: There are several reasons why Agri SA is of the opinion that a carbon tax system is firstly inappropriate and secondly will not be effective:

  • Agriculture is responsible for food production which has to increase because of an increasing population. It is therefore unavoidable that GHG emissions will increase and it doesn’t make sense to tax Agriculture in its efforts to produce more.

  • The annual fluctuation in production because of drought and other reasons together with unreliable statistics especially in livestock numbers, will make it difficult if not impossible to determine whether GHG emissions of Agriculture are increasing or decreasing.

  • The contribution of AFOLU to the total GHG emissions in South Africa is about 6%. Thus, even if the target of 42% reduction by 2025 is met, which is highly unlikely, the contribution of the sector will be a mere 2.5% (6% x 0.42), which is far less than the measurement error in the monitoring programme.

  • Farmers generally operate at a low profit margin and therefore a further tax will make it difficult to survive, given the annual fluctuation in production, carry over debt and the further increase in the fuel levy and energy tax.

Position on carbon offsets: The capacity to harvest carbon dioxide from the atmosphere by photosynthesis and other processes and to store it in soil and plant material is several orders in magnitude greater than the capacity to reduce GHG emissions. This does not mean that emission reductions should be ignored; on the contrary, it is the responsibility of every farmer to do so and the commodity organisations should manage the effort. However, the emphasis should be to enhance carbon storage and sequestration which can be managed easily by farmers by introduction of conservation practices such as minimum tillage or even no tillage, usage of less inorganic and more organic fertilizers, more conservative stocking rates and limiting erosion to improve veld condition and biomass, and by planting trees and shrubs. Agri SA is of the opinion that these practices will contribute much more towards meeting the objectives. The practices are also practical and measurable and do not put further pressure on farmers. Of course, there will be financial implications: Reclamation of eroded areas will require funds and the State should budget to assist farmers. Secondly, carbon storage/sequestration projects provide the opportunity to companies which exceed their GHG emission threshold to invest in projects where their carbon footprint can be reduced. National Treasury listed the following qualifying endeavours for investment:

  • Restoration of sub-tropical thicket, forests and woodland

  • Restoration and management of grassland

  • Small scale reforestation

  • Biomass energy

  • Anaerobic biogas digesters

  • Reduced tillage

It is clear that agricultural projects are well presented. In addition to such projects are those with a socio-economic development component, as well as those which aim to restore water supply, eco-systems and biodiversity, and combat pollution; in other words all projects that will support sustainability.

The road ahead: As mentioned above, Agri SA has been pro-active and prepared a document which covers these principles in some detail and emphasizes its commitment to reduction of the carbon footprint. This document will now be presented to the Department of Environmental Affairs, DAFF and National Treasury. The advantage is that there is ample time for discussion before the envisage carbon tax for Agriculture is introduced in 2020.