Dennis Jensen (Tangney, Liberal Party) Share this | Hansard source

In my speech on the report of the House of Representatives Standing Committee on Primary Industries and Resources on the role of the government to assist Australian farmers to adapt to the impacts of climate change, I would like to address the real implications of the government’s CPRS—and no, it has not gone away; it has just been put aside while it is inconvenient and while it is convenient to fiddle the books to make the budget look better than it otherwise would. Pastoralists, graziers and farmers right across the country have played a big part in setting our nation’s course. Australians have great respect for people who work on the land. The esteem in which Australians hold farmers cannot be underestimated. Farmers are seen as trustworthy, honest and hardworking, so when it came time to oppose the CPRS and basically the ETS their voices were heard clearly and without contempt.

Farmers more than anyone else on earth know precisely the nature and frequency of changes in weather and climate. These changes show up in their annual income. There are bumper crops because of rain at the right time; crop losses through droughts, storms and floods; the production and survival of calves, lambs and so on due to benign weather; and stock losses because of droughts, floods or unseasonably cold weather. Farmers know whether we are having the hottest, coldest, wettest or driest season because the weather pretty much rules their lives.

The Productivity Commission report of 2005 entitled Trends in Australian agriculture states:

Agriculture is characterised by substantial volatility in output over time, with fluctuations in climatic conditions, such as droughts, substantially impacting on output in some years. Over the last three decades, agriculture has recorded the highest level of volatility in year-to-year output growth of all industries (more than two and a half times higher than the average for all industries).

Despite that, agriculture plays a much bigger role in Australia’s exports than might be expected given its output share. In 2003-04 it directly accounted for around 22 per cent of Australia’s total goods and services exports.

Speaking as a nonfarmer, I imagine what would help farmers most is factual information about short-, medium- and long-term weather patterns. We hear a lot about El Nino and La Nina effects. Only relatively recently meteorologists decided that Australia’s weather patterns were more determined by the Indian Ocean dipole than by the Pacific, the El Nino and La Nina influences. Therefore, there is still a lot of work to be done to determine the actual causes of weather and climate changes. One thing I can tell you is that there is very little evidence that man-made carbon emissions are causing these changes. I and others have asked Australia’s Chief Scientist, Professor Penny Sackett, for such evidence. None has been forthcoming.

Another thing I can assure you is that, despite assurances that agriculture will be somehow exempted or made a special case, farmers will be in the firing line. There is a graph on page 170 of the Garnaut report headed ‘Direct emissions intensity of Australia’s agriculture industry compared with selected OECD countries’. It shows Australia as being the second biggest emitter after Ireland of tonnes of CO2, at more than twice the average. The problem with exemptions is that they are illogical. If you really believe that carbon dioxide is the problem, how can you say to certain sectors, ‘Well, your CO2 is okay but their CO2 must be reduced’? CO2 is either dangerous or it is not. The IPCC and organisations which seek to control economies by the limiting of CO2 emissions insist that it is and that increased man-made CO2 emissions have caused global warming. There are parts of the Garnaut report which, if removed from the carbon dioxide obsession, are still quite useful. It refers to research into adaptation technologies. According to Garnaut, in 2006-07, 22 per cent of all government expenditure on research and development could be attributed to research into plant and animal production and primary products. However, the general idea that farmers need to be flexible and adapt to changes in consumer demands and government policies, technological advances and innovation, and emerging environmental concerns is not new. Farmers have been doing that very successfully.

The Productivity Commission research paper Trends in Australian agriculture 2005 states:

Australian agriculture has undergone considerable change over the last few decades. Thanks to rapid productivity growth, agricultural output has more than doubled in this period.

I wonder how Mr Garnaut thinks farmers achieved this amazing success, if not for flexibility and the ability to change and adapt. Farmers have been doing it pretty tough compared to other sectors of the community. The Productivity Commission report shows the ratio of prices for each sector to an all-industries price index. The changes in relative prices have contributed to the decline in the share of GDP accounted for by agriculture.

In summary, Australian farmers have been doing everything that they possibly could to ensure their farming sector is productive but, in pure economic terms, are being overshadowed by the growth in services and mining. In addition, farmers are not affected just by market vicissitudes that impact on markets but by the added variation in weather and climate. Despite this, agriculture will suffer from any form of carbon restrictions taxation or whatever other political imposition the government finally decides upon.

This ETS will provide limited protection for our trade exposed industries and, given the level of protection in certain large markets given to their local farmers, this added limiting of overseas markets could prove devastating. Despite vague indications that agriculture may get special consideration, the agricultural sector has not been provided with a certainty that it will be excluded from the scheme. As I said, that would be illogical if you are a CO2 purist. Even if there are allowances made for methane emissions from politically incorrect cows and sheep, farmers are still affected by costs on input such as energy, fertiliser and chemicals. There is not one shadow of a doubt that electricity costs will rise suddenly and substantially—and that goes for your super tax on profits with the mining sector, I have to add.

Fossil fuels are generally the cheapest, most reliable and most plentiful source of energy the world has ever seen. As I reflected in parliament recently, it is precisely that cheap and accessible energy that has enabled human progress over the last few centuries, including agriculture. One example is that farmers in Tasmania will face an increase in their electricity costs of over $10,000 by 2020 according to the government’s own modelling. This means that the 3,000 farmers in Tasmania, who collectively employ one in five Tasmanians, will face a huge rise in their electricity prices without any compensation. Everyone will feel the impact of Labor’s ETS but regional communities will be hit hardest of all.

Research commissioned by the New South Wales government into the regional impact of Labor’s scheme found that regional centres would be hardest hit. Regional communities in WA, such as central Western Australia and the Kimberley, would bear the brunt of Labor’s ETS. This pretty bleak output was reinforced in the June 2009 ABARE study which looked at the effect of the CPRS on the economic value of farm production. It confirmed that there will be increased costs of electricity, fuels and freight. It also said that farmers may face lower farm gate prices for their goods from downstream processors.

The production of fertiliser and chemicals is an energy-intensive process. Therefore, domestic fertiliser and chemical producers will face significantly higher input costs. Amazingly, ABARE says that, because there will be international companies also producing these products, competition will prevent price rises. The problem for Australian companies is that, if their costs are increasing but they cannot increase prices, financial oblivion surely beckons. Then we will have no local chemical and fertiliser companies and farmers will be at the mercy of overseas companies without the protection of a local producer.

The ABARE report also highlights the difficulty of assessing the economic impact of the CPRS, because no-one has any idea what the real price of carbon might be. The government estimated that the initial price in 2011 would be $10 per tonne. The price after that will be determined by the domestic permit market as well as rules around access to international markets and will not be known until after the scheme commences. ABARE also says that its analysis assumes an emission price equal to that projected by Treasury, increasing on average by four per cent a year.

In summary, agriculture may initially be exempt from paying for its direct emissions but will be impacted upon by other sectors, principally energy, but that exemption may change at any time. The cost of carbon may start at $10 a tonne but, because the price is not attached to anything real, the price in one or five years is anyone’s guess. If that sounds like economic vandalism and the height of stupidity, you have it in one. All of the economic assessments I have read include such uncertainties. In other words it is a matter of, ‘We will try to guess what impact this will have, not knowing how exempt or not your industry will be and what the carbon price will be.’ It reminds me of the old story about the farmer who won Lotto. He was asked what he would do and he replied, ‘Keep farming until it is all gone.’

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