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Does money grow on trees? Mitigation under climate policy in a heterogeneous sheep-beef sector

Author

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  • Levente Timar

    (Motu Economic and Public Policy Research)

Abstract
I use simulations from the Land Use in Rural New Zealand model to consider mitigation for different classes of sheep-beef farms under climate policy. Farmers in the model can respond to carbon prices by abandoning or afforesting marginal land. In assessing carbon credits against liabilities, I consider only the income a farmer would be able to get with certainty without taking a carbon price risk. Farmers in intensive farm classes tend to bear the costs of emissions because their opportunity cost of exiting pastoral agriculture is high. The dominant land-use response in more extensive systems is land abandonment or afforestation, depending on location. Less profitable farm classes generally face higher average liabilities in relation to profits, both before and after the land-use response. Results indicate that farmers in North Island hill country may benefit most from afforestation opportunities. In this farm class, income from rewards could offset over half of farmers’ emission liabilities.

Suggested Citation

  • Levente Timar, 2016. "Does money grow on trees? Mitigation under climate policy in a heterogeneous sheep-beef sector," Working Papers 16_09, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:16_09
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    File URL: https://motu-www.motu.org.nz/wpapers/16_09.pdf
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    References listed on IDEAS

    as
    1. Zach Dorner & Suzi Kerr, 2015. "Methane and Metrics: From global climate policy to the NZ farm," Working Papers 15_11, Motu Economic and Public Policy Research.
    2. Simon Anastasiadis & Suzi Kerr & Wei Zhang & Corey Allan & William Power, 2014. "Land Use in Rural New Zealand: Spatial Land Use, Land-use Change, and Model Validation," Working Papers 14_07, Motu Economic and Public Policy Research.
    3. Levente Timar & Suzi Kerr, 2014. "Land-use Intensity and Greenhouse Gas Emissions in the LURNZ Model," Working Papers 14_03, Motu Economic and Public Policy Research.
    4. Suzi Kerr & Simon Anastasiadis & Alex Olssen & William Power & Levente Tímár & Wei Zhang, 2012. "Spatial and Temporal Responses to an Emissions Trading System Covering Agriculture and Forestry: Simulation Results from New Zealand," Working Papers 12_10, Motu Economic and Public Policy Research.
    5. Lock, Kelly & Hendy, Joanna & Kerr, Suzi, 2006. "Sheep and Beef Production Costs Across New Zealand: Introducing the Spatial Dimension," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31952, New Zealand Agricultural and Resource Economics Society.
    6. Levente Tímár, 2011. "Rural Land Use and Land Tenure in New Zealand," Working Papers 11_13, Motu Economic and Public Policy Research.
    7. Suzi Kerr & Joanna Hendy & Emma Brunton & Isabelle Sin, 2005. "The likely regional impacts of an agricultural emissions policy in New Zealand: Preliminary analysis," Working Papers 05_08, Motu Economic and Public Policy Research.
    8. Darian Woods & Andrew Coleman, 2012. "Price, Quality, and International Agricultural Trade," Working Papers 12_08, Motu Economic and Public Policy Research.
    9. Suzi Kerr & Alex Olssen, 2012. "Gradual Land-use Change in New Zealand: Results from a Dynamic Econometric Model," Working Papers 12-06, Motu Economic and Public Policy Research.
    10. Woods, Darian, 2012. "Price, Quality, and International Agricultural Trade," 2012 Conference, August 31, 2012, Nelson, New Zealand 136073, New Zealand Agricultural and Resource Economics Society.
    11. Suzi Kerr & Wei Zhang, 2009. "Allocation of New Zealand Units within Agriculture in the New Zealand Emissions Trading System," Working Papers 09_16, Motu Economic and Public Policy Research.
    12. Arthur Grimes & Sean Hyland, 2013. "Passing the Buck: Impacts of Commodity Price Shocks on Local Outcomes," Working Papers 13_10, Motu Economic and Public Policy Research.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Suzi Kerr, 2016. "Agricultural Emissions Mitigation in New Zealand: Answers to Questions from the Parliamentary Commisioner for the Environment," Working Papers 16_16, Motu Economic and Public Policy Research.

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    More about this item

    Keywords

    Climate change policy; sheep-beef farming; farm classes; mitigation; cost distribution;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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