Calculating the Cost of Carbon

In the light of the recent introduction of the Federal Government’s Carbon Tax scheme on 1 July, understanding greenhouse gas (GHG) emissions from production systems, including supply and demand chains, is a critical issue for agriculture and for the horticultural industry. The big question is, how will the tax affect the bottom line for growers, particularly in the first few months of its introduction?

The overwhelming majority of energy users in Australia will experience rising energy costs after the introduction of a carbon price. Experts agree that the only way to beat the carbon tax is to emit less carbon in your operations. Understanding the cost exposure is crucial to understanding the investment growers should be making now to reduce carbon footprint and energy expenditure.

What is a carbon footprint?

The term ‘carbon footprint’ has gained increased popularity in recent years and is now widely used in government, business and the media. Although extensively used in the public domain, further investigation shows that this term has not been adequately defined in scientific literature. As such, a large range of definitions exists for this term. Despite the lack of scientific endorsement, the term carbon footprint has quickly become a widely accepted ‘buzz word’ to further stimulate consumers’ growing concern for issues related to climate change by describing anything from the narrowest to the widest interpretation of greenhouse gas measurement and reduction.

In general, distinctions in the literature are primarily focused on two key issues: units of measurement and scope of measurement.The following definition of a carbon footprint is based on existing literature:

A direct measure of greenhouse gas emissions (expressed in tonnes of carbon dioxide [CO2] equivalents) caused by a defined activity. At a minimum this measurement includes emissions resulting from activities within the control or ownership of the emitter and indirect emissions resulting from the use of purchased electricity.

In general, the term carbon footprint is associated with a less rigorous, consumer oriented, popularised concept of greenhouse gas reductions for the purpose of marketing the benefits of less emission intensive products and services. On the other hand, the term ‘greenhouse gas accounting’ is tailored towards a more rigorous measurement of greenhouse gases for the purpose of calculating and reducing a company’s greenhouse gases.

While there is no question of the popularity of the term carbon footprint, the suitability of its use in association with measuring greenhouse gas emissions in horticulture is more questionable. Depending on the purpose of the investigation, alternative terms such as ‘greenhouse gas accounting’ may be more appropriate.

Regardless of the term that is used, at a minimum a tool to measure greenhouse gases from horticultural production systems should:

  • Be developed with close reference to the underlying rationale for the importance of such a tool in the horticultural industry.
  • Measure and report on emissions that result from practices directly controlled or owned by the unit (country, company, person, etc.) under investigation
  • Measure and report on all six greenhouse gases covered in the Kyoto protocol expressed in terms of the warming potential of CO2.

Australian Vegetable Industry Carbon Footprint Tool Project

Funded by Horticulture Australia Ltd (HAL) and New Rural Industries (NRIA) – formerly the Rural Industry Research Development Corporation (RIRDC) – the Australian Vegetable Industry Carbon Footprint Tool project has developed an online vegetable carbon footprinting tool for the Australian Vegetable Industry. The project has two elements:

  • Development of a vegetable carbon footprinting tool in consultation with industry.
  • Vegetable industry carbon education with seminars, information products and extension activities to prepare the vegetable industry for operating in a carbon-constrained world. This component is funded by Woolworths and HAL Although using a different approach, these projects build on work completed by Houston’s Farm in May 2009. The tool considers on-farm greenhouse gas emissions associated with vegetable production, processing and packaging.

Vegetable Carbon Calculator Manual

The Vegetable Carbon Calculator Manual is a guide for vegetable growers on how to use the online tool, including step-by-step instructions. The manual is also designed to give growers a clearer understanding of carbon footprinting: what it means to them as a grower and a business owner and how they can reduce their carbon impact.

The training manual is intended as a supporting reference, to work alongside a seminar program, which involves a demonstration of the Vegetable Carbon Calculator and associated website. Through the training, the project aims to identify the benefits associated with growers understanding their carbon footprint and will highlight opportunities for vegetable growers. Growers are also educated on the changes they can make to ensure their ongoing sustainability from both a business and environmental perspective.

Who is NRIA?

New Rural Industries (NRIA) is a private entity focused on the capacity building and commercialisation of new and emerging Australian rural industries. Created as an independent entity in 2011 by the Rural Industries and Research Development Corporation (RIRDC), NRIA now stands as a business focused on the positive development of rural industries across regional Australia. The organisation aims to give a stronger voice to its stakeholder industries through positive advocacy, business networks, project development, trade and investment promotion.

NRIA is a not-for-profit company limited by guarantee that invests profits back into projects that advance the opportunities of its stakeholder industries. NRIA’s business services are available directly to members and through advisory arrangements to Government, regional economic development agencies, other industries and investors. The strategic focus of NRIA is to be a ‘solution provider’ for rural industry development across Australia.

NRIA provides advisory services for regional development initiatives that seek to build future economic sustainability through industry diversity and collaboration between industries. NRIA’s project management role ensures effective collaboration between agriculture, mining, energy and indigenous commercial entities.

Ultimately, the NRIA strategy is about being an effective business that credibly represents its membership and stakeholder base. NRIA’s core belief is that passion is very important and profitability is critical to the sustainability of rural enterprise. NRIA will combine Passion and Profit as the factors driving its strategic business focus.

What is the Vegetable Carbon Calculator?

Currently, there is no statutory requirement for growers to undertake carbon accounting on their farms. However, the Australian vegetable industry has shown its support for the process of carbon footprinting via the development of an on-farm footprinting tool, the Vegetable Carbon Calculator (HAL Project VG09187).

The Vegetable Carbon Calculator is an online tool designed to help the Australian Vegetable Industry calculate their on-farm greenhouse gas emissions. The tool is designed to help growers understand the carbon footprint of their entire operation (within the farm boundary), as well as for specific crops or crop categories. It will identify the greenhouse gas emissions associated with:

  • Fertiliser
  • Electricity
  • Fuel
  • Waste
  • Refrigerants
  • Land use change

The online tool is designed to be easy to use, and should only take growers 30-45 minutes to complete. The Vegetable Carbon Calculator will provide information to help growers understand their carbon footprint and increase their sustainability. It is also expected that the tool will help growers to identify strategies to reduce their greenhouse gas emissions.
The tool is designed to be used once each year.

How does it work?

The Vegetable Carbon Calculator uses a library of emission factors, which convert farming inputs into greenhouse gas emissions. All of the calculations occur ‘behind the scenes’, meaning the tool appears simple, yet in the background many calculations are being performed.

Data needed to complete the tool

In order to estimate an on-farm carbon footprint, information needs to be collected relating to farming inputs. It is important to collect this information before beginning to use the tool, as it will make the process much easier.
Elements required include:

    • Electricity bills or meter records for the reporting year
    • Fuel bills or fuel receipts for the reporting year (i.e.natural gas, petrol, diesel, LPG, wood)
    • Records of waste processed on-farm for the reporting year
    • Records of fertiliser usage for the reporting year (e.g. information on the percentage of nitrogen in each fertiliser, where available)
    • Growers with a cold room or industrial on-site freezer will need any service documents from the reporting year. If service records are not available, the charge size of any refrigeration system(s) can be used. Once necessary information is collected, the next step is to go to the Vegetable Carbon Calculator website, which guides users through the process and saves data entered at the end of each page, allowing users to return and add additional information at a later date.

Who will use it?

The Vegetable Carbon Calculator has been designed for Australian vegetable growers, giving them the ability to improve their on-farm efficiencies and become more sustainable. The results produced by the Vegetable Carbon Calculator will show growers the total greenhouse gas emissions produced by their farm, and by individual crops on the farm. It is also expected that service providers to the vegetable industry may utilise this tool.

Why the need for a Vegetable Carbon Calculator?

The Vegetable Carbon Calculator is aimed at helping growers identify their carbon emissions.
It is likely that growers will need to gain a clearer understanding of their carbon emissions over the next few years, as retailers become increasingly interested in the carbon footprint of the products they sell. Estimating on-farm carbon emissions is an appropriate place for vegetable growers to start to satisfy the demands of environmentally conscious retailers. Interest is also increasing amongst consumers, who want to know more about the carbon footprint of the products they are purchasing.

At this point there is NO statutory or regulatory requirement for Australian vegetable growers to comply with any carbon labelling for produce/products sold in the Australian market. However, carbon labelling may become a market access issue for Australian businesses seeking to access international markets in the future.
It is expected that over the next few years the cost of electricity, fuels and fertiliser will all increase, partly due to the greenhouse gas emissions associated with these farming inputs. It is therefore critical that the Australian Vegetable Industry develop an understanding of carbon emissions so that future efforts can be focused on improving areas of the industry, which are most vulnerable to carbon pricing.

Grower adoption and education

To find out more about carbon footprinting visit the ‘Training’ page of the Vegetable Carbon Calculator website (www. vegiecarbontool.com.au), and read more about ‘Understanding Carbon’ – a training package developed as a lead-in to the release of the Vegetable Carbon Calculator.

Concerns over carbon tax costs

According to some sectors of the horticulture industry, the introduction of a $23 per tonne carbon tax has the potential to severely affect the horticulture industry, with some growers likely to face cost increases of more than $100,000 per annum.
Sue Finger, VFF Horticulture Group President, said even though agriculture won’t be included under the carbon tax in its initial form, growers will still be stung by rising gas and electricity costs.

“Fruit and vegetable growers must use electricity and gas to operate their packing sheds and coolstores. There will be a significant increase in input costs as soon as the tax is introduced.

“Quality assurance programs mean product must be stored at particular temperatures, must be packed to certain standards, and above all, must be fresh when sold to consumers.

“These requirements can only be met with high energy use, and there’s currently very little scope to reduce this. The Carbon Tax will mean a straight increase on input costs for growers,” Mrs Finger said.

Indicative modelling suggests a $23 per tonne carbon tax will add 10% to electricity costs and 9% to gas prices.
“We recently surveyed our members and some of the larger growers will face increases of more than $100,000 per annum, while smaller growers still face increases of over $10,000 per annum.”

Mrs Finger said that she was concerned that the costs could also be passed onto the consumers.

“We all know that food security depends on profitable farms,” she said.

“Every additional dollar we lose with this tax is one less dollar farmers can use to reinvest in productivity improvements.

This isn’t good enough for an industry that produces $1.7 billion of fresh produce each year and supplies Australians with quality fruit and vegetables,” Mrs Finger said.

Peak horticulture organisation Growcom has said an initial examination of the Federal Government’s carbon tax scheme showed that it would put further pressure on farm margins with increases in input costs such as electricity, fertiliser and chemicals. Chief Executive Officer Alex Livingstone said estimates showed the cost of electricity would go up by about 2.5c per kWh, which would have repercussions for all horticulture growers and especially those who run pack-house operations, including refrigeration. Growers would also be likely to see increases in the cost of fertilisers and chemicals.

Mr Livingstone acknowledged that agriculture’s direct emissions were excluded from the scheme so that horticulture growers would have no direct liability for on-farm emissions. He also welcomed the fact that liquid fuels used in agriculture would not be included.
“Growers will be shielded from increases in carbon price on fuels (including diesel) and will continue to receive full fuel tax credits,” he said.

“In addition, heavy road transport is out until mid-2014 which means freight costs will not be affected by this development until then. After 2014 we estimate freight costs will increase by about 1-2%.”

However, Mr Livingstone said it was difficult to identify any cost-effective offset generating activities applicable to fruit and vegetable farms under the Carbon Farming Initiative and warned there was too much reliance on this scheme by government to deliver compensation to rural industries.

He said the industry would continue to lobby for direct compensation for horticulture growers since as price takers they would have limited ability to pass on costs down the supply chain. In addition, consumers were unlikely to be willing to pay higher prices for fruit and vegetables as a result of the scheme.

Mr Livingstone noted the several complementary programs announced by the Government, which may have benefits for horticulture:

  • $240 million in small business assistance to 2014-15
  • Increase in small business asset write-off threshold to $6,500 (to encourage investment in energy efficient equipment)
  • $40 million energy efficiency information program
  • $9.2 billion Jobs and Competitiveness Program for regional Australia.
  • $400 million in agricultural mitigation research,development and extension was welcomed.

Mr Livingstone said Growcom had previously worked with the Department of Climate via the Technical Options Development Group to explore and evaluate alternative policies that would lead to genuine emissions reductions on horticultural farms and seeks to re-engage with the Department on this issue.

“We urge the Federal Government to consider the special needs of the horticulture industry in this far-reaching legislation,” he said.

About the author
Christine Paul is a Sydney-based journalist and regular contributor to PH&G with a special interest in the environment and sustainable technology. Email: c.brown.paul@gmail.com


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