Conserving our natural capital

21 Jul, 2015 02:00 AM
Comments
13
 
The scientists propose government action to encourage sustainable farming practices

YOU get the feeling Tony Abbott doesn't lie awake at night worrying about what our economic activity is doing to our natural environment.

In which case, those of us who do care about ecological sustainability - including many Coalition voters and, in all probability, Abbott's successor, whether Liberal or Labor - will have a lot of catching up to do.

This looks like being true of our excessive contribution to global greenhouse gas emissions. But it also applies to the more mundane problems of protecting and restoring our degraded land, water systems and native flora and fauna.

So what should we be doing, even if we aren't yet? The Wentworth Group of Concerned Scientists have produced a paper on Using Markets to Conserve Natural Capital. As the name implies, it has economists' fingerprints all over it.

In many cases the adverse environmental consequences of economic activity aren't reflected in the costs faced by producers and their customers, a classic instance of "market failure".

For instance, industries will continue to emit excessive greenhouse gases if there's no market value placed on retaining a stable climate system. And farming may cause land degradation if there's no market value placed on preserving the services the ecosystem provides to society by allowing us to grow food and fibre.

The economy and the environment are inextricably linked but, left to its own devices, the market isn't capable of ensuring we don't stuff the environment and thereby stuff the economy.

Most economists accept this truth, but argue that the least economically costly way to fix the problem is to intervene in markets in ways that harness market forces to the service of the environment. Often this can be done by getting the social (community-wide) costs of environmental damage incorporated into the private costs borne by producers and consumers.

The concerned scientists accept this logic and propose four market-oriented interventions to reduce future damage to "environmental assets" and to fix past damage.

Duty of care

Their first proposal is to change the law to impose on all landowners, public or private, a "duty of care" to prevent further damage to their land and water resources. Developing codes of practice would give landowners greater certainty about their obligations.

This reflects the principle that the community's right to a clean and sustainable environment overrides rights of individuals to unrestricted use of private property.

Actions of great environmental value that go beyond the standard of care required - such as fixing damage done in the past - could be purchased by governments from private owners using programs that use market-based instruments, such as Victoria's BushTender program.

Engage in 'carbon farming'

The scientists' second proposal is for the federal government to supplement our efforts to reduce carbon emissions by paying farmers, Indigenous communities and other landowners to engage in "carbon farming" - doing things that improve the rate at which carbon dioxide is removed from the atmosphere and converted to plant material or soil organic matter, where it stays.

If you do this right, it can also be used to restore degraded land. But it involves a price on carbon so farmers can be rewarded with valuable "carbon offset" certificates.

However, there are risks if the market for carbon offsets isn't properly regulated.

"Without complementary land-use controls and water accounting arrangements in place, carbon forests could take over large areas of high quality agricultural land and affect water availability," the paper warns.

"This could create adverse impacts on food and fibre production, and affect regional jobs that are dependent on these industries."

Reform tax system

The scientists' third proposal is that we reform the tax system to make it one that encourages the conservation and repair of the environment.

"Subsidising or providing economic incentives for fossil fuels makes no sense because it results in increased costs to the environment, costs we will all have to bear sooner or later," the paper says.

It particularly makes no sense when at the same time we're using a tax on carbon to discourage the use of fossil fuels or, as now, spending taxpayers' money to pay for "direct action" to cut emissions.

And yet our miners and farmers are exempt from paying petrol excise on fuel used off-road.

The paper also recommends establishing a broad-based land tax to provide long-term, equitable funding for paying farmers, Indigenous communities and other land holders to restore and maintain environmental assets in a healthy condition.

Financial rewards needed

Finally, the scientists propose government action to encourage sustainable farming practices. They say farmers need a financial reward for managing farms sustainably and suppliers, retailers and consumers need to have confidence their products satisfy rigorous standards.

A farm is sustainable when environmental assets on the farm are maintained in a condition that contributes to the health and resilience of its surrounding region.

Environmental assets - not all on farms - include soil, native vegetation, native fauna, water resources (rivers, aquifers, wetlands, estuaries) and carbon.

The financial reward doesn't have to come from the government. Consumers will pay a premium for food grown sustainably, if they have assurance this is so.

The government's role is to support the development of voluntary, industry-based sustainable certification of farms and to ensure such schemes are trustworthy. It should also be active in developing international sustainability standards so our exporting farmers can participate and benefit.

All very sensible stuff. Now we just need a sensible government.

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READER COMMENTS

Pete Rothwell
21/07/2015 7:11:10 AM

No Ross Gittins, what we need now is for you to jump off a cliff.
Boris
21/07/2015 7:25:48 AM

The Wentworth group wouldn't know a market if they tripped over one. Why demonise CO2, I would have thought any credible scientist would want it in abundance? 400 p/p/m is not enough, for increased plant biomass we need at least 800/p/p/m.
dogsbody
21/07/2015 8:14:51 AM

the prospect of a sensible government is enticing. The collection of headless chooks currently intent on selling off anything not tied down and signing trade agreements that disadvantage us for generations is killing us, the fact that there is no viable opposition is depressing. We do need to continuously look at land management but in the main farmers are the best suited to do this not academics.
practical farmer
21/07/2015 8:27:15 AM

yet another example of a mis-informed group trying to put agriculture out of business with more interference, taxes, etc., driven by a warm fuzzy feeling. Why don't they get off the CO2 band wagon and have a look at what is really going on?
Adam Willson, Chairman OFA
21/07/2015 8:33:43 AM

High value organic production for domestic and export markets is in demand by women worldwide. In Australia the market is worth $1.72B and has grown 15.4% pa since 2008. Internationally it is a US$100B industry and the demand for organic food outstrips supply. Ballamys Organics is one example where China cant get enough baby food. Premiums for producers for organic food range between 75-300% and if all of Austalia went organic we would not supply the top 2% of Asia with certified organic food. It does require diversified farming enterprise and a farm design that protects biodiversity and soil.
OntheRiver
21/07/2015 8:42:17 AM

This article is based on the very false assumption that all farmers are currently operating unsustainably and their practices are degrading the landscape. While that may have been so in the past - it is widely accepted that the majority of Australian farmers have adopted practices to improve soil condition, provide native vegetation refuges on their land and generally leave it in a better condition for the next generation. Gittens and Wentworth should stop demonizing farmers and trying to price them off the land and start encouraging them to keep up the good work.
The Drover
21/07/2015 11:18:24 AM

The final segment sums up the "feel good" imaginings of city based financial economists such as Ross Gittins (and Bushie Bill) and his complete lack of understanding of where modern agriculture is really at. Sadly, consumers won't pay a premium for sustainably grown food - otherwise we'd have been seeing some hefty price rises a decade ago. Retaining or increasing soil carbon is already happening and doesn't need a so-called carbon market, which only feathers the pockets of profiteers. Sustainable practice is led by farmers working with scientists and gov's, while maintaining viable markets.
Barcoo
21/07/2015 11:22:19 AM

This is the standard response from those wealthy individuals who want to continue with their planet-destroying lifestyles and still have a warm fuzzy feeling that some where, some farmer is doing something to preserve the planet on their behalf. If The Wentworth Group is serious about saving the planet from human activities lets hear them support a ban on overseas holidays. That would indicate support for the principal that care for the environment takes precedence over the right to unrestricted use of private wealth. See second paragraph under "Duty of Care" above.
pragmatist
21/07/2015 12:22:47 PM

Ross, Very disappointing , comes across to modern farmers as elitist, paternalistic and from an ill informed inner city academic. Well, if the shoe fits. The market failure to provide price signals back to the producer to ensure best practice is as obvious as the falling organic beef price. By all means Ross encourage your mates to buy sustainable produce, just leave the big government crap out of it. Please
AgEconmist
21/07/2015 1:55:19 PM

Ross, as an economist does the paper address transaction costs and deadweight costs of taxes. All sensible stuff until you examine the bureaucratic cost for bugger all benefit. Never mind the additional costs that you impose on a sector that competes in a world market. A very poor exposition from an economist. Sounds like a cut and paste of a media release, top and tailed with some Tony Abbott bashing, all done before lunchtime.
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