Policy considerations for mandating agriculture in a greenhouse gas emissions trading scheme: a comment
Résumé
In a recent article, Ancev (2011) argues that mandating agriculture in a greenhouse gas (GHG) emission trading scheme (ETS) would not be socially beneficial, because of high abatement and transaction costs in agriculture. We re-examine this conclusion by assessing the costs and benefits of extending the coverage of the EU ETS to agriculture in the perspective of the EU 2020 GHG reduction target. As for marginal abatement costs in agriculture, our assessment is based on the results from a recent meta-analysis also used by Ancev. Taking Ancev's assumptions regarding transaction costs, our results do not support the conclusion that costs offset the gains permitted by a greater flexibility across sectors. Moreover, we argue that transaction costs in agriculture may be lower than what is suggested by the extrapolation of results obtained for the sectors currently covered by the ETS, in particular if (i) the calculation of GHG emissions are based on the internationally-agreed IPCC guidelines, (ii) the monitoring and verification rely on the existing bodies and provisions under current agricultural policy, and (iii) participation of farmers to the ETS is subject to a (well-defined) minimum level of per-farm GHG emissions.