Carbon budgeting in UK agriculture

The CCC was set up under the recently passed Climate Change Act 2008, and has the task of delivering interim budgets as part of the UK's longer-term commitments on GHG mitigation. Budgets are derived for 2012, 2017 and 2020 using a bottom-up MACC approach in all sectors including agriculture, land-use, land-use change and forestry.

The bottom-up MACC provides a static "snap shot" illustration of the annual potential to reduce emissions and average costs of doing so for a wide variety of technologies and abatement measures for a given year relative to an assumed baseline. Ranking abatement measures in order of decreasing cost effectiveness — such that measures to the left of the curve and below the x-axis indicate negative costs of savings to society, and costs to the right and above the x-axis illustrate costs to society — permits technologies and measures to be compared at the margin (i.e. the steps of the curve) and provides an invaluable tool for cost-effectiveness analysis. These volumes are taken as annual emission savings for a given year, additional from initial fixed baseline. As such, the emission savings should be constructed from the difference between CO2e emitted in the baseline or business as usual scenario and emissions in the abatement scenario where a particular technology or abatement measure is employed across a reasonable counterfactual characterised by likely adoption within a reasonable policy environment (see Figure 5.2).

Figure 5.2. An illustrative MACC and its relationship to a carbon budget

Domestic Carbon Budget

Emissions "Cost-effective" abatement potential Projection - (identified in MACCs)

1995 2000

1995 2000

Abatement I00"1 Potential [200

(Identified in -< MAC Analysis) 0

Emissions Projection

(Baseline)

Abatement I00"1 Potential [200

(Identified in -< MAC Analysis) 0

2020 Domestic Carbon -400J Budget (Baseline net of Abatement Potential)

Source: Defra/Committee on Climate Change (2008).

Development of the marginal abatement cost schedules is data-demanding in terms of screening the range of crop, soil and livestock mitigation methods and their associated adoption costs. The MACC

provides a measures hierarchy showing mitigation costs (in this case GBP per million tonnes of CO2 equivalent) and effectiveness (volume of gas), showing which deliver cheapest to most expensive savings of CO2 (Figure 5.2). Assuming a policy environment that allows or promotes the adoption of emissions mitigation measures, the UK analysis suggests that by 2012, agriculture, land-use, land-use change and forestry (ALULUCF) could be mitigating around 6% of current greenhouse gas emissions (reported to be 45.25 Mt CO2e in 2005). By 2022, this rises to nearer 25%.

The central feasible MACC shown in Figure 5.3 is backed by a number of important assumptions about the adoption rates of measures (i.e. the spatial scale of application for a measure), the way the potential of some measures can be reduced by interaction with other measures, and the need to reduce costs to a present value equivalent using a specific discount rate. The figure demonstrates considerable negative cost (i.e. win-win) potential inherent in measures related to better management of fertilizers and animal breeding. A notional efficient budget is defined as the applicability of these win-win options plus measures up to the threshold provided by either the SPC or an EU ETS price. Note also that many of the measures considered are truncated as high cost and that this figure excludes relevant forestry bars.

A number of caveats are noteworthy when considering the accuracy of the budget emerging from this particular exercise. The first is that the results do not include a quantitative assessment of ancillary benefits and costs, i.e. other positive and negative external impacts likely to arise when implementing some greenhouse gas abatement measures. Reduced water pollution related to more efficient use of nitrogen fertilizer is a classic example. While emissions abatement and water pollution may be positively correlated, the same is not always true for the effect of some abatement measures on biodiversity. Some ancillary impacts will be significant, and they ideally need to be quantified and added to the cost estimates. The inclusion of these effects will likely tend to make crops and soils measures more attractive, and livestock measures less so.

A similar caveat applies to the need to extend the consideration of costs to the life-cycle impact of some measures. Qualitative analysis suggests that crops and soils measures will have co-benefits in reducing emissions from fertilizer production.

Figure 5.3. Illustrative marginal abatement cost curve for UK agriculture

Cost effectiveness £2006/tCO2e 300 250 200 150 -100 -50 0

Livestock measures Crops/soils measures Forestry

Anaerobic digestion

Livestock measures Crops/soils measures Forestry

Anaerobic digestion

Plant breeding

Abatement potential (MtCO2e/year)

Using composts Separating slurry and mineral N

Plant breeding

Abatement potential (MtCO2e/year)

Using composts Separating slurry and mineral N

Source: Defra/Committee on Climate Change (2008).

A third point is to reiterate that there is some uncertainty about the extent to which some of the identified measures are counted directly in the current UK national emissions inventory format. As currently compiled, some measures may only reduce emissions indirectly and it is important to try and identify how a measure can qualify as being of direct mitigation potential. Removing indirect measures can have the effect of reducing abatement potential by around one-third. There is clearly a need to clarify how measures qualify for inclusion in national inventory formats.

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