Achieving GHG Emission Commitments And Food Security Objectives In Norwegian Agriculture

At the UN climate change conference in Paris in November 2015, Norway committed itself to a 40% reduction in greenhouse gas (GHG) emissions by 2030 compared to 1990 levels. Agriculture accounts for 8% of Norway’s total GHG emissions. If GHGs from drained and cultivated wetland (categorized under land use, land use change and forestry) are included, the share is 13%; this for a sector that accounts for roughly 0.3% of GDP. As is the case in most countries, agriculture is currently exempt from emission reduction measures, including the European Union’s Emissions Trading System (ETS), in which Norway participates. But the country has recently signaled its intention to include agriculture in future emission reduction efforts. Consideration is being given to how best to achieve GHG reductions in the sector. A recent report by the Norwegian Green Tax Commission, established by the government to evaluate policy options for achieving emission reductions, (Government of Norway, 2015) emphasizes the importance of including agriculture. The Commission suggests that agricultural emissions should be taxed at the same rate as for other sectors. It also recommends that reductions in the production and consumption of red meat should be specifically targeted, through cuts in production grants to farmers and the imposition of consumption taxes. Unsurprisingly, this proposed policy shift is extremely controversial and faces resistance, particularly from the farmers’ unions. Farmers argue that the maintenance of domestic agricultural production is crucial for achieving national food security objectives, in addition to pursuing other aims such as the maintenance of economic activity in rural areas and landscape preservation. Food security, which has been a key policy objective since the end of the Second World War, has been interpreted in Norway as requiring high levels of selfsufficiency in basic agricultural commodities. To achieve this, substantial subsidies are provided to farmers and domestic prices of many commodities are kept at high levels by restricting imports. The Organization for Economic Cooperation and Development (OECD) estimates that the total financial support provided to Norwegian agriculture in 2015 was equivalent to 62% of the value of gross farm receipts, which made Norway (along with Switzerland) a leader in the amount of support provided to agriculture by the 50 OECD member and non-member countries monitored by the Organization (OECD, 2016). In this paper we analyze policy options for achieving a 40% reduction in agricultural GHG emissions, consistent with the economy-wide target, while imposing the restriction that national food production measured in calories should be maintained (the food security target). This is consistent with the way that the Norwegian government identifies the country’s food security objective. In section 2 we outline the current situation with respect to GHG emissions in Norwegian agriculture. In section 3 we illustrate the policy issues involved by considering two product aggregates that are intensive in the use of land for crop production (grainland) and grassland, respectively. The aggregates are based on data for the main commodities in Norwegian agriculture relating to GHG emissions, land use, caloric content, subsidies, and costs per unit of production. We show that even though the opportunity set (i.e., the production combinations that are possible within technical constraints) is narrow, a 40% cut in emissions is achievable by substituting from ruminant products that are intensive in the use of grassland to products based on grainland. We also show that the emissions reduction both reduces government budgetary costs and land use, i.e., ruminant products are characterized by relatively high subsidies and land use. Two-dimensional analysis ignores the fact that per unit emissions from dairy production are low compared to other ruminant products (i.e., beef and sheep production). Both in terms of production value and agricultural employment, dairy farming is the most important component of Norwegian agriculture. Consequently, milk production deserves to be separated from ruminant meat production. Finally in section 4, we present a detailed analysis 3 of policy options derived from a disaggregated model that includes all the major products in Norwegian agriculture. In the model-based analysis, we examine first the imposition of a carbon tax, while maintaining existing agricultural support policies and import protection, and achieving the food security (production of calories) target. Since the imposition of a carbon tax in agriculture presents both technical and political challenges, we then examine an alternative approach of changing the existing structure of agricultural support to approximate the same result. We show that it is possible to change current subsidy rates to mimic the carbon tax and calorie target solution. The explanation for this is that ruminant products not only generate high emissions per produced calorie, but they are also the most highly subsidized products. Meat from ruminants is relatively unimportant in achieving Norway’s food security objective of calorie availability.