Mitigation in EU agriculture
Mitigation in EU agriculture An economic assessment of abatement costs
Stéphane De Cara INRA, UMR Economie Publique, Grignon, France
23 May 2006 - SBSTA - Bonn, Germany
Mitigation in EU agriculture
INSEA
Mitigation in EU agriculture
Outline Introduction A farm-type based modelling approach Overview Farm typology Key modelling features GHG emissions from agriculture Methane and nitrous oxide emissions EU-wide marginal abatement cost curves Regional and individual distribution of marginal abatement costs Carbon sequestration through alternative tillage practices Concluding remarks
Mitigation in EU agriculture Introduction Background
Sources of GHG emissions from agriculture (2001, EU-15)
Source
CO2
CH4
N2 O
CO2 -eq
Share in ag emis (%) 46 17 36 1 100
(Tg) (Gg) (Gg) (Tg) Agr. soils 635 188 Manure man. 2,156 70 70 Enteric ferm. 6,268 144 Rice cultivation 111 3 Total agriculture 8,535 704 405 Total all sources 3,384 15,695 1,111 4,073 Based on 2003 EU National Communication for the year 2001 using 2001 GWPs: GWPCH4 =23, GWPN2 O =296,
Share in tot emis (%) 5 2 4 0 10 100
Mitigation in EU agriculture Introduction Background
GHG emissions from agriculture (1990–2001, EU-15) Observed Emissions (UNFCCC 1990=100)
104
Reported agricultural emissions (UNFCCC 1990=100)
102 100 98 96 94 (-8% of UNFCCC-1990)
92 90 88 86 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Years
(Based on 2003 EU National Communication to the UNFCCC)
Mitigation in EU agriculture Introduction Background
Agriculture vs CO2 emissions (1990–2001, EU-15) Observed Emissions (UNFCCC 1990=100)
104
Reported agricultural emissions (UNFCCC 1990=100) Reported CO2 emissions (UNFCCC 1990=100)
102 100 98 96 94 (-8% of UNFCCC-1990)
92 90 88 86 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Years
(Based on 2003 EU National Communication to the UNFCCC)
Mitigation in EU agriculture Introduction Objectives
Objectives
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Assessment of (marginal) abatement costs in EU agriculture I
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How much does it cost (at the margin) to farmers to meet a given abatement target? For a given CO2 price, how much abatement farmers are willing to supply?
How do marginal abatement costs vary across regions and types of farming? Analysis of optimal policy instrument
Mitigation in EU agriculture A farm-type based modelling approach Overview
A farm-type based modelling approach
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Micro-economic approach (farm-level) Detailed representation of agronomic and CAP-related constraints Focus on the heterogeneity of marginal abatement costs and potential Farmers are assumed to be price-takers (constant input and output prices)
Mitigation in EU agriculture A farm-type based modelling approach Overview
Overview of the model Revised version of the model described in De Cara et al. (2005) I
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Input data: 2002 FADN (EU-15), IPCC Guidelines, National Inventory Reports and CRF, FAO. Typology: 1074 farm-types, covering annual crop and livestock farmers, as well as mixed crop/livestock systems. Exogenous variables: Total area, baseline livestock numbers, yields, prices, variable costs, CAP-related parameters, technical coefficients (agronomic, livestock feeding, emission coefficients, etc.). 1074 independent models: MILP, maximization of total gross margin subject to crop area, CAP, livestock feeding constraints Calibration: Based on FADN 2002 data Output: Crop area mix, livestock numbers, animal feeding, emissions
Mitigation in EU agriculture A farm-type based modelling approach Overview
Overview of the model (cont’d)
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The generic (annual) model is a mixed integer linear programming model for farm-type k: max πk (xk ) = gk · xk xk s.t. Ak · xk ≤ zk xk ≥ 0
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gk is the n-vector of gross margins xk is the n-vector of producing activities Ak is a m × n-matrix, describing the feasible production set
(1) (2) (3)
Mitigation in EU agriculture A farm-type based modelling approach Farm typology
Farm typology
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Grouping of surveyed farms in the FADN sample I I
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Based on automatic classification techniques Variables used for the classification: FADN region (101 regions in EU-15), type of farming, elevation class (3 classes: 600m), economic size. e.g. Large dairy farms in Baden-Württemberg located below 300m Distinction between crop- and animal-oriented activities Representation of mixed farming systems (both crop and livestock)
Each farm-type is assumed to behave like one single farm (gross-margin maximizer) independently from the other farm-types
Mitigation in EU agriculture A farm-type based modelling approach Key modelling features
Key modelling features I
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CAP measures: mandatory set aside, milk quotas, compensatory payments, intervention prices, etc. Area constraints: total area constraint, maximal area shares, balance between crops, between cereals and oilseeds, etc. Livestock demography (cattle): Demographic equilibrium between age classes, stable places constraints. Livestock feeding: Protein and energy requirements by animal categories, maximum ingested matter Manure management: Constant nitrogen excretion rates by animal categories, fixed shares of each management system as in the NCs to the UNFCCC Fertilizer use: Total fertilizer expenditures from FADN, split by crop for each farm type, assumption on a composite fertilizer price by crop and by country. Fixed per-hectare N input by crop and by farm-type.
Mitigation in EU agriculture GHG emissions from agriculture Methane and nitrous oxide emissions
Emission accounting I
Emission accounting methodology I
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Baseline run: I I
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Based on the IPCC Good Practice Guidelines emission factors linked to the relevant optimal levels of producing activities at the farm-type level Emission coverage consistent with the 2003 NC to the UNFCCC Country-differentiated emission factors if available in the 2003 NC to the UNFCCC; default IPCC emission factors otherwise Calibration year: 2002 Includes Agenda 2000 provisions of the CAP
An emission tax is added to the objective function: from 0 to 200 EUR/tCO2
Mitigation in EU agriculture GHG emissions from agriculture Methane and nitrous oxide emissions
Emission coverage Emission sources Activity data N2 O Agricultural soils Direct Emissions Use of synth. fertilizers N fert. application Manure application N excr. by animals Biological N fixation Prod. of N-fixing crops Crop residues Reutil. of crop residues Animal production N excr. by graz. anim. Indirect Emissions Atmospheric deposition Total N application Leaching and run-off Total N application N2 O Manure manag. Animal numbers CH4 Manure manag.(∗) Feed energy intake CH4 Ent. fermentation(∗) Feed energy intake CH4 Rice cultivation Rice area (∗) Further disaggregated into: Dairy cattle, non-dairy poultry.
Linked to
Crop area Animal numbers N-fixing crop area Crop area Animal numbers Crop area and animal numbers Crop area and animal numbers Animal numbers Animal feeding and animal numbers Animal feeding and animal numbers Rice area cattle, sheep, goats, swine, and
Mitigation in EU agriculture GHG emissions from agriculture Methane and nitrous oxide emissions
Emission coverage (cont’d) 100
CH4 Rice cultivation CH4 Manure management CH4 Enteric fermentation N2O Manure Management N2O Agricultural soils
Emissions (MtCO2-eq)
80 UNFCCC 60
Model
40
20
0 FR GE UK SP IT IR ND BE DK PT SV AT GR FI LU
(Based on 2003 EU National Communication to the UNFCCC)
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Abatement supply (EU-15) 80 70
Abatement (MtCO2 eq)
60 50 40 30 20 10 0 0
50 100 150 Marginal abatement cost (EUR/tCO2 eq)
200
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Abatement supply (EU-15) 80
CH4 Enteric fermentation CH4 Rice cultivation CH4 Manure management N2O Manure management N2O Agricultural soils
70
Abatement (MtCO2 eq)
60 CH4
50 40 30
N2O
20 10 0 0
50 100 150 Marginal abatement cost (EUR/tCO2 eq)
200
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Implied marginal abatement costs: Comparison with previous estimates Marginal abatement cost (EUR/tCO2 eq)
200
150
100
50
0 0
0.05
0.1 0.15 0.2 Abatement (percent of reference emissions)
0.25
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Implied marginal abatement costs: Comparison with previous estimates Marginal abatement cost (EUR/tCO2 eq)
200
150
100
50 Current version De Cara et al. (2005, tax) De Cara et al. (2005, individual constraint)
0 0
0.05
0.1 0.15 0.2 Abatement (percent of reference emissions)
0.25
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Implied marginal abatement costs: Comparison with previous estimates Marginal abatement cost (EUR/tCO2 eq)
200
150
100
50 Current version De Cara et al. (2005, tax) De Cara et al. (2005, individual constraint) De Cara et al. (2005, BW only) EFEM (2004, BW only)
0 0
0.05
0.1 0.15 0.2 Abatement (percent of reference emissions)
0.25
Mitigation in EU agriculture GHG emissions from agriculture EU-wide marginal abatement cost curves
Implied marginal abatement costs: Comparison with previous estimates Marginal abatement cost (EUR/tCO2 eq)
200
150
100
50 Current version De Cara et al. (2005, tax) De Cara et al. (2005, individual constraint) Perez (2005, regional constraint) Perez (2005, equilibrium price)
0 0
0.05
0.1 0.15 0.2 Abatement (percent of reference emissions)
0.25
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Regional abatement rates for various CO2 prices Abatement rate (20 EUR/tCO2eq) abatement_given_mac_region.ABATRATE1 0% - 2% 3% - 4% 5% - 6% 7% - 8% 9% - 10% 11% - 12% 13% - 14% 15% - 16% 17% - 18%
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Source of the FADN region map: DG AGRI
CO2 price: 20 EUR/tCO2 eq EU abatement: 13.7 MtCO2 eq EU abatement rate: 4.0%
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Regional abatement rates for various CO2 prices Abatement rate (40 EUR/tCO2eq) abatement_given_mac_region.ABATRATE2 0% - 2% 3% - 4% 5% - 6% 7% - 8% 9% - 10% 11% - 12% 13% - 14% 15% - 16% 17% - 18% 19% - 20% 21% - 22% 23% - 24% 25% - 26% 27% - 28%
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29% - 30% 31% - 32%
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Source of the FADN region map: DG AGRI
CO2 price: 40 EUR/tCO2 eq EU abatement: 31.2 MtCO2 eq EU abatement rate: 9.1%
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Regional abatement rates for various CO2 prices Abatement rate (60 EUR/tCO2eq) abatement_given_mac_region.ABATRATE3 0% - 2% 3% - 4% 5% - 6% 7% - 8% 9% - 10% 11% - 12% 13% - 14% 15% - 16% 17% - 18% 19% - 20% 21% - 22% 23% - 24% 25% - 26% 27% - 28%
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29% - 30% 31% - 32% 33% - 34%
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Source of the FADN region map: DG AGRI
CO2 price: 60 EUR/tCO2 eq EU abatement: 43.3 MtCO2 eq EU abatement rate: 12.7%
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Regional abatement rates for various CO2 prices Abatement rate (200 EUR/tCO2eq) abatement_given_mac_region.ABATRATE4 2% - 4% 5% - 6% 7% - 8% 9% - 10% 11% - 12% 13% - 14% 15% - 16% 17% - 18% 19% - 20% 21% - 22% 23% - 24% 25% - 26% 27% - 28% 29% - 30%
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31% - 32% 33% - 34% 35% - 36%
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37% - 38%
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Source of the FADN region map: DG AGRI
CO2 price: 200 EUR/tCO2 eq EU abatement: 72.7 MtCO2 eq EU abatement rate: 21.2%
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: 20 EUR/tCO2 eq Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50 FADN Regions
0 0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Abatement rate (percent)
0.4
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: 20 EUR/tCO2 eq Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50 FADN Regions Farm-types
0 0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Abatement rate (percent)
0.4
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: 40 EUR/tCO2 eq Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50 FADN Regions Farm-types
0 0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Abatement rate (percent)
0.4
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: 60 EUR/tCO2 eq Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50 FADN Regions Farm-types
0 0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Abatement rate (percent)
0.4
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: 200 EUR/tCO2 eq Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50 FADN Regions Farm-types
0 0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Abatement rate (percent)
0.4
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Distribution of abatement rates: Individual abatement rates Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100 20 EUR/tCO2eq 40 EUR/tCO2eq 60 EUR/tCO2eq 200 EUR/tCO2eq
50
0 0
0.05
0.1
0.15
0.2 0.25 0.3 0.35 0.4 Abatement rate (percent)
0.45
0.5
0.55
0.6
Mitigation in EU agriculture GHG emissions from agriculture Regional and individual distribution of marginal abatement costs
Impact on agricultural supply
0 Gross margin CO2 value Area Cereals Oilseeds and prot. crops Sugar beet Forage crops Grassland and pastures On-farm consumption Cereals
89.8 0
Animal numbers
78.3
36.7 7.1 2.0 7.3 23.0 33.2
CO2 price (EUR/tCO2 eq) 20 40 60 (109 EUR) -0.1% -0.5% -0.9% 6.6 12.7 18.6 (106 ha) -0.4% -2.0% -2.9% -4.4% -12.7% -20.4% -1.3% -0.3% -0.5% -2.6% 0.9% -0.7% 0.3% 2.4% 5.1% (106 t) -1.8% -3.3% -4.6% (106 LU) -1.4% -2.3% -3.0%
200 -6.8% 53.9 -17.7% -54.1% -4.3% 19.9% 11.4% -13.0% -5.6%
Mitigation in EU agriculture Carbon sequestration through alternative tillage practices
Carbon sequestration through alternative tillage practices I
As a result of alternative tillage practices I I I
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Change in soil organic carbon (SOC) over time (usually ∆SOC > 0) Change in variable costs (∆C ≷ 0) Change in yields (usually ∆Y < 0)
Impacts of alternative tillage practices on SOC accumulation are derived from EPIC runs I
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Three management practices: conventional (base), reduced and minimum tillage Homogeneous Response Units definition (HRU) for the EU-25 Endogenous rotations and uniform management 10-year simulations Restricted to arable land (Corine Land Cover definition)
Mitigation in EU agriculture Carbon sequestration through alternative tillage practices
Alternative tillage practices: Changes in SOC and yields
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See Erwin Schmid’s presentation Based on 10-yr EPIC simulations Conversion from HRU to farm-types results I I I I
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Overlay of the FADN region map from DG-AGRI Distinction between elevation classes 10-yr average absolute change in SOC (tC/ha/yr by crop×farm-type) Average relative changes in yield (% of base yield by crop×farm-type) applied to FADN crop yields Conventional tillage assumed as base management practice
Mitigation in EU agriculture Carbon sequestration through alternative tillage practices
Alternative tillage practices: Changes in costs
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Based on Baden-Württemberg case study conducted within INSEA (Schmid et al., 2005) Changes in number of field trips Account for labor savings Additional use of pesticides upon adoption of less intensive tillage practices
Mitigation in EU agriculture Carbon sequestration through alternative tillage practices
Alternative tillage practices: Changes in costs (cont’d)
Ploughing Sowing Field tiller Chisel plough Rotary harrow Combined rotary harrow Herbicide spraying Direct sowing Harvest chopper Combined driller Herbicide (%) Seeds (EUR/ha) Labour (h/ha) Cost savings (EUR/ha)
Reduced tillage Minimum tillage Cereals Root crops Cereals Root crops and oilseeds and maize and oilseeds and maize Operation (nb of trips) -1 -1 -1 -1 -1 -1 -1 -2 -1 1 1 1 -2 -2 -2 -2 2 2 1 1 1 1 1 Others 10% 15% 30% 30%
Source: Schmid et al., 2005
-1,3 14,0
-1,8 6,1
-1,8 32,6
-2,0 11,3
Mitigation in EU agriculture Carbon sequestration through alternative tillage practices
Impacts on gross margin of alternative tillage systems
Cumulative RY-2002 emissions (MtCO2 eq)
350 300 250 200
150
100
50
0 -0.15
Reduced tillage Minimum tillage -0.1
-0.05
0
0.05
Change in gross margin (percent)
0.1
0.15
Mitigation in EU agriculture Concluding remarks
Marginal abatement costs: Discussion I
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Abatement can contribute to emission reductions at current CO2 prices Modelled abatements result from changes in crop area allocation, animal numbers and animal feeding (no “end-of-pipe” abatement technologies) Constant number of farms and distribution of types of farming Disaggregated approach highlights the importance of marginal abatement cost heterogeneity for the design of economic instruments (cost-effectiveness) Importance of the use of CO2 tax revenue and/or initial allocation of emission allowances Disaggregated and static modelling approach: complement, rather than substitute, to partial equilibrium and dynamic approaches (cf EU-FASOM) Control cost issues
Mitigation in EU agriculture Concluding remarks
Perspective for further research
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Impact of CAP reform on emissions, carbon sequestration and abatement costs Importance of the baseline (data needs about existing tillage practices and management)
