Carbon permits spark meat prices alarm

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Meat, especially beef, dairy products and wool could cost a lot more if farmers are required to buy permits under the Federal Government’s planned greenhouse emissions trading scheme, a farm policy think tank says.

Because of the high methane emissions from cattle, beef could cost almost 25pc more in 21 years and 5pc more in 11 years, the Australian Farm Institute says in a report published today.

Billions of dollars’ worth of meat and milk production could cease, as farmers decided they would be unable to pass on their permit costs to overseas buyers.

The lost production could be worth almost $11 billion by 2030.

“It is pretty big,” said David Pearce, head of the Centre for International Economics, which was commissioned by the Australian Farm Institute to conduct the research.

“They would be scrambling to find all kinds of ways to adjust.”

Farmers are vulnerable because most agricultural produce is exported and Australia is a small player in a highly competitive market, the report says.

The researchers used one particular “conservative” model based on the likelihood farmers would at first qualify for free permits because this vulnerability makes them “trade-exposed” under the scheme.

The cost blowout would be slow at first, but then would soar, they found.

By 2030 consumers could pay 15pc more for sheepmeat, 10pc extra for dairy, 5pc more for pork and 25pc more for wool if farmers pass on the cost of permits.

Such rises might result in changed eating patterns as people buy less meat, Mr Pearce said.

The projections are based on a scenario in which all farmers become part of the trading scheme in 2016 with free permits, but each year must pay for an increasing portion of permits until 2026, when none are free.

Although farms are big greenhouse gas emitters - particularly of methane from livestock, crops and fertiliser - the Government has initially excluded them from the scheme, which it wants to introduce in July next year.

It has said they could be included from 2015 and has pledged to let them know in four years.