Options to Overcome the Barriers to Pricing European Agricultural Emissions

35 Pages Posted: 19 Feb 2016 Last revised: 7 Nov 2016

See all articles by Godefroy Grosjean

Godefroy Grosjean

Potsdam-Institut für Klimafolgenforschung (PIK)

Sabine Fuss

Mercator Research Institute on Global Commons and Climate Change (MCC); International Institute for Applied Systems Analysis (IIASA)

Nicolas Koch

Mercator Research Institute on Global Commons and Climate Change (MCC); University of Hamburg

Benjamin Bodirsky

Potsdam-Institut für Klimafolgenforschung (PIK)

Stéphane De Cara

French National Institute for Agricultural Research (INRA) - UMR Economie Publique

William Acworth

Adelphi

Date Written: November 2016

Abstract

Although agriculture could contribute substantially to European emission reductions, its mitigation potential lies untapped and dormant. Market-based instruments could be pivotal in incentivizing cost-effective abatement. However, sector specificities in transaction costs, leakage risks and distributional impacts impede its implementation. The significance of such barriers critically hinges on the dimensions of policy design. This article synthesizes the work on emissions pricing in agriculture together with the literature on the design of market-based instruments. To structure the discussion, an options space is suggested to map policy options, focusing on three key dimensions of policy design. More specifically, it examines the role of policy coverage, instruments and transfers to farmers in overcoming the barriers. First, the results show that a significant proportion of agricultural emissions and mitigation potential could be covered by a policy targeting large farms and few emission sources, thereby reducing transaction costs. Second, whether an instrument is voluntary or mandatory influences distributional outcomes and leakage. Voluntary instruments can mitigate distributional concerns and leakage risks but can lead to subsidy lock-in and carbon price distortion. Third, the impact on transfers resulting from the interaction of the Common Agricultural Policy (CAP) with emissions pricing will play a key role in shaping political feasibility and has so far been underappreciated.

Keywords: European Agriculture; Mitigation; Market-based instruments; Emissions pricing; Barriers to implementation; Common Agricultural Policy

JEL Classification: Q18, Q24, Q25, Q28

Suggested Citation

Grosjean, Godefroy and Fuss, Sabine and Koch, Nicolas and Bodirsky, Benjamin and De Cara, Stéphane and Acworth, William, Options to Overcome the Barriers to Pricing European Agricultural Emissions (November 2016). Available at SSRN: https://ssrn.com/abstract=2734677 or http://dx.doi.org/10.2139/ssrn.2734677

Godefroy Grosjean (Contact Author)

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Sabine Fuss

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany
49303385537224 (Phone)
303385537224 (Fax)

HOME PAGE: http://www.mcc-berlin.net

International Institute for Applied Systems Analysis (IIASA) ( email )

Schlossplatz 1
Laxenburg, 2361
Austria

HOME PAGE: http://www.iiasa.ac.at

Nicolas Koch

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

University of Hamburg ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Benjamin Bodirsky

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Stéphane De Cara

French National Institute for Agricultural Research (INRA) - UMR Economie Publique ( email )

Centre de Grignon
BP01
Thiverval-Grignon, 78850
France

HOME PAGE: http://www.grignon.inra.fr/economie-publique/

William Acworth

Adelphi ( email )

Caspar-Theyss-Strasse 14a
Berlin
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
162
Abstract Views
700
rank
183,239
PlumX Metrics