Controlling Greenhouse Gas Emissions by means of Tradable Emissions Permits and the Implications for Irish Farmers

The increasing concern over climate change has led to a number of international agreements to control greenhouse gas emissions. Agriculture currently accounts for 28 percent of Ireland’s total greenhouse gas emission and therefore has a major role to play in Ireland achieving its emissions targets. To date research into reducing emissions from Irish agriculture has focused on devising abatement strategies at the farm level such as changes in animal feeding practices. Alternatively emissions could be controlled using market-based emissions abatement strategies such as emissions taxes or permit trading, which are in theory a least cost means of cutting emissions. This paper uses data from the Irish National Farm Survey to construct a farm-level Linear Programming model and to simulate a market for tradable emission permits. The impact on average gross margin of allowing farmers to reduce greenhouse gas emissions by trading permits is compared with a scenario where emissions are unconstrained and a scenario where a command and control approach is adopted to reduce emissions.