The Federal Government's climate green paper says choosing the way agriculture emissions will be treated will be decided by weighing up the cost of regulating emissions across thousands of farms, with shifting the cost of obligation off the farm to ag-related business, like processors or fertiliser suppliers.
The green paper points out that most of the farm sector's emissions are produced by thousands of small farm businesses making it potentially very costly and inefficient to impose obligations on that business.
It said very few businesses would meet the threshold for reporting under the national greenhouse guidelines.
It also said as there are certain fixed costs associated with scheme compliance, like reporting emissions and permit management, compliance costs on the farm would be greater than nearly any other business.
The report says there is a relatively weak relationship between emissions at upstream and downstream points in the agricultural supply chain and direct farm emissions.
Therefore it says a combined approach may be a good alternative option, with agricultural obligations applied indirectly but large farm emitters given the option to report directly and manage their own emissions.
Abatement incentives and the fairness of the scheme can also be improved by progressively adopting more differentiated estimation methodologies.
The report says the improvement of emissions estimation capability should be a priority ahead of the sector being included in the emissions trading scheme.
So too should improvements to mitigation opportunities, the report says.
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