A recent report by the independent public policy research centre, the Australia Institute, suggests that alternative policy instruments for agriculture such as voluntary markets ‘could deliver emissions abatement similar in scale to the CPRS, but at a lower cost’.

The Grain Growers Association (GGA) is keen to explore the potential for a voluntary market system similar to those developing in countries such as the United States and Canada.

GGA chairman, John Eastburn, said farmers should be allowed to trade carbon credits in a voluntary market based approach and be rewarded for positive practice change.

“Agriculture will be the sector most strongly affected by climate change,” Mr Eastburn said.

“Farmers will be impacted by increased input costs much the same as other small businesses, even if agriculture is not covered by the formal scheme.”

ABARE analysis shows costs for grain farmers could increase by 6pc if agriculture is included in the scheme and 4.5pc if excluded.

The Australian Farm Institute says the negative cash margin impact for grain farmers may be 27pc if agriculture is covered.

“Delaying a decision until 2013 about possible inclusion in the CPRS in 2015 does nothing but create uncertainty for farmers and act as a barrier to investment.

“The Government’s current position provides a total disincentive for agriculture to cut greenhouse gas emissions, as any activity before 2015 won’t be considered ‘additional’.

“Our call is to exclude agriculture from the CPRS but provide a voluntary market based approach to provide immediate incentives for abatement activities in the agricultural sector.

“A lot of effort is going into the management of industrial emissions and engineered solutions to carbon capture and storage, but agriculture can provide atmospheric cleansing services right now, using the proven technology of photosynthesis, if we are given the right incentives.

“A voluntary market approach would allow agriculture to provide offsets to those industries covered in the Government’s Scheme. It would also reward Australian farmers for adopting farming practices that reduce the emission of greenhouse gasses,” Mr Eastburn said.