Impacts of national vs European carbon pricing on agriculture

Abstract

The agricultural sector has the potential to contribute to reaching both global and national climate targets. Lately, frequent discussions emerge among academics as well as policymakers regarding whether the agricultural sector should be subject to carbon pricing under different emission trading systems. Germany has set ambitious climate targets envisaging to reach carbon neutrality by 2045, and the EU plans reaching carbon neutrality by 2050. However, the current GHG emission mitigation trends are not in line with this goal. In this study, we quantitatively analyze the environmental and economic effects of the possible inclusion of the agricultural sector into a carbon pricing scheme, once for Germany only, and second for the EU. Moreover, we evaluate the role of already existing and novel technological mitigation options in the GHG emissions mitigation quest. Our findings demonstrate that even the unilateral action by Germany leads to net agricultural emissions reduction, although, the effect obtained by the EU-wide implementation of carbon pricing in agriculture is fivefold larger. The results also highlight the importance of stimulating the use and transferability of the technological options not only in mitigating GHG emissions but also in alleviating the emission leakage to third countries and easing the economic consequences of such a policy.