AUSTRALIAN farmers will take a double hit from climate change as a result of the Federal Government rushing into an emissions trading scheme before most other countries, says BRIAN FISHER

The climate debate is tinged with emotion and the underlying facts are poorly understood.

What is known is that the concentration of greenhouse gases in the atmosphere is rising rapidly and the Intergovernmental Panel on Climate Change has warned this is likely to lead to increases in global average temperatures and rising sea levels.

A significant amount of scientific work suggests large parts of rural Australia will be both hotter and drier in future.

Of course, such changes will not be confined to Australia.

Climate change will occur everywhere, with many of the projections suggesting the impacts on agriculture will be large on the Indian subcontinent, Africa, Mediterranean Europe, and parts of north and south America.

The Federal Government's key response has been to announce the introduction of a domestic emissions trading scheme from July 2010 and to ratify the Kyoto Protocol on the assumption such action is crucial in persuading other countries to join in the fight to cut emissions of greenhouse gases.

The short-term effectiveness of this strategy is open to debate.

What is not open to debate is that no matter what Australia does in terms of reducing its own emissions, global emissions will continue to grow for decades to come as developing countries try to catch up to the living standards in the developed world.

And because the rest of the world emits 98.7 per cent of the greenhouse gases, Australia's individual actions have no real influence on the global climate.

Australia is a climate taker, not a climate maker, just as it is largely a price taker in global agricultural markets, not a price maker.

The bottom line for Australian agriculture is that no matter what the Federal Government says or does about domestic greenhouse gas emissions, farmers will still suffer the effects of climate change.

It is politically dishonest to pretend domestic mitigation action will protect Australian ecosystems from any changes in the climate that are coming.

A priority must be to devise strategies for Australian agriculture to adapt, not only to changes in local climate but also to the changes in international prices and trade flows that will inevitably arise from changes in both the supply of and demand for agricultural products around the world.

But let's come back to the proposed domestic emissions trading scheme.

The Government's green paper suggests agriculture should join the ETS in 2015, five years after Australia's other export industries. It also proposes that some industries be given a proportion of the permits they will need to cover their emissions and that they be required to purchase the remainder at auction.

There are a few issues for farmers to consider here.

First, just because agriculture is excluded from the scheme in the first five years does not mean farm costs will not rise.

Your suppliers of electricity and diesel will have to purchase permits and they will pass those costs on to you.

Your competitors in the key developing countries will not be subject to such cost increases.

Then, in 2015, agriculture would be directly covered by the scheme.

If you are a livestock producer, the methane belched by your sheep or dairy cows will be subject to the scheme.

I don't think Daisy the dairy cow is likely to change her table manners on the say-so of some urban-based politician who she's never met.

So what are you to do with her?

You can pay her methane tax or you can roast her on a spit.

Jointly, you and Daisy are going to have trouble with those choices.

The real dilemma here for both Daisy and the nation's exporters is that unless the ETS is very carefully designed and introduced in a coordinated way with our main export competitors, we will take a double hit from climate change.

We will suffer the consequences of the physical changes at the same time as we damage our export competitiveness.

Where's the sense in that?

Brian Fisher is the executive director Concept Economics and is a former executive director of ABARE.