THE reality is different to the carbon price scare campaign, writes MARK DREYFUS

In response to Mike Hamblin (Weekly Times, December 20), it is difficult to fathom how and from where he has sourced what appear to be over-inflated figures for the dairy industry, all attributed to the carbon price.

The carbon price does not apply directly to dairy farming. Where farmers are seeing indirect effects through electricity prices, it is important to separate the scare campaign from reality.

Here are the facts: ABARES, in its report, Australian Dairy: Financial Performance of Dairy Producing Farms 2008-09 to 2010-11, estimated that electricity is about 2 per cent of dairy farm cash costs.

Treasury's estimate of a 10 per cent rise in electricity costs means this would represent a 0.2 per cent increase in farm costs.

For an average farm buying electricity on similar terms and conditions as households and small businesses, the annual increase in electricity costs would be about $1200.

Treasury modelling estimated the carbon price would affect the consumer price of milk by 0.4 per cent, meaning some of the modest cost is expected to be passed through to end consumers.

The Government is providing average assistance of $10.10 to households to manage cost impacts on consumer goods.

Suggestions that the carbon impact on a dairy farm would cost an average Australian dairy farmer about $7500 are not based on rigorous analysis and infer 100 per cent cost pass-back from dairy processors.

ABARES considers that 100 per cent pass back of carbon costs would be unlikely. It is also wrongly assumed processors are doing nothing to conserve energy and reduce carbon emissions.

It is important to note that three key global exporters in the dairy market - Australia, New Zealand and the European Union - have introduced carbon prices and some states in the US have introduced carbon prices.

Assertions the European Union provides more assistance ignores the fact that European dairy and other food processors are not eligible for any help for the impact on their electricity costs nor can they get any credit for reductions in agricultural emissions.

The Australian Government has carefully put in place measures to help dairy and other food-based industries manage the effect of the carbon price and take up opportunities flowing from it.

The Carbon Farming Initiative, for example, provides an opportunity for extra income for dairy farmers undertaking projects to increase carbon stored in the landscape or reduce carbon emissions by changing farm practices.

Energy efficiency investments pay for themselves and are widely adopted across many industries in Australia as we move to a low pollution economy.

Dairy Australia has received $1 million in funding to provide practical information and advice about energy efficiency specifically for dairy farmers.

Meanwhile, leading milk processor Fonterra announced it would invest $15.7 million in upgrading processing plants in Victoria and Tasmania.

The carbon price here and in many other countries is a necessary response to cutting pollution and meeting the increasingly serious challenge of climate change which is already having an impact on farming land.

Farmers know better than most that Australia is very exposed to extreme weather.

It is important for all of us to take responsible steps to strengthen and protect the land so we can maintain our first class primary industries for many decades to come.

  • Mark Dreyfus is Parliamentary Secretary for Climate Change