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“Devastating carbon leaks for European agriculture”

The future of arable crops will depend on a carbon adjustment mechanism with realistic borders, believes Copa president Christiane Lambert.

European agriculture is among the most efficient and advanced in the world in terms of commitment to the climate and the environment, and we know that this will only go further with the ambitions of the “Green Deal” .

As professionals in the field, we are and will be the first to be affected by climate change. We are also committed to making Europe climate neutral by 2050, by reducing our emissions, producing biofuels, and above all by increasing the “carbon sink” that can be provided by agriculture.

Store carbon for society

We too often forget that only the agricultural sector, while producing our food, can naturally fulfill this mission of carbon storage for society as a whole. This may be underestimated in the media, but such projects are being implemented all over Europe, even in the face of declining income from agricultural production.

Climate dumping

Of course, volunteering to be at the forefront of any revolution carries the very real risk of dying as a hero. As agriculture has become more and more globalized over the years, European field crop producers have been forced to sell their grains at world prices as the European market is wide open.

One of the main risks that the EU agricultural sector will face as a result of the European Green Deal is climate dumping from countries which, voluntarily or unintentionally, will move more slowly with the adoption of greener agriculture.

In grains and oilseeds, our main competitors are Russia, Ukraine, Brazil and Argentina. Acting against global warming in Europe is one thing, convincing our trading partners to get involved so quickly and so strongly is another.

Carbon leak

I am convinced that any significant difference in means or ambitions to achieve climate goals between Europe and its competitors will be devastating for European agriculture. This is the principle of carbon leakage. Our agriculture would become this dead hero: it would produce only small volumes of luxury food, while its basic food productions would simply be replaced by food produced elsewhere that does not have the same costly constraints, without any gain in terms. to achieve climate objectives.

Conversely, if they were encouraged to do so, all farmers in the world could contribute to this new climate mission. This is where the carbon market and trade policy come in.

Carbon frontier adjustment mechanism

In this context, we support the idea of ​​setting up a border carbon adjustment mechanism for agricultural products, provided certain conditions are met.

The principle is simple: imposing a levy on the carbon contained in imported goods would prevent production from relocating to countries with less stringent requirements. The measure seems obvious on paper, but the reality is much more complex because it involves European climate policy and international trade rules.

To be concrete without going into detail, the main mechanism of European climate policy is the European Emissions Trading System (ETS), which has been in place since 2005 and requires our main industries to pay a price for each ton of carbon dioxide they emit. This system, which does not concern agriculture, is criticized because, to avoid carbon leaks, that is to say the relocation of our refineries or steelworks, they receive free emission rights, which reduces the price of allowances on the European carbon market and therefore the effectiveness of climate policy.

To get out of this vicious circle, Europe plans to abolish free emission allowances and replace them with the Carbon Border Adjustment Mechanism (CBAM): foreign companies exporting goods to the EU would also pay the same. emission allowance prices than they would on the European market. market, depending on the carbon emitted during their production process. This would have the double advantage of contributing to the financing of climate policy and of avoiding unfair competition and carbon leakage from Europe.

Agriculture excluded

The Carbon Frontier Adjustment Mechanism is seen as a complement to the ETS system, to which it is closely linked. According to European plans, it would therefore apply to all or part of the industries subject to the ETS and would cover the electricity sector and energy-intensive industrial sectors, such as electricity, cement, steel, aluminum, petroleum refineries, paper, glass, chemicals and fertilizers. Thus, it would exclude agriculture.

And if the carbon border adjustment mechanism were to include fertilizer producers while excluding farmers, then the situation would quickly become intolerable.

While the carbon border adjustment mechanism does not apply to agricultural products, it should not apply to fertilizers either.

Nitrogen fertilizers are the most important input in crop production and the main variable cost item for our grain and oilseed operations. However, the price of fertilizers is already higher in Europe than elsewhere because our fertilizer market is protected by customs duties and anti-dumping measures which cost European farmers 600 million euros per year.

Soaring fertilizer prices

If a border adjustment mechanism were added to it, the price of fertilizers would skyrocket, further increasing the cost of agricultural production in Europe, while making the use of imported food more competitive and attractive.

In the end, implementing the Carbon Frontier Adjustment Mechanism only on the main raw materials for plant production would be unfair and would lead to the opposite of the desired effect, namely a massive carbon leakage from European agriculture. . In short, it is a perfect example of a double penalty for farmers, which is difficult to justify to our fellow citizens.

I would like to draw attention to this essential point; either agriculture and its downstream sectors must be included in the future carbon adjustment mechanism at borders, or agricultural supply activities and in particular nitrogen fertilizers must also be excluded, otherwise our agriculture will lose all competitiveness.

The more complex a system and the more fragile its balance, the more the peasant community must also be heard in this debate, which promises to be essential for the survival of many agricultural sectors, especially arable crops.

Prevent carbon leakage

From an agricultural point of view, the carbon border adjustment mechanism could function as a measure to prevent carbon leakage in all agricultural sectors, provided it is in line with the European tariff system and agricultural expectations.

Our final position on this proposal will largely depend on its overall design, coverage, administration and legal implications. That is why we call on EU policy makers to conduct a careful impact assessment so that we have all the elements to design a policy tool that could genuinely match the interests of millions of EU farmers.

Margarita W. Wilson

The author Margarita W. Wilson