STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS AND TRANSPORT - 23/02/2009 - AGRICULTURE, FISHERIES AND FORESTRY PORTFOLIO - Wheat Exports Australia

Senator MILNE» -I would like to start by asking about the role of the Department of Agriculture, Fisheries and Forestry in the development of the green paper and the white paper and, in particular, the issues that the department was involved in developing with the CPRS.

Mr Quinlivan-The white paper and, before that, the green paper were developed through a cabinet process, so the minister and the department participated in the normal way through development of a whole-of-government product-through that cabinet process. Separate to that, there were informal interactions between us and the Department of Climate Change on the development of specific components-those that related to the land-use sector and the land-use change issues that potentially arose from the propositions being considered in the green paper and then the white paper, but that was a relatively minor issue compared to the whole-of-government policy development and our involvement along with a whole range of other portfolios through the cabinet process.

Senator «MILNE»-Is there any work being done by any of you in this section on the estimated costs of the change in climate to, firstly, agricultural productivity and, secondly, to sustainability of agricultural productivity?

Mr Quinlivan-If I could just go back to the previous question, I was talking more about the policy development. Of course, separate from that was the modelling work that Treasury was coordinating. ABARE, as an area within the department, was a participant in that work. The question goes to costs and so on principally being done through ABARE and to their involvement in the work, so those officers are available for questions today.

Senator «MILNE»-I will ask them that when we get to ABARE. We will go then to Australia's Farming Future and the Climate Change and Productivity Research Program. Can you tell us what the money has been spent on in the last year and how much has been spent?

Mr Mortimer-It might be best if I take that on notice to give you the details. The funding in that program is spent around a number of elements. There is funding for the Climate Change and Productivity Research Program, and I can advise you that there has been no expenditure on that element at this stage because the assessing committee is still looking at the applications and has advised the minister on those. The minister is yet to sign off on that but we expect that funding will be provided this year.

Another key element of the program is the Farm Ready Program-you might wish to ask a question about expenditure on Farm Ready under the Agricultural Productivity Division. And the other key element of the Australia's Farming Future program is the Climate Change Adaptation Partnership Program. I do not have the exact figures with me but the expenditure there relates to exit grants for agriculture and also advice to farmers to prepare for the future. I do know it is a relatively low uptake there, and that is essentially because much of Australia is still in drought and is getting the benefit of the drought assistance programs: ECRP and interest rate subsidies. As a result, the uptake on the Climate Change Adaptation Partnership Program has not been great.

Senator «MILNE» -Just take me back-what was allocated of the $15 million over four years in the Climate Change and Productivity Research Program for this financial year?

Mr Mortimer -For this financial year there was an allocation of $10 million for that program.

Senator «MILNE» -Ten million dollars-we are now in February and nothing has been signed off or allocated yet?

Dr O'Connell-We expect that full $10 million to be expended before the end of the financial year. We are on track for that-it is a question of a complex set of projects being developed. But we believe we are on target to expend the full $10 million this year.

Senator «MILNE» -What are the criteria you will use to prioritise those grants?

Mr Mortimer-The research priorities are reducing methane and nitrous oxide emissions and life cycle analysis; carbon in soil and also adapting to a change in climate.

Mr Quinlivan-We also need to make the point that the components of the $15 million Australia's Farming Future program that you mentioned were reconfigured so that $46.2 million is now available for climate change research. So the $10 million that was mentioned is $10 million of the $46.2 million, rather than $10 million of $15 million.

Senator «MILNE»-Okay, thank you for that. I want to come to the research in soils-is this the only work going on in terms of soil carbon, if indeed any of the grant money is allocated for soil carbon?

Mr Mortimer-This will be the key funding provided by the Commonwealth for research into soil carbon. There may well be other research happening in other agencies-the CSIRO or R&D corporations-but this is the allocation for the Commonwealth direct funding.

Senator «MILNE»-As I asked the question before on the modelling-if ABARE has done the modelling, is that modelling feeding into the allocation of these research programs in terms of addressing some of the productivity issues?

Mr Mortimer-I think the ABARE modelling is operating independently of this research. This research is dealing with scientific issues around reducing methane and use of soil carbon. I expect that when the research becomes available it can then be drawn on by ABARE to help in its modelling and analysis.

Senator «MILNE»-Now coming on to the Climate Change Adaptation Partnership Program-can you tell me how that money is being spent this year? Or what allocation is in this financial year and how is it being spent to date?

Mr Mortimer-I think this is an issue that is dealt with under the ag productivity division. You are reading off the figures in the budget papers, I think Senator.

Senator «MILNE» -Yes, I am just looking at the budget speech earlier this year, in relation to that.

Mr Mortimer-That funding covers, in part, the Farm Ready Program-which is dealt with in the ag productivity division-and it also covers the Community Networks and Capacity Building Program, which is operated through the corporate services division.

Senator «MILNE»-My understanding is that you are the lead group in terms of climate change, but I am not getting a sense that there is a global emergency being addressed, given the nature of the responses to these questions, frankly. I know that is a comment.

Mr Mortimer-If I can just comment-it is a very diverse program which is dealing with a very diverse and large issue, as you indicated. It is helping farmers in a number of ways. The Farm Ready Program will provide farmers with direct training and education to help them deal with the issues. Certainly, that information can be readily provided. I am sorry but it is not part of my divisional responsibility. In terms of the Climate Change Research Program, a lot of work has been put in. There was a call for applications for that program. An expert committee assessed those projects and has put their advice to the minister, and as the secretary indicated, it is expected to be announced shortly. They are the two single biggest funding elements. And there are other activities which provide assistance to farmers to help deal with climate change. I think it is not entirely reasonable to suggest that it is not part of a total package.

Senator «MILNE»-Well, if everybody else is dealing with these issues except you and your team here, what are you actually dealing with? What do you actually do?

Mr Mortimer-This division has four areas of responsibility. It deals with the policy for climate change issues broadly. In particular, it contributes to the whole-of-government strategy for climate change-which Mr Quinlivan talked about-which means contributing information and expertise about agriculture in the development of the green paper and the white paper, and subsequently the legislation which will implement that scheme. The division is also responsible for the assistance programs to farmers as well as the drought policy review. The government has indicated that it wants its review of drought policy to be against a background, a context, of ongoing climate change, and it sees a relationship there. Similarly, this division is responsible for forestry issues, with forestry also playing a part in climate change. Indeed, they have a role in that they will form part of the government's CPRS-the Carbon Pollution Reduction Scheme-as you probably understand. Those four areas of activity come together to help provide an overview and policy integration for the issues around how farmers, foresters and people who use the land across Australia engage with and are affected in their land use by climate change issues.

Senator «MILNE»-That is precisely what I am asking and I am not getting very far in terms of what you are actually doing at the moment to raise awareness, but more particularly, in adaptation and mitigation strategies. We are hearing about exit packages, we are hearing about research that will be conducted that has not, of course, been conducted to date-long after the horse has bolted. But anyway, it is important work that needs to be done. But can you tell me what the impact is on Australian agriculture of the CPRS? You are giving advice. You just said that you are giving strategic, whole-of-government advice. What is the impact of the Carbon Pollution Reduction Scheme on agriculture?

Mr Quinlivan-Senator, I think it is best if we can leave that discussion until the ABARE officials are at the table and we have a general discussion about those issues.

Senator «MILNE»-Well, that might be fine, but you are the climate change people. Surely, you can give us a sense of what- you have just told us that you are coordinating a whole-of-government approach and that you are advising into the white paper process, and I cannot even get a general statement about any of the issues on agriculture and climate change.

Mr Quinlivan -Would you like us to bring the ABARE officials to the table now and have that discussion?

Senator «MILNE» -No, they can tell me about modelling. You are the people who are coordinating the whole-of-government response for agriculture.

Mr Mortimer-In broad terms, agriculture is not, as you would be aware, going to be part of the carbon pollution reduction scheme, as the government has announced it to commence in 2010. The government is going to establish a work program so that it can take a decision in 2013 such that the government can make a decision about whether agriculture can come into the scheme and be covered by the scheme in 2015.

In terms of what the impact on agriculture would be, I guess you could make a few simple observations. If agriculture is not part of the scheme it is not going to be directly required to account for its emissions. So it is not part of the scheme; it will not have to engage and it will not have to take permits or buy permits et cetera. It simply will not be participating in the scheme in that sense.

Senator «MILNE» -But it is going to be impacted in the scheme. I cannot believe I am hearing this, frankly.

Senator Sherry -I am going to ask ABARE to come up to the table and be available as well. We are here to assist and provide witnesses who can answer questions fully.

Senator «MILNE» -With respect-

Senator Sherry-It is the government's decision as to who comes to the table, and I am trying to help you by providing an additional range of witnesses who are involved in this process. That is our decision.

Senator BOSWELL -You will not let Mr Mortimer go away-

CHAIR -Senator Boswell, you will have an opportunity to ask your questions.

Senator «MILNE»-I am fully aware the agriculture is not coming into the scheme until later in terms of emissions, but there will be an impact on agriculture, rural Australia-agricultural production-as a result of putting a price on carbon. When you were feeding into the green paper and white paper process, I want to know what your assessment was of the pros and cons of agriculture going in early or later and, secondly, what the likely cost is across the sectors. You can talk about modelling from ABARE, but I am asking for the overall policy response. This is a whole-of-government approach.

Mr Glyde -Senator «Milne», as I understand it, you are asking what our involvement was in the lead-up to the green paper and the white paper in terms of making estimates in relation to the impact of, in the first instance, climate change on the agriculture sector, and, in the second instance, the impact of the carbon pollution reduction scheme on the agriculture sector. In relation to the first instance, ABARE did some modelling for the Garnaut review that tried to look at what the impact would be of climate change on the agricultural sector. That was published as part of the Garnaut review. On the second question, I think you are aware that we seconded two full-time staff to the Treasury for period of about 18 months to help the government answer some of those questions in relation to what the impact might be of the CPRS, under various assumptions, on the agricultural sector. The modelling work that Treasury has done has been published and it has various estimates for the agricultural sector under the assumptions that were used by the Treasury in doing that work. We, ABARE, are currently engaged with the Department of Climate Change and Treasury over the course of the next few months in getting down to a finer level of detail about what some of the impacts might be. We expect to be releasing some of that information.

Senator HEFFERNAN -Could I just assist you, Christine. We have till a quarter to one.

CHAIR -We have three people vying for the call. A bit of order, thanks. Senator Heffernan, you will have your chance.

Senator «MILNE» -I have to excuse myself for 10 minutes. I will be back.

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Senator «MILNE» -Can I just follow up on Senator Williams's question. Do you know what assumption the Treasury fed in about climate change? I mean, taking the historical record of increased productivity for the last 50 years or 30 years and looking at policy changes on issues like trade or whatever is one thing, but climate is an entirely different thing. Do you know what the Treasury assumptions were that led to an assumption that they will increase productivity in the face of ecosystem collapse?

Mr Glyde-I personally do not know the specific details of that. I think it is best to probably speak to the Treasury about that. The point you are making is that the impacts of climate change itself on agriculture are also a hurdle that the agriculture sector has to get over. Those effects are built into the system already and we are beginning to see some of the impacts of that. They have to jump over that because of the change in climate, if you like. Then there is also the consequence of the medicine you have to take in order to try and do something about climate change. That will also have an adverse impact in the first instance.

Senator «MILNE»-Essentially my point is that you cannot take the historical record as an indication of what productivity increases you might expect in the future in the face of significant shifts in rainfall and fundamentals of productivity-quite apart from tax and so on. I would be very interested because my concern here is that ABARE or Treasury is putting out things to the agricultural sector saying that there is an expectation that productivity will increase. If there is not an assumption built into that about the level of climate shift or the negative impact of climate then it is actually misleading everybody as to why you would expect productivity to increase.