The main tool kit for our project:Jordmod – a partial equilibrium model of Norwegian agriculture

Ivar Gaasland (SNF)

Outline

1. General characteristics of Jordmod

2. Adaptation at the farm level – Model Farm illustration

3. Adaptation at the sector level – Climate policy scenario

4. Improvement of model – on-going work

5. Use of model - potential

General characteristics

Model class Partial equilibrium model (small sector assumptions) Small country assumption Comparative static model Long run perspective Domestic and foreign products perfect substitutes

General characteristics

north

Price

S

south-west

PW

D Milk production

General characteristics

Optimization modelMax: producers’ + importers’ + consumers’ surplus

subject to:

1) available land

2) regulations

3) policy targets

Policy analysis optimal policy subject to policy targets exogenous policy instruments, like:

Subsidies of various kinds Import tariffs and quotas Emission taxes or quotas

General characteristics

32 production regions (e.g., western Norway) 11 model farm types (e.g., combined milk and beef) 15 products (e.g., milk and beef) 8 intermediaries (e.g., grass fodder) 4 land qualities

arable land, food grain arable land, other surface tilled land infield pasture

32 regions

Example model farm -milk and beef production Western Norway

Separate supply module that constructs model farms for given relative prices, technology, and natural restrictions

36 activities to choose among Most inputs are proportional to the number of animals

and land units, but endogenous: Plant yield per land unit = f(nitrogen) Milk production per cow = g(fodder)

Functions and coefficients for GHG emission have been attached to activities and production factors

IPCC methodology, adapted to Norwegian conditions and practices)

Milk and beef production Western Norway – current policy

Activities

Dairy cows (#) 20

Animals (total #) 58

Farm land (haa) 29.1

- Mowed grassland, tilled 21.3

- Mowed grassland, no-till 0,0

- Infield grazing, no-till 7.8

Production

Milk (1000 kg) 118

Meat (1000 kg) 5

Fodder, mowed grass (1000 feed units) 85

Fodder, pasture (1000 feed units) 25

Economic indicators

Net subsidies (1000 NOK) 417

CO2 tax (1000 NOK) 0

Labour (person-years) 1.9

Residual wage (1000 NOK per person-year) 197

Milk and beef production Western Norway – current policy Intensity plant production

Nitrogen (kg per ha) 187

Yield (feed units pr ha) 3 776

No-till share of land use 27 %

Intensity milk production

Milk per cow (1000 kg) 5.9

Gross energy per cow (MJ/cow/day) 295

Roughage share of fodder intake 69 %

GHG emissions (CO2 equivalents; 1000 kg)

Methane (CH4) 120.2

Nitrous oxide (N2O) 40.9

Carbon oxide (CO2) land 41.8

Total GHG emissions 203.0

kg pr ha 6967

kg pr kg milk 1.72

Milk and beef production Western Norway – carbon tax Current policy Carbon tax

Activities

Dairy cows (#) 20 20

Animals (total #) 58 57

Farm land (haa) 29.1 31.5

- Mowed grassland, tilled 21.3 18.0

- Mowed grassland, no-till 0,0 4.6

- Infield grazing, no-till 7.8 8.9

Production

Milk (1000 kg) 118 145

Meat (1000 kg) 5 5

Fodder, mowed grass (1000 feed units) 85 87

Fodder, pasture (1000 feed units) 25 26

Economic indicators

Net subsidies (1000 NOK) 417 336

CO2 tax (1000 NOK) 0 96

Labour (person-years) 1.9 1.9

Residual wage (1000 NOK per person-year) 197 168

Milk and beef production Western Norway – carbon tax

Current policy Carbon tax % change

Intensity; plant production

Nitrogen (kg per ha) 187 168 -10.5 %

Yield (feed units pr ha) 3 776 3 586 -5.0 %

No-till share of land use 27 % 43 % 59.1 %

Intensity; milk production

Milk per cow (1000 kg) 5.9 7.2 22.8 %

Gross energy pr cow (MJ/cow/day) 295 328 11.4 %

Roughage share of fodder intake 69 % 60 % -13.0 %

GHG emissions (CO2 equivalents; 1000 kg)

Methane (CH4) 120.2 121.8 1.3 %

Nitrous oxide (N2O) 40.9 40,0 -2.3 %

Carbon oxide (CO2) land 41.8 43.9 5.0 %

Total GHG emissions 203.0 205.6 1.3 %

kg pr ha 6967 6519 -6.4 %

kg pr kg milk 1.72 1.42 -17.5 %

Adaptation at the sector level –climate policy analysis GHG emission target:30 percent reduction in GHG emission compared to base solution

Policy assumptions:Current policy as a point of departureMarket access and export subsidy commitment as in the Doha proposalCarbon tax: NOK 300 per ton GHG emissionsProduction and land use as high as possible subject to these requirements

Climate policy analysis

  Base solution Carbon tax % change Production (mill kg) Milk 1510 1320 -13 % Beef and veal 87 59 -32 % Sheep 26 13 -50 % Pig 106 93 -12 % Poultry 53 59 12 % Eggs 54 61 11 % Grains 1164 963 -17 % Potatoes 290 351 21 % Total production (index) 100 87 -13 %

Land use (1000 ha) 885 749 -15 % Share tilled 0.87 0.75 -14 % N per ha, wheat 155 123 -21 % N per ha, grassland 194 170 -12 %

GHG emission (CO2 equiv. mill. kg) Enteric fermentation 1917 1304 -32 % Manure management 1108 858 -23 % Fertilizer, manure 233 164 -30 % Fertilizer, syntetic 576 325 -44 % Net emmision land use 1530 1101 -28 %

Total GHG emission 5433 3802 -30 % kg per ha 6139 5079 -17 %

Climate policy analysis

Base solution GHG tax % change

Support (billion NOK)

Budget support 11.3 11.5 2 %

Market price support 8.6 5.1 -41 %

GHG tax 0.0 1.1 -

Total support 19.9 15.5 -22 %

Abatement costs is negative in agriculture if no value is attributed to agricultural activity beyond the world market price of food

Improvements of model -on-going work Data

Regional differences in emission or sequestration with respect to land use (e.g., till/no-till; forest) at different land types (e.g., cultivated wetland; mineral soil)

Nationally adapted emission coefficients Technologies

Restoration of wetland, forest, biogas, bio-char Model aspects

Dynamic aspects handled in a comparative static model “Permanence”

Use of model –potential Cost-benefit analysis of different ways to

reduce GHG emissions from agriculture Trade-offs between policy objectives, e.g.,

emission cut vs.: production targets land amenities values

What if carbon sequestration on agricultural land is credited?