The impacts of the proposed carbon price mechanism on Australian horticulture (AH09014)

This is a final research report from Hort Innovation’s historical archives. Please note that as these reports may date back as far as the 1990s, the content and recommendations within them may be superseded by more recent research.

What was it all about?

Hort innovation (which was then Horticulture Australia Limited) commissioned the Centre for International Economics (CIE) to quantify the potential impacts of the Australian Government’s Clean Energy Futures program on the Australian horticulture industries.

• This quantification was conducted using the Hi-Link model developed and maintained by the CIE.

The CIE adopted the carbon price trajectory and estimated of the potential impact on input prices.

• However, the policy environment around the carbon price mechanism remained highly uncertain as a result of recent and anticipated changes in the supporting legislation and administration of the scheme.
• In the headline analysis, the carbon price commenced at $23 per tonne of emissions in 2012, increasing to $24.15 per tonne on 1 July 2013. It was projected to increase steadily to $30 per tonne by 2020. The CIE assumed that it remained stable at $30 per tonne from 2020 to 2025, although there was considerable uncertainty around carbon prices beyond 2020.
• However, in recognition of the strong possibility of moving towards an emissions trading scheme earlier than planned the researcher modelled a separate lower carbon price trajectory in the sensitivity analysis. In this alternative carbon pricing scenario they assumed a flexible price mechanism in 2014 trading at $10 per tonne, increasing to $15 per tonne by 2020.

Overall, the carbon price reduced the competitiveness of Australian horticultural products in both domestic and export markets. While the value of the industry continued to grow over the period, the rate of growth was slower than without a carbon price.

• The carbon price may have caused an annual reduction in gross value of production at the wholesale level of between 0.5 per cent and 1.0 per cent by 2020, depending on the price trajectory assumed. In gross value added (GVA) terms, sectoral value may reduce by 1.1 per cent to 2.2 per cent by 2020.
• In dollar terms, by 2020, the GVP of the sector at wholesale prices could be
  $135.6 million less under carbon pricing, although a smaller carbon price was expected to moderate this impact significantly.