This is my take on how the carbon tax would affect transportation (and only transportation) costs for the companies engaging in transportation of fresh fruit and vegetables in Victoria. The accuracy of these calculations is just as good as the source of the information (see below) and as good as my brain can work numbers out in these early days, so use these estimates with caution (see my disclaimer about this blog’s contents).

Based on the results reported in the CSIRO/FCI/VEIL report, I calculated the following increase per tonne of fresh produce only transported in Victoria (see report for details, specifically Table 6.3). The 1st column is the estimated emissions in kg CO2-e per tonne of product transported in Victoria during the commercial part of the supply chain; the 2nd column is the extra cost added in Australian dollars per tonne of produce transported at a carbon price of $23 per tonne CO2-e:

Therefore, if we take mandarins (the fruit that has the most emissions-intensive commercial transportation), a tax that prices carbon at $23 will add an extra $2.24 per tonne transported, which translates into an extra 0.22 cents per each kg of mandarins. Just looking at the Woolworths website, I gather that the price per kg is about $1.70. Therefore, the carbon tax increase represents only 0.13% of the price per kg. I think that increases in price due to changes in packaging format introduce a much more higher cost to the chain players.

Looking at the carbon emissions produced by transportation of fruit and vegetables by the major supermarkets and greengrocers in Victoria (and only from farm to store), the VEIL report estimates that this activity leads to between 51,500 to 155,777 tonnes of CO2-e per year (see page 92 in the report). This translates into an extra cost (or liability) that ranges from $1.2 million to $3.6 million. Note that these values consider a mix of type of vehicles, including light commercial vehicles (see page 74). LCVs carry only a small proportion (i.e. 3.5%) of the total freight and this author estimates that they contribute to less than 0.5% of the emissions, so the effect of including emissions from LCVs in this carbon accounting calculation is minimal.

This cost is to be split among the various players that pay any transport segment in the chain: if the grower pays the transportation from farm to store, the shipper/3rd party logistics (3PL) provider that is liable to the carbon tax (or its equivalent in loss of fuel tax credit) will pass on this cost to the farmer. If the supermarket is in charge of logistics, they will pay the extra cost.

If someone was to be accountable for the store-to-home CO2 emissions, we would see a doubling of all the numbers above, i.e. an extra cost ranging from $2.2 million to $7.2 million). Given that petrol for domestic transport is excluded from the carbon tax, the CO2 produced during consumer travel to and from shops (which is 50% of the total supply chain transport emissions from fruit and vegetable consumption) remains untouched in this first iteration of the tax.

An “issues paper” has been published, which includes the general consultation questions listed in this summary, plus further detailed questions on specific topics.

The summary of the questions to respond are:
Question 1: What is the most important thing you think a national food plan should try to achieve?
Question 2: What do you think the vision and objectives for a national food plan should be?
Question 3: What do you see as the major risks to Australia’s food supply in the coming years and decades? How could they be avoided or managed more effectively?
Question 4: What does food security mean to you? How would this be achieved? How would we know if/when we are food secure?
Question 5: What are the most important benefits that Australian consumers get or should get from our food supply? Why?
Question 6: What two or three actions:
• by the government sector would most benefit food consumers?
• by the non-government sector would most benefit food consumers?
Question 7: What do you see as the major opportunities for Australia’s food industry in the coming years and decades? How could they be realised?
Question 8: What two or three actions:
• by the government sector would most benefit businesses that make,
distribute and sell food?
• by the non-government sectors would most benefit businesses that
make, distribute and sell food?
Question 9: What specific food policy and regulatory functions within or between governments:
• overlap?
• are at cross-purposes?
• have gaps?
Question 10: Which regulation or regulatory regime poses the greatest burden on the food industry along the food supply chain (production, processing/manufacturing, transport and logistics, wholesale, retail)? What could be done to reduce this burden?
Question 11: What two or three actions:
• by the government sector would most benefit communities that are
highly dependent on food production, processing, distribution or sale?
• by the non-government sector would most benefit communities that are highly dependent on food production, processing, distribution or sale?

1. Increase agricultural production and productivity on a sustainable basis.

2. Increase market information and transparency in order to better anchor expectations from governments and economic operators.

3. Strengthen international policy coordination in order to enhance confidence in international markets and to prevent and respond to food market crises more efficiently.

4. Improve and develop risk management tools for governments, firms
and farmers in order to build capacity to manage and mitigate the risks associated with food price volatility, in particular in the poorest countries.

5. Improve the functioning of agricultural commodities’ derivatives markets, through the work of Finance Ministers and Central Bank Governors.

Point 1 is of particular interest to R&D organisations because the mechanisms proposed to achieve an increase in productivity include an agreement to strengthen agricultural research and innovation and support results based agricultural research for development through national agricultural research systems, the Consultative Group on International Agricultural Research (CGIAR) and the Global Forum on Agricultural Research (GFAR).

Further, the promotion of technology transfers, knowledge sharing and capacity building through North-South, South-South and triangular cooperation is emphasized in the document, as is innovation in plant breeding and strengthening internationally agreed legal mechanisms for plant varieties.

The first G20 conference on agricultural research for development,involving the most important agricultural research centers, will be held in Montpellier on 12 and 13 September 2011 and the G20 seminar on Agricultural Productivity to be held in October 2011. There is ongoing work by FAO and interested G20 members to develop a platform for capacity building in tropical agriculture in developing countries.

Another initiative in the document is the launch of an International Research Initiative for Wheat Improvement (IRIWI) in order to coordinate research efforts on this important crop for food security. Research work on rice through CGIAR, the International Rice Research Institute (IRRI), the Global Rice Science Partnership (GRiSP) and the Coalition for African Rice Development (CARD) was also highlighted.

The goal to increase investment in agriculture is expected to be achieved through public-private partnership on investments, based on a value-chain approach, for services (e.g. financial services, agricultural education and extension services), infrastructure and equipment for production (such as irrigation), agroprocessing, access to markets (e.g. transport, storage, communication) and for reduction of pre and post-harvest losses.

Countries, international organizations and the private sector are encouraged to increase investment in developing countries agriculture, and in activities strongly linked to agricultural productivity growth, food security and generation of income in rural areas, such as agricultural institutions, extension services, cooperatives, research, roads, ports, cold chain, power, storage, irrigation systems, information and communication technology, climate change mitigation and adaptation.

The group welcomes the initiative of Multilateral and Regional Development Banks to scale up their interventions. We encourage further interaction with the Development Working Group and the joint Finance / Development Ministerial Meeting in September 2011. G20 encourages the Banks’ coordination efforts including the Joint Working Group on Food and Water Security to develop an Action Plan on Food and Water Security by November 2011.

The triple challenge for agriculture was articulated as meeting food security objectives while adapting to climate change and reducing its contribution to greenhouse gas emissions. To achieve this, R&D on climate change adaptation -especially for smallholder farmers- and mitigation technologies, was highlighted as a crucial element in developing countries.

The document also discusses the importance of strengthening international and regional networks, national and international standards, information, surveillance and traceability systems, good governance and official services, to ensure an early detection and a rapid response to biological threats, facilitate trade flows and contribute to global food security.

Another important point was the removal of food export restrictions or extraordinary taxes for food purchased for non-commercial humanitarian purposes by WFP and agree not to impose them in the future. The G20 will seek support within the United Nations agencies and will also recommend the adoption of a resolution by the WTO for the Ministerial Conference in December 2011.

The launch of a Global Agricultural Geo-Monitoring Initiative is also crucial, in my view.This initiative will strengthen global agricultural monitoring by improving the use of remote sensing tools for crop production projections and weather forecasting. The initiative will involve representatives from various organizations and institutions interested in enhancing international monitoring capabilities around the world, including the organizations that comprise the GEO Agricultural Monitoring Community of Practice (FAO,
World Meteorological Organization - WMO, etc.) created in 2007 by GEO. The roles of the various actors in this initiative will be defined by June 2010; Australia should seek to have a strong role here.

Also important is the establishment of a Rapid Response Forum within the framework of the Agricultural Market Information System (AMIS). Through the participation of senior, capital-based agricultural policy officials from the major producing, exporting and importing countries, the Rapid Response Forum will promote early exchange of key information on and discussion of prevention and responses to crises among policy-makers and assist in mobilizing wide and rapid political support for appropriate policy response and actions on issues affecting agricultural production and markets in times of crisis.

The Rapid Response Forum will:

- assess information and analyses from AMIS Secretariat on the current global market situation and outlook;

- receive information and assessments electronically from early warning systems on the extent to which global market developments affect vulnerable countries and assess the ensuing implications for food security;

- when the market situation and outlook as evaluated by the AMIS Secretariat indicates a potential crisis, meet to discuss and promote appropriate policy options on issues affecting agricultural production and markets (but not seek influence on humanitarian responses); and,

- work closely with the Committee on World Food Security (CFS) to promote greater policy convergence and strengthen policy linkages at global level.

FAO will be in charge of forming this group, with the first meeting to be organized in the second half of 2011 involving countries and international organizations to discuss processes and scheduling. Again, a very important initiative where Australia should be represented.

In regards to emergency humanitarian food reserves, the G20 will support the preparation of a feasibility study and a proposal for a pilot. The WFP
and other international organizations will establish by the end of June 2011 a working group with bilateral development partners and potential eligible countries in a particular region that could participate in an emergency humanitarian food reserves pilot, involving expertise from the civil society and the private sector. The final proposal for a pilot for the emergency humanitarian food reserves will be discussed at the Joint Finance / Development Ministerial Meeting in September 2011.

All considered, the response of G20 shows that food security is an issue that will be taken seriously internationally. I find many of these initiatives novel and exciting. However, the reduction of biofuel production from food sources and the reduction of export bans was significantly opposed by the US, Brazil and China. The draft of the communique did include a call for a feasibility study on flexible mandates to restrict biofuel production from food supplies in times of food scarcity. However, the final version does not contain this important addition. However, the G20 did agree on exempting food purchased for humanitarian purposes from export bans.

The latter recommendation is unlikely to resolve the live cattle ban for Australian producers, where the ban is seen as a positive step toward supporting local farmers in Indonesia.