Greenhouse Gas Abatement in Norwegian Agriculture: Costs or Benefits?

Agriculture, which currently accounts for 0.3 per cent of Norway's gross domestic product, is estimated to generate roughly 13 per cent of the country's emissions of greenhouse gases (GHGs). Norway has proposed a reduction of 40 per cent in its total emissions in the run up to the international climate change conference in Paris in December 2015. High levels of protection mean that Norway is a closed economy as far as agriculture is concerned. Agriculture is also highly subsidised. We estimate a marginal abatement cost curve for agriculture. Since producers, consumers and taxpayers would all be affected if emissions reductions are imposed on agriculture, we calculate abatement costs in terms of national economic welfare. We find that a cut of around 30 per cent in emissions from agriculture can be achieved, without undermining the stated policy objective of ensuring a minimum supply of domestically-produced calories, by taking drained peatland out of production and restoring it to wetland. Progressing beyond a 30 per cent reduction requires a more fundamental restructuring of production away from emissions-intensive ruminants and towards less emissions-intensive crop and livestock products. Emissions reductions of over 60 per cent can be achieved with no reductions in national economic welfare, due to reductions in agricultural subsidies.