Assessing the risk of carbon displacement in the agri-food sector
Background
In Spring 2022, the ADAS Policy and Economics team delivered a project for Defra to explore the risk of carbon displacement in the agri-food sector and the potential impact of UK net-zero policies.
Carbon displacement can occur if domestic climate policies result in businesses looking to offset any associated costs by transferring production to other countries with laxer emission constraints. The UK Government has legislated to achieve net zero greenhouse gas (GHG) emissions by 2050. This requires UK businesses, including farmers, to invest in decarbonisation.
ADAS assessed the impact of these policies, both within the existing policy framework and upon the systems that the policies are hoping to change.
Methodology
To accurately understand the impact, we created a quantitative framework to measure current carbon displacement and the wider impacts of implementing low emission food production in the UK. This framework aimed to quantify how trade flows would respond to UK compliance costs and the potential impact on overall GHG emissions.
The framework was tested on three example commodities – beef, vegetable oils and vegetable proteins. In developing this framework, the overarching principle was to provide a means of assessing carbon displacement risk that was quick and simple.
Results
The outputs from this piece of work included a policy analysis framework and three case studies. These allowed UK Government policymakers to understand the carbon displacement implications of different policy instruments when applied to the UK food chain.
The use of this framework will support informed policy decisions in the development of activities to support the UK’s move towards becoming net zero.
Example with the beef sector
Figure 1 below provides a schematic overview of how the simple framework determines carbon displacement using a simplified example in the beef system. It identified the volume of beef coming from different sources, the emissions per tonne of production from each source, and therefore the total emissions from beef consumption in the UK before and after a carbon policy was applied.
