Greenhouses Gas Emission from Livestock Digestions on the Economic Efficient Equilibrium of the Market
In the context of Australian economy, livestock industries are regarded as the most viable economic industry. For instance, in the year 2008, gross value of the livestock economy was projected at AUD 19.7 billion including AUD 14 billion as export earnings (Abare, 2008). Australia is regarded as the world largest economy in the export of wool and second behind Brazil in export of red meat. Livestock richly valued in the Northern part of the country that supports 16 million beef cattle. Globally, livestock industry is regarded as the most growing sub agricultural sector since population projected to double by the year 2020 due to continuous consumption of red meat in developing nations ( De Haan et al., 1996) With respect to increase in demand for red meat, Australian livestock industries have greater opportunity to supply the same in addressing global food security.
Even though this is regarded as a major step in tackling food security in both Australia and developing countries, it is also regarded as a major environmental issue since overproduction of the same leads to continuous greenhouses gas emission. Cows and sheep are the major red meat producers in Australia and their greenhouse gas emission accounts for approximately same amount of greenhouse gas emitted by transport industry as a whole. Seventy percent of the total Australia greenhouse gas emissions in the livestock sub sector are derived specifically from cows and sheep in the agricultural sector which is equivalent to 10 percent of the total national greenhouse gas emission and manure from cow and sheep also accounts for 1 percent of the national greenhouse which comprises of nitrous oxide and methane (Department of Climate Change, 2008). The data is significantly irrelevant due to its small contribution to the whole world methane emitted globally but a successful development of abatement strategies is regarded as a major mitigation towards greenhouses gas emission.
This paper therefore expounds on the effects of greenhouses gas emission from livestock digestions on the economic efficient equilibrium of the market. The analysis is based on economic theory of externalities thus helps to articulate the effects in terms of cost-benefit analysis using private and social costs and benefits respectively.
Statistical Data Description of Australia Greenhouse gas Emission with Comparison to USA
Methane quantity (MtCo2-e)
Diagram 1: Greenhouse gas emission from livestock industry in Australia in the year 1990, 2002 and 2008 (Department of Climate Change, 2008)
From the above diagram, it is evidently noted that in the year 1990, 2002 and 2008, beef cattle and sheep livestock had the highest quantity of methane gas at 38.7, 39.45 and 36.6 respectively and 25.0, 16.2 and 13.6 respectively. It is therefore clear that the research paper will implicitly look onto these two major significant contributors of greenhouse gas emission in Australia.
During the year 1990
During the year 2008
Share in %
Diagram 2: United States of America Greenhouse gas Emission for the years 1990 and 2008 (EPA, 2010)
USA is the major contributor in the whole world of greenhouse gas emission into the atmosphere. Comparing the USA data for the year 1990 and 2008 with that of Australia, it is evidently clear that even though Australia greenhouse gas emission is insignificant to that of USA but it still has a positive effect on the produce of red meat which is distributed globally mo so to the developing countries.
Share in %
Electricity and Gas
Services and Transport
Diagram 3: Australia’s Direct Greenhouse Gas emission by Economic Sectors 2016 (Australia Greenhouse Emission Information System, 2016)
Agricultural sector contributes to 12.1 percent of the greenhouse gas emission in the whole Australia, just behind mining sector. This is a significant an alarming effect to both the consumers who depends on red meat from livestock since once the digestion of the same gas has occurred; livestock will be butchered and sold to the consumers who will have both health complications and economic effects (Department of Climate Change, 2008
Effects of Greenhouse Gas Emissions from Livestock Digestions on the Economic Efficient Equilibrium of the Market
Greenhouse gas emission in Australia from livestock digestions contributes to a major economic loss to consumers since there is neither a market price for GHC emissions nor alternate institutions to impose limits on it thus this paper regards GHC emission as an uncorrelated negative externality. Economic equilibrium is always inefficient in the presence of uncorrelated externalities hence; it leads to no economic opportunity cost which might be the solution to correcting such externalities. This can only be revised by investing resources which are mostly diverted from their intentional use to mitigating such externalities thus raising economic well-being of both the present and future generations. Specifically, externality is defined as a utility or production variable (non monetary) whose value is chosen by the third party without a particular attention to the effect on its welfare to either party (Rezai et al.,2009) i.e. it is the cost or benefit that adversely affects an agent who did not chose to incur same cost or benefits.
Greenhouse gas emission from livestock digestion is regarded as a negative externality and it is incorporated with some economic costs and benefits. This includes private costs which are defined as costs incurred when producing a commodity, like in this paper the commodity being produced is the red meat. Social cost is regarded to be greater than private costs and it includes the greenhouse gas emitted in the environment from the livestock ranching. They are disadvantages that the society as a whole suffer from the actions of the producer hence generally known as externalities. Externality is divided into two i.e. negative (that which harms the society) and positive externality (that which benefits the society). The social cost can then be calculated as private cost plus externalities. Externalities is a very fundamental economic argument that was captured by leissez-faire economists such as Milton Friedman and Friedrich Hayek who referred to it as a neighborhood effect even though it is not minor aspect of economical discussion (Rezai et al.,2009)
Diagram 4: Negative externalities with deadweight welfare loss from greenhouses gas emission for livestock digestion, specifically on cows and sheep.
From the above diagram, equilibrium in the quantity of red meat from cows and sheep will be experienced at the point where the price ‘P1’ is equal to quantity demanded ‘Q1’ which is the point where private cost cuts the demand curve. Due to negative externalities which are the greenhouse gas emission from livestock digestion, the socially optimum position will be at a point where price ‘P2’ and quantity demanded ‘Q2’ meets. This shows a higher price charged for the produce from cows and sheep at a lower quantity demanded by consumers. The negative externalities being emphasized in this paper is the greenhouse gas emission from livestock digestion, more specifically on cows and sheep. The ideal equilibrium is therefore found at ‘E2’ instead of ‘E1’ representing current equilibrium since that is the point where social cost benefit is incorporated though the general price of red meat will increase leading to a deadweight welfares loss to th...