The impacts of energy costs on the Australian agriculture sector

The impacts of energy costs on the Australian agriculture sector

Data on the cost of energy to Australian agriculture is surprisingly sparse. The energy debate has thus occurred in an environment where there has been limited ability to estimate the sectoral and value chain impact of energy policy changes. This research compiled available data and estimated the cost of energy to agriculture and for sub-sectors and value chain components. The data has been built into the Energy Cost Calculator which can be used to model the impact of energy price changes on Australian agriculture.

The cost of energy as a proportion of production costs in Australian agriculture has significantly increased in the past five years. Australian farm businesses have been becoming more energy efficient for some time, however recent price rises have outstripped the sector’s ability to match price rises with efficiency gains. The significance of energy costs to agriculture is also being amplified by moves in many sectors to more energy-intensive practices.

Data on the cost of energy to Australian agriculture at a sectoral level is surprisingly sparse. The energy policy debate has thus occurred in an environment where there has been limited ability to estimate the sectoral and value chain impact of energy policy changes affecting the price of energy.

The research reported here has compiled available data and estimated the overall cost of energy to agriculture and for sub-sectors and value chain components. The data has been built into the Energy Cost Calculator which can be used to model the impact of energy price changes on Australian agriculture. The Energy Cost Calculator will be a useful and timely aid for providing impact context to the ongoing discussion about energy policy.

The results of the sub-sector analysis of the Australian agriculture sector using the Energy Cost Calculator indicate the estimated annual cost of energy for the Australian agricultural sector at approximately $5.85 billion.

A scenario modelling the impact of a 30% increase to electricity and a 5% increase to all other major energy sources (applied to the baseline data) resulted in a 15% increase to total energy costs, or an impact of an additional $863 million annual cost to the Australian agricultural sector. Due to the limited availability of sub-sectoral data for input and the relatively conservative increases chosen for the model, the modelled cost impact could likely be an underestimation.

NOTE: Users can download the Energy Cost Calculator and input different percentage costs impacts (positive or negative) on the materials and methods tab of the spreadsheet to see the results of different cost impact models. Once the Energy Cost Calculator spreadsheet has been downloaded, the user will need to ensure that calculations are automatic (not manual) in order to input different percentage values. In Excel, go to Formulas > Calculation options > click Automatic.

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