The objective of this study is to analyze the impacts of the United Nations Framework Convention on Climate Change (UNFCCC) on the agricultural sector.

Chapter 1 describes the need for the study and carries out literature review. Chapter 2 provides the overview of global warming and the UNFCCC. The concepts of greenhouse effects and global warming, the impacts of global warming, the meaning and implementation mechanism of the UNFCCC, and recent discussion trends and future prospect of the UNFCCC are elaborated. Chapter 3 estimates the agricultural sector's greenhouse gas emission and sink volume and presents a forecast. Chapter 4 analyzes the impacts of the UNFCCC on the agricultural sector using dynamic computable general equilibrium (CGE) and partial equilibrium model. Chapter 5 highlights implications to consider based on the analysis of the effects. Lastly, Chapter 6 summarizes the study and reaches a conclusion.
Under the UNFCCC, mandatory reduction will be demanded from the 2nd compliance period (2013-2017). The reduction volume of greenhouse gases will get different depending on implementation conditions, but if five percent emission reduction (based on the 2000 level) is required from 2013, the crop sector is expected to see its emission volume going below the permissible level and thereby able to sell emission credits since it emits less than permitted. Nevertheless, the livestock sector is expected to see their greenhouse gas emission exceeding the permissible level and thereby is required to reduce emission. When the mandatory emission reduction is implemented, 300,000 tCO2, 126,000 tCO2, and 56,000～59,000 tCO2 will be allocated to cattle, swine, and chicken farms respectively for reduction, and accordingly 170,000 heads of cattle, 1.03 million heads of swine, and 45.7 million heads of chickens will be needed to be eliminated. If those numbers of animals are reduced, there will be a considerable burden on the livestock industry.
Under the Scenario 1 where greenhouse gas reduction is pursued with individual implementation of the UNFCCC, mandatory reduction will be assigned to the livestock and non-farming sectors. As of 2013, the unit costs of reduction per tCO2 are estimated as follows: KRW 2,369,500 won for swine; KRW 2,352,000 for poultry; KRW 565,500 for cattle, KRW 450,100 for beverage, KRW 380,100 for manufacturing and service, and KRW 9,200 for fossil fuel. In particular, the livestock sector should bear the highest level of economic burden, and the implementation of the UNFCCC could serve as a risk factor to the livestock sector.
Under the Scenario 2 where all industrial sectors participate in the greenhouse gas emission trading system, an emission credit is presumed to be traded at KRW 33,300 per tCO2 for all industries. In case cultivation and agribusiness sectors have surplus emissions, they can sell emission credits to the livestock and non-agricultural sectors, and increase their incomes. To the contrary, if the livestock and non-agricultural sectors participate in the emission trading system instead of carrying out greenhouse gas reduction on their own, they could significantly reduce the costs of greenhouse gas reduction by purchasing the emission credits. Then this will drop emission reduction costs.
In the Scenario 3 where the agricultural sector carries out individual implementation and the non-agricultural sector applies the emission trading, the unit price of emission reduction applicable to the livestock sector will increase compared with individual implementation. In the non-agricultural sector, except for fossil fuel, the emission trading price is a bit higher compared with emission trading across all industries. In particular, if the non-agricultural sectors do not participate in greenhouse gas emission trading, the emission price will rise. Therefore, it was found the agricultural sector needs to participate in the emissions trading since it will have a positive impact on reducing the greenhouse gas reduction unit cost of the non-agricultural sector.
Regarding economic effects of the agricultural sector's participation in emission trading, the cultivation sector where surplus emission exists will not be able to sell emission credits and thereby record no income if individual implementation is pursued. But, if it is able to sell emission credits by participating in emission trading, it will be able to earn KRW 69.8 billion by 2013. In particular, it is inevitable the livestock sector will face heavier financial burden in reducing greenhouse gas emission. But if it participates in the emission trading, the cost of greenhouse gas reduction can be considerably reduced. In this context, appropriate measures should be worked on. The agricultural sector's participation in emission trading will have a positive impact on the non-agricultural sectors by bringing down emission credit prices for all industries, and it will be worthwhile in the future.
In case where greenhouse gas reduction policy measures require the imposition of carbon tax, the effects will get different depending on the tax rates (assuming the tax rate is 30 percent). But in the case of rice, the effect of tax rates on management cost and productivity will not be great. In case of vegetables and flowers that are cultivated in greenhouses, so that they are highly dependent on fossil energy, the pressure of rising management cost posed by carbon tax is expected to be high.
To prepare for the time when Korea is required to implement its greenhouse gas reduction duty, a more accurate and reliable greenhouse gas database system should be established to find out greenhouse gas emission and sink volume. In addition, objective and reliable studies should be continuously conducted on the effects of the Kyoto Protocol on national and agricultural economies in relation to the mandatory emission reduction. More in-depth and systematic researches are needed to develop mandatory reduction plans and countermeasures in consideration of the current economic situation and the status of agricultural sector.
Researchers: Chang-Gil Kim, Tae-Young Kim, Yong-Kwang Shin
E-mail address: changgil@krei.re.kr