The report, Effects of the Carbon Pollution Reduction Scheme on the economic value of farm production, says the impact will vary depending on the degree of cost-price pass-through from processors to farmers.

The ABARE research released today shows that the initial effect of the CPRS on the value of farm production will differ between sectors, based on the proportion of emissions intensive inputs, the emissions intensity of production and the extent to which agricultural processors also pass on their increased costs to farmers.

The greatest effects in 2011 are expected in the dairy industry, with average farm income estimated to fall by 1.9pc (around $1800), assuming 100pc cost-price pass-through.

"Although the analysis suggests the effects on Australian broadacre agriculture could be larger by 2015 (ranging from falls of 9.1pc to 14.5pc), it does not take into account likely actions by farmers to implement lower emissions production and management practices," ABARE executive director Phillip Glyde said.

Mr Glyde said agriculture would be affected by the introduction of the CPRS in 2011 through increases in input costs.

"There is also a possibility that agricultural processors will pass some of their higher costs on to farmers through paying lower prices for inputs from farmers," he said.

But Mr Glyde said the CPRS, in combination with a global response to climate change, would reduce the expected negative effects of climate change on agricultural productivity in Australia.