Developing An Efficient Climate Tax For Food

There may not be two food items that seem as different as tomatoes and beef. If you’re an animal advocate, you’ve most likely eaten more than your fair share of the former, and less of your share than the latter. Have you ever thought how much you might eat of each if they were taxed differently?

In this study, researchers in Sweden calculated cradle-to-retail carbon footprints for the production of both tomatoes and beef. These two food items were chosen because they have very different production chains, greenhouse gas (GHG) emissions levels, type of GHG that is generated, and taxation levels. Furthermore, as 86% of tomatoes and 47% of beef are imported to Sweden, the calculations were thus made for both domestic production and major import countries.

The theoretical results were then used in calculating efficient consumption taxes on the two items as they would be sold in Sweden, and compared to non-efficient GHG taxes. In this case, efficiency was defined as maximizing net benefits from reductions in GHG. The main purpose of this study, then, was to establish the conditions for efficient design of a climate tax on food consumption.

Why does this matter? The researchers remind us that the food production sector accounts for 19-29% of total global emissions of GHGs. Agricultural emissions include the release of farmed animal emissions from digestion and manure management, accounting for two thirds of the total from the entire sector.

Emissions arising in pre-farm activities such as the production of fertilisers and pesticides, on-farm activities such as rearing of animals and cultivation of food and feed crops, and post-farm processes, all add up and can be difficult to quantify accurately. Some of these activities (and related emissions) may also already be included in existing carbon taxation, a point that the researchers stress upon: “It needs to be considered when establishing an efficient climate tax on food in order to avoid double taxation.” In addition, unlike the transport and energy sectors, the food system generates substantial amounts of non-taxed methane and nitrous oxide emissions, which have different characteristics in terms of global warming potential than CO².

When growing tomatoes, emissions from heating are the main source of GHGs in Sweden and the Netherlands, a contribution that is subject to national taxation in both countries. There are considerable differences in GHG emissions between the countries, with tomatoes from the Netherlands generating highest emissions of all GHGs in this case study.

Meanwhile, beef is imported into Sweden mainly from Ireland, but also from the Netherlands, Germany and Poland. Emissions from imported beef arise from manure handling, feed production, ruminant digestion, electricity and fuel use. The untaxed part of total emissions is relatively high in both countries because of high methane emissions from ruminant digestion.

The overall results show that the commonly applied approach on climate taxes on food, results in a tax that is 1.4 – 2.8 times higher and a tax that is between 30% lower and 20% higher than the efficient taxes for tomatoes and beef, respectively. Per capita consumption of beef in Sweden amounts to approximately 0.65 ton of CO2 equivalent GHG annually. The researchers claim that the lowest tax level could reduce beef demand by 2.91 kg, and in turn the emissions by 0.105 tons per capita. Although it is unlikely that such in-depth calculations and tracking would be possible for all food items, it does show the potential of efficient taxation.

The study shows that it is important to account for existent taxation and treat the different GHGs separately when designing efficient taxing. Price increases on food due to a climate tax, and the resulting effects on emissions vary significantly depending on the tax calculation method. As taxing the most impactful foods seems unavoidable in curbing our unsustainable habits, climate and animal advocates will undoubtedly appreciate the efforts put towards ensuring fair and efficient methods of implementing economic incentives.