Willingness To Pay For Environmental And Animal Benefits
It’s no secret that the production of meat through intensive farming has a devastating impact on the environment. Government bodies sometimes attempt to address this issue by mandating that farms adopt new technologies to reduce their environmental impacts. However, these policies often fail because they are expensive to implement and offer little to no direct benefits to the farms. This study, published in Food Policy, investigated the extent to which consumer willingness to pay more for sustainably produced meat incentivizes farms to adopt water-reduction technologies.
In the first part of the study, the authors used data from 46 other studies focused on consumer willingness to pay (WTP) for meat products with either pure environmental characteristics (labels indicating environmental attributes only, such as reducing water) or impure environmental characteristics (labels indicating environmental and other attributes, such as increased human health and animal welfare). They performed Bayesian analysis to estimate three models that calculated WTP based on several variables, including study methodology, publication date, and location and gross domestic product (GDP); meat type and cut; and labels and attributes such as grass-fed, organic, local, and animal welfare-friendly.
The models indicated that WTP was influenced by meat type, location, and environmental label. Specifically, WTP was higher for chops and steak than ground beef; North American and European consumers had substantially lower WTP than Asian consumers; and for every $1,000 increase in GDP, WTP increased by 1.03%. Regarding labels, WTP for impure environmental labels was substantially higher than WTP for pure labels, and it was highest for products labelled as grass-fed, natural, and local. Results showed that, on average, consumers in North American would pay a 29.1% premium for impure environmental products and 14.8% for pure environmental products.
The authors also created a “multi-objective nutritional optimizer” that explored to what extent WTP would offset increases in production costs attributed to reducing whole-system water use on beef farms in the Pacific Northwest, South, and Midwest regions of the United States. Factoring in the probability of consumers purchasing beef at each WTP value, they found that a 10% premium is the ideal WTP, which equates to an increase of $1.10/kg of retail price of beef and translates to a $0.17 increase in operating costs per kg carcass weight of beef. Such changes could result in water use reductions between 24.4 and 41.4 L per kg of carcass weight in the different regions.
In summary, the authors state that their findings indicate a willingness on the part of consumers to pay extra for pure environmental labels and demonstrate that “moderate WTP increases that are palatable to the average consumer will have a greater aggregated impact on reducing water use than niche products with excessively high retail prices.” For advocates, these findings are useful for understanding the extent to which consumers are willing to spend additional money for more sustainably produced meat, as well as the extent to which farms are willing to adopt more sustainable practices. The findings also quantify the potential benefits of adopting water-reduction technologies.