Epsilon Archive for Student Projects

Abstract

Global warming, declining biodiversity, overuse of natural resources and social fundamentals such as health and a secure income are all affected by our food consumption. In the last 30 years, global meat consumption has doubled, which has increased the negative effects on these issues. This study assesses the possibilities of changing the negative trend and steer towards a more plant-based diet using economic instruments. When only climate change is considered, taxing beef would be the most efficient instrument. The study, however, also highlights other sustainability aspects such as circular production and biodiversity, making the choice of which type of meat to tax more complex. Therefore, a general taxation of all meat but also a subsidy on plant-based diets is examined. The aim is to give an overview of the consequences for such a policy mix, where the tax system is relatively easy to implement. Three tax scenarios are applied to real market data from one of Sweden's largest ICA stores. Two of the scenarios are based on GHG-emission taxes, where one only includes meat and the other includes all animal protein foods. The third scenario is an increase of VAT (value-added tax) to 25 % for animal goods and a VAT-reduction to 6 % for plant-based goods. A Quadratic Almost Ideal Demand System (QAIDS) is used to estimate the change in budget shares and to estimate Marshallian demand and income elasticities. The parameters are used to construct a system of linear demand curves which then is used to calculate the change in quantities as an effect of the price change. The result indicates that an applied general meat tax has the potential to shift consumption towards an increased plant-based consumption. When the price of meat is increases by 10 and 11.6%, consumption decreases by 11.7, 10.7 and 11.87%, respectively, for the different scenarios. A subsidy on plant-based foods further increases this change by increasing plant-based consumption with 11.2 % for only a 5.4 % decrease in price. Including taxes on other animal protein foods does not show as large potential to further decrease the negative pressures. The third scenario resulted in the largest reduction in greenhouse gas emissions by 3.08 tonnes, but the difference between the scenarios is small. Including other animal goods in the analysis has almost no effect on emission reductions.