Epsilon Archive for Student Projects

Abstract

Two of the most pressing sustainability challenges today are climate change and biodiversity loss. The modern food sector, particularly meat production, is a major contributor to all two. In light of this, the need for policy measures to shift dietary patterns becomes clear. However, to only incorporate environmental challenges creates a risk for potential trade-offs regarding other sustainability indicators. Therefore, the indicator for animal welfare is included in this analysis as well, aiming to handle possible substitution effects between different types of meat. This study examines the design of a potential consumption tax on beef, pork and poultry based on these sustainability indicators, as well as the effects such a tax could have on consumption levels and the reduction of associated externalities. The carbon tax is designed as a Pigouvian tax based on carbon footprints, while the taxes related to animal welfare and biodiversity are simulated using price elasticities and targeted reductions in quantity demanded. The effects of these tax rates are then compared with those of a uniform tax rate applied across all three types of meat, using a targeted 10% reduction in quantity. The 10% target is chosen as it may represent a remarkable yet realistic potential change in meat consumption. The results suggest that both tax designs would have significant effects on the reduction of externalities. For the individual tax rates, the reductions for carbon footprint, biodiversity loss and animal welfare are estimated at approximately 4-20%, 8-10% and 4-10% respectively. The uniform tax rate was estimated to 20 SEK per kilogram of meat, which resulted in a reduction between 4-16% for each externality. Although a uniform tax is less cost efficient than a Pigouvian tax, arguments can still be made in its favour, as different sustainability indicators are difficult to compare directly and consequently, challenging to combine into a single, rational framework. The results do not however support the claim about potential trade-offs between different sustainability indicators, as all types of meat appear to be complements according to the estimated elasticities. One limitation is that taxes of this design would not provide incentives for individual producers to adopt more sustainable production systems, since a consumption tax does not account for the individual impact from a specific producer. Furthermore, existing evidence suggests that consumers are generally not highly supportive of taxes on food products, highlighting the need for additional measures to strengthen public support and enable implementation. Finally, the findings highlight the importance of assigning monetary values to externalities such as animal welfare and biodiversity loss in order to enable more accurate comparisons across sustainability indicators.