Environmental economics might be one of the most curious and demanding disciplines, since it tries to combine two fields at the opposite ends of the ideological spectrum – environmentalists on the one hand and economists on the other, the one trying to preserve every last bug for the benefits of biodiversity while the others coolly point towards the logic of profit-maximizing individuals and beckon the bulldozers.
When you dare to mix the two, interesting things happen – such as this analysis of the consequences of a green meat tax in Sweden.
We have already talked about the environmental and public health impacts of meat consumption, and of a need to change consumption patterns. While marketing and information campaigns are struggling to sway consumers towards a more herbivore lifestyle, environmental economists are a little more blunt. Their argument: right now, people aren’t paying the real price of meat. So let’s make the price right and see what happens!
The fact that meat production also creates environmental impacts that are not paid for by the end consumer is, in economist speech, a problem of externalities. Since consumers believe the good is cheaper than it is in reality, they buy more of it and producers meet that demand – creating more pollution and environmental problems than would occur in an optimal scenario.
In order to internalize the costs, several methods exist, but the most straight-forward is (so-called Pigouvian) taxation. The reasoning is simple: once you estimate the ‘real cost’ of production, you can simulate the environmental cost by taxing the good accordingly. Thus, consumption decreases, production adapts, pollution is decreased and the state even has more revenue that it can spend (hopefully on conservation projects 😉
Two Swedish economists, Sarah Säll and Ing-Marie Gren, have simulated such a scenario in their country and found interesting results: A simultaneous introduction of taxes on beef, pork and poultry could “decrease emissions of GHG, nitrogen, phosphorus and ammonia by at least 27%“!
What are some of the most interesting findings worthy to be highlighted?
- In Sweden, meat production is responsible for 6.73% of total CO2 emissions, 21.8% of nitrogen, 27.0% of phosphorus and 54.5% of total ammonia use.
- Using commonly cited prices for the environmental impacts of CO2 emissions, as well as nitrogen and phosphorus leaking into the Baltic Sea, they found that beef prices would have to be raised by 28.1%, pork by 26.4%, and chicken prices by 39.6% to internalize their environmental externalities! (p. 16)
- If you introduced all three taxes simultaneously, according to their computer model, beef consumption would drop by 27%, pork by 25% and poultry by 47.4% (which corresponds fairly well to the price changes above). However, if you would only impose, for instance, a tax on beef, people would shift their consumption relatively quickly to the two other meats and you would only reduce beef consumption by 11%.
- Another interesting aspect was that in the single-tax scenario, poultry consumption actually dropped more when they simulated a tax on pork than when they introduced a tax on poultry. Say what? An underlying reason could be that people change their chicken consumption by a lot relative to changes in their budgets (the technical term is income elasticity). So, when pork gets more expensive, and they still want to buy beef, pork, and chicken, they will save some money on chicken and treat themselves to a good pork chop.
- From an environmental perspective, pollutant emissions from Swedish meat production could be decreased by 28 – 34%. Nitrogen and ammonia would show the largest decreases, whereas the smallest effect would be in greenhouse gas emissions.
Now, you are probably thinking “nice research project. But a tax on meat is politically absolutely impossible.” Well, actually, in Sweden they are already discussing it in earnest! In fact, the Swedish Board of Agriculture recommended a meat tax in January of this year, and debate has been rife in Swedish media and society. According to Johanna Sandahl, a spokeswoman of the Swedish Society for Nature Conservation,
“consumers have a responsibility based on the knowledge they have to make decisions in everyday life, to reduce their own consumption of meat. But a great responsibility also rests on the policy to design instruments that drive development in the right direction.”
It seems improbable that any tax would go as far as the simulation and create a price hike of 30 – 50%, but this is not an all-or-nothing strategy: even a small increase in price might convince consumers to try out other protein sources as well.
However, the challenge with models such as this one is that it is extremely difficult to create a model that includes all possible interaction factors: due to a lack of data, the researchers for instance could not look assess the change of fish consumption when meat prices increase. Yet, at a time when our most of our fisheries are seriously overfished, a sharp increase in demand for fish might have detrimental effects on ocean ecosystems while the policy was originally introduced for its positive environmental effects. Whether such trade-offs are worth it is ultimately up to policy makers and their constituency to decide.
What do you think about a meat tax that internalizes the environmental impacts of a good steak? Would this be a viable policy option in your country?