Effects of an environmental tax on meat and dairy consumption in Sweden
Meat and dairy consumption have increased globally over the past fifty years. As livestock account for 80% of agriculture’s total greenhouse gas (GHG) emissions, this article argues that to achieve climate targets, humans need to change their dietary habits.
The article looks at the impact of a Pigovian tax on meat and dairy products in Sweden. (A Pigovian tax is defined as a tax applied to a market activity that is generating negative externalities, i.e. costs for someone other than the person on whom the tax is imposed.) In total this study calculated the impacts of introducing such a tax on seven different products (beef, pork, chicken, milk, fermented products, cheese, and cream).
The calculation of the tax was based on the environmental cost of producing of each product, by measuring GHG, nitrogen, ammonia and phosphorus. It is also based on the assumption that the product is produced in Sweden. The researchers measured the effects of the Pigovian Tax by looking at consumer responses to price changes, taking into account the differences in consumers’ disposable income. They found that the consumption of meat products was more affected by price changes and available income than dairy consumption. The effects of the tax on meat and dairy ranged from 1.8 - 13.1%. Consumption of some meat products, such as beef and pork, would be reduced to the lower consumption levels of the late 1990s. The study suggests that the costs and effects of a tax on imported meat and dairy products would be different. If reductions in demand mainly affected imported products, the environmental gain in Sweden might be zero, while if reductions affected only meat and dairy produced in Sweden the gain could be important for the Swedish environment.
The article concludes that the use of a Pigovian tax to cover environmental damage costs would not only contribute to a healthier environment but also to a healthier population in Sweden.
NB: It is not clear from the paper what the authors’ assumptions are about the substitution effect – i.e. if fewer animal products are consumed then other foods will be consumed in their place. These substitute foods will generate environmental impacts that need to be accounted for.
This study evaluated the environmental impacts of introducing an environmental tax on meat and dairy consumption in Sweden. Three meat products (beef, pork and chicken), four dairy products (milk, fermented products, cream and cheese) and four pollutants generating environmental damage (greenhouse gases (GHG), nitrogen, ammonia and phosphorus) were included in the analysis. The unit tax applied corresponded to between 8.9% and 33.3% of the respective price per kg product in 2009. Consumer response to the tax was calculated by econometric estimates of the almost ideal demand system (AIDS) for meat and dairy products, using per capita consumption data and prices. The results indicated relatively inelastic own price elasticities and high income elasticities for all meat products and slightly lower for dairy products. Simultaneous introduction of a tax on all seven products decreased emissions of GHG, nitrogen, ammonia and phosphorus from the livestock sector by up to 12%.
Säll, S., Gren, I. (2015). Effects of an environmental tax on meat and dairy consumption in Sweden. Food Policy. 55(2015) 41-53.
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