Assessing the Potential of Tax Policies in Reducing Environmental Impacts from European Food Consumption

Abstract

Food consumption patterns generate significant environmental externalities that remain insufficiently addressed by public policies. This paper explores the global environmental footprints induced by food consumption in the European Union (EU27) and assesses the potential of tax policies for mitigation. Based on a multi-regional input-output model we determine environmental footprints specific to each food category. Using household expenditure data, we estimate country-specific demand systems on food products and link these to the footprints for the policy analysis. We find that a removal of current VAT reductions on meat products has the potential to decrease greenhouse gas (GHG) emissions, water consumption, land use, biodiversity loss, nitrogen and phosphorus footprints of EU27 food consumption by 3.5 to 5.8 percent. We show that a GHG emission price of approximately 52 EUR/tCO2eq on all food products leads to equivalent emission reductions with higher associated environmental co-benefits, however at higher average costs for consumers. (joint with Michael Sureth and Matthias Kalkuhl)