Carbon Tax on Food

Until recently, the vast majority of action targeted towards minimising climate change has focused on decarbonising energy and transportation, but with food production and consumption accounting for around 20% of UK emissions, scientists believe our diets deserve more attention. Could a carbon tax on food make the food system more sustainable?

What Are Carbon Taxes On Food, And Why Do We Need Them?

Most food-related greenhouse gas emissions are not a result of fossil fuel usage but rather biological activity like methane produced by ruminants during digestion and the nitrous oxide from fertilised soils, as well as some CO2 released through land transformation - such as deforestation for new pasture or cropland. Whilst carbon taxes and/or emission trading schemes (ETS) have already been brought into place in over 40 countries, including all EU states, these account for just a small proportion of food production and consumption-related emissions, and no country has yet introduced a food-specific carbon tax.^3,4,5

It is for this reason that the UK Health Alliance on Climate Change, a communications and campaign coalition of 21 health organisations, including Medical and Nursing Royal Colleges, Faculties of Health, the British Medical Journal and the Lancet, are calling for the implementation of a so-called ‘carbon tax’ – a levy that will be imposed on food producers according to the carbon footprint of their products.¹

“It is now widely recognised that it will be impossible to keep global temperatures at safe levels unless there is a transformation in how the world produces and consumes food, which makes up over a quarter (26%) of total global greenhouse gas emissions”. Nicky Philpott, the Director of the UK Health Alliance on Climate Change, told FoodUnfolded.

IS A TAX THE RIGHT MEASURE?

History suggests that fiscal incentives are often highly effective in bringing about change, even when education and other measures have failed. The Soft Drinks Industry Levy (SIDL), or ‘sugar-tax’, implemented in the UK in April 2018, led to more than half of drinks producers reformulating their products to lower sugar recipes, and an overall 30% reduction in sugars consumed from soft-drinks alone. Similar benefits are seen when the consumer is the one who pays the premium, leading to a change in purchasing behaviours, as demonstrated with the recent minimum unit pricing on alcohol in Scotland, as well as plastic bag levy in the UK, which led to an 86% decrease in single-use plastic bags.^6,7,8

Modelling research from other countries also supports the efficacy of such a policy; a study conducted in Sweden looked at the emissions produced by seven different animal products (beef, pork, chicken and four dairy based foods), and applied a hypothetical tax on those according to their environmental cost. The study revealed a potential 12% decrease in livestock-related emissions by taxing these seven products.⁹

What Would Carbon Tax Look Like?

With the notion only recently being proposed by the UK Health Alliance on Climate Change, and no word yet from the UK government as to whether it is indeed under consideration, exactly how the tax would be calculated and how products would be categorised is currently unclear. One of the most straightforward approaches would be taxing food types according to their average environmental footprint. 

Under such a scheme, rather than considering the nuances and differences between different product types or production systems, all dairy products, for example, would be subject to the same level of tax. Another possibility would be for flexible tax brackets to be identified so that food producers considered ‘high emitters’ suffer the same level of tax, those that are considered ‘moderate emitters’ taxed somewhat less, and those identified as ‘low emitters’ potentially exempt.⁶

Potential Problems With A Carbon Tax

The environmental impact of food is, however, a highly complex matter. With so many steps in the supply chain as well as various emissions to take into consideration, having one single tax applied across all products of a single type - independent of the individual production systems - risks creating a reductive policy would likely unfairly discriminate against certain producers whilst also spreading misinformation to the consumer.

In accordance with this complexity, the Alliance proposes what could be considered the most extensive and fairest of the possible options. All food producers would be subject to the levy, with each food item being taxed according to its individual footprint, based on existing and in-progress databases. Under this system, everything ranging from production, processing, packaging, and transportation would be considered and contribute to the end levy imposed on that food item.¹

The Money: Who Would Pay The Price Of A Carbon Tax?

While the Alliance states that the levy should fall onto the producer in the first instance, many producers will likely choose to offset these increased costs, at least partially, by increasing the price that retailers and, ultimately, customers pay for their products. This sort of trickle-down effect could play an important role in the extent to which the tax could bring about change. 

While taxing farmers and producers acts as an incentive to bring about change at the production level, historical evidence indicates that financial incentives at the consumer level are highly effective in bringing about behavioural change, indicating that a rise in prices could lead to consumers, however reluctantly, making more environmentally friendly dietary choices. Whilst maximising this benefit will be vital in generating sufficient change, the government must also account for and mitigate any distributional impacts which could affect lower-income individuals disproportionately.¹

Where would the tax revenue go?

On the other side of the coin, it is important to consider where the revenue from the tax could go and how it could be used to positively incentivise farmers, encouraging and rewarding change, as opposed to relying solely on the cost-incurring aspect of the policy to bring about change. This could take the form of the government developing subsidy schemes for climate-positive actions such as tree-planting, as well as putting some of the money towards accelerating existing programs such as the Environmental Land Management scheme, which will see farmers financially rewarded for taking action to provide ‘public goods’ such as clean air, clean water and the protection of wildlife.^1,10

When Can We Expect To See Carbon Taxes?

The call for a carbon tax comes as the last of a series of recommendations made by the Alliance in its recent report ‘All Consuming: Building a Healthier Food System for People and Planet’. The changes – which the Alliance deems necessary if we are to meet our commitments to the Paris Agreement – include increasing public information and advice, mandatory environmental labelling, ending the practice of ‘buy-one-get-one-free’ promotions as a means to reducing household waste, and using state purchasing power in places such as schools and hospitals to transform the market, change eating behaviours and increase the supply of sustainable food. The carbon levy should act as a final option, only to be brought in if the food industry has not enacted the other recommendations by 2025.¹