Hlavní práce73950_berv04.pdf, 13.1 MB Stáhnout

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Master’s Thesis

2020 Valerie Friederike Berger

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University of Economics, Prague

Faculty of Business Administration Master´s Field: International management/CEMS

Title of the Master’s Thesis:

Positive and Negative Impacts of a Meat Tax on Society: the Case of Sweden.

Author: Valerie Friederike Berger

Supervisor: prof. Ing. Bronislava Hořejší, CSc.

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D e c l a r a t i o n o f A u t h e n t i c i t y

I hereby declare that the Master´s Thesis presented herein is my own work, or fully and specifically acknowledged wherever adapted from

other sources. This work has not been published or submitted elsewhere for the requirement of a degree programme.

Prague, December 11, 2020 Signature

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Positive and Negative Impacts of a Meat Tax on Society: the Case of Sweden.

Abstract:

Meat consumption and its societal effects have been of high interest to researchers, policy makers and the public in recent years. Meat provides both utility to the individual, as well as imposes externality cost on society. This thesis aims to investigate both sides, compare them and discuss which outweighs which. For this, Sweden as a case study was investigated, due to the amount of research existing and the country’s own interest in the topic. The paper bases its conclusions on extensive literature review, a research questionnaire and quantitative models. The results showed that both significant externality cost and utility exist. The research further proved, that a tax on meat could reduce the amount consumed but would also decrease the consumer’s welfare. However, the cost of meat may outweigh the utility lost. The conclusion can be drawn that incentivising a reduction in meat consumption may be justified, but due to the complexity of the topic, further research would be required.

Key words:

Meat taxation, consumer welfare and compensating variation, externality cost of meat consumption, meat utility.

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Acknowledgment

I would like to extend my deepest gratitude to my supervisor, prof. Ing. Bronislava Hořejší, CSc., for providing me with guidance and feedback throughout this paper. Ms.

Hořejší was always very helpful and quick to answer, supportive and a great source of inspiration to me. I enjoyed and benefited from each and every of our talks greatly.

Thank you also to my dear colleagues Charlotte E., Klara B., Monika V., and Nikola K., who were always willing to review my paper or have a lengthy discussion on the topic and help arrange my thoughts. And who were also simply great friends.

Thank you to my family, for all the support and love throughout this research and the five years of me studying.

Many thanks to the Swedish Embassy for their support in sharing my questionnaire.

Lastly, I want to thank everyone who was willing to spend their time to help bring me a little further with this research endeavour, and to those who helped me in my studies overall. I am beyond thankful to have met with so many kind and helpful individuals.

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Figure 1: Dietary risk ranking second and third, respectively, for men and women as the cause of death (Lancet, 2020a). ... 8 Figure 2: A shift in dietary patterns could critically improve our emission levels on the environment (Westhoek, et al., 2014). ... 12 Figure 3: Meat consumption creates inefficiency in terms of land needed (Wirsenius, Hedenus,

& Mohlin, 2011). ... 13 Figure 4: Healthier diets rich in vegetables and fruits are also costlier (Drewnowksi, Darmon,

& Briend, 2004). ... 18 Figure 5: The impact of bans on consumer surplus and Individual’s utility (Nicholson & Snyder, 2010, p. 103). ... 22 Figure 6: Imposing a ban would reduce the output levels and create a deadweight loss (FEG) and with no price control shift some of the consumer surplus to the producer as well (Nicholson

& Snyder, 2010, p. 324). ... 23 Figure 7: The effect of imposing a Pigouvian Tax to combat externality inefficiencies. (Adapted from Nicholson & Snyder (2010, p. 578)). ... 25 Figure 8: Elasticity of supply and demand determine how the tax burden is shared. If supply is more elastic, consumers pay more of the tax (A) and producers less (B) (scenario in the graph) and vice versa (adapted from Mankiw, 2016, p. 126) ... 27 Figure 9: Consumer surplus and reduction thereof for a fictive case of poultry meat, in case of policy interference. (Adapted from Nicholson & Snyder, 2008, p.102) ... 30 Figure 10: The effects of taxation on welfare. (Adapted from Nicholson & Snyder, 2010, p 578

& Kutasi & Perger, 2015) ... 31 Figure 11: The effect of taxation with different DWL scenarios. (Bishai, 2015) ... 31 Figure 12: The effects of internalising externality cost as researched by Springmann et al.

(2018). Picture a and b show the change in the price of red meat and processed meats, respectively, whereas c shows the combined change in deaths when both price levels are considered. (Springmann, et al., 2018) ... 34 Figure 13: The research cycle: From formulation to solution (and back to formulation). Adapted from: (Adams, Khan, & Raeside, 2014, p. 27). ... 36 Figure 14: The variety of qualitative literature review: from topic exploration to critical investigation of the sources at hand to contextualising the findings (Saunders, Lewis, &

Thornhill, 2019, p. 75). ... 39

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Figure 15: Van Westendorp pricing survey results, graphical representation. (Sherwood, 2018)

... 44

Figure 16: Survey creation is an iterative process, where piloting and continuous testing can ensure high-quality outcomes (Adams, Khan, & Raeside, 2014, p. 119). ... 44

Figure 17: Swedish health care spending in 2017 and 2050e (Lancet, 2020b). ... 46

Figure 18: Age distribution of questionnaire participants (cleaned data). ... 50

Figure 19: Histogram analysis example for observing the normality of the data. ... 52

Figure 20: Outlier identification for the question of beef prices being a bargain, computed by using z-scores. ... 52

Figure 21: Data validation for the Van Westendorp method, as suggested by Pritchard (2020). ... 53

Figure 22: Van Westendorp price sensitivity meter output for beef prices in SEK. ... 54

Figure 23: Awareness amongst respondents of the damage meat causes to health and the environment. ... 55

Figure 24: Scatter plot for correlations between beef prices and meat externality cost awareness. ... 56

Figure 25: Modification of data and computation outputs for the compensating variation data. ... 60

Figure 26: A summary of the results: CV as opposed to environmental and health damage cost. ... 60

Figure 27: CV is significantly lower than environmental damage cost for beef and pork, and slightly lower for chicken in Sweden. ... 61

Figure 28: Health damage cost for processed and red meat are nearly as high as the environmental damage costs of beef per kg. ... 62

Figure 29: Sensitivity analysis – different income groups require different compensating variation. ... 62

Figure 30: Sweden’s sustainable meats are now found in all of ICAs supermarkets in a separate section. ( (Frodl, 2020). ... 70

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List of Tables

Table 1: GHG emission of animal vs plant-based sources per MJ (Wirsenius, Hedenus, &

Mohlin, 2011). ... 11 Table 2: Nutrient efficiency (measured in protein in energy) is higher for plant-based than animal-based foods (Lusk & Norwood, 2009). ... 14 Table 3: Price elasticity of demand in the EU27 and Sweden. ... 29 Table 4: Hypotheses and selected research methods. ... 42 Table 5: Normality testing for the pricing questions leading to the conclusion that the data is generally not normally distributed. ... 51 Table 6: Van Westendorp analysis summary: Price Range, OOP and PI for part 1 and 2. .... 54

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List of Abbreviation, Terms and Definitions

CHD Coronary Heart Disease

Compensating variation (CV) A measure of utility change, calculating the amount needed to compensate the consumer.

Consumer Welfare The benefits that individuals receive from consuming a particular good or service.

Externality Cost The cost (or benefit) caused by a market player that is not financially covered by that market player.

Flexitarian A person who is primarily on a vegetarian diet, but occasionally eats meat of fish.

GHG Greenhouse Gases

Omnivore/omnivorous Here: A person consuming meat and plants as part of their regular diet.

Pigouvian Tax A tax aiming to internalise market externalities.

Plant-based diet A usually vegan, sometimes vegetarian diet, rich in plants. A plant-based diet consists therefore mostly or exclusively of foods drawn from plants.

Private Cost Cost that a market player pays to buy/produce a good/service. It does not take externality cost into account.

Social Cost Private cost + Externality cost

Standard Western Diet =Western pattern diet. A diet high in animal products, processed foods, fats and sugar.

Utility The concept of value to the market players.

vW Van Westendorp Price Sensitivity Meter

Vegan A person who does not consume any animal-

derived foods, such as meat, milk, eggs and butter.

Vegetarian A person who does not consume any meat or

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1. Introduction

1.1. Topic Relevancy and Background

If there is only to be one argument for the relevancy of analysing meat consumption and its consequences, then it is the fact that Bill Gates, third richest man in the world and very likely a genius, is heavily invested in it as well (Beverland, 2014). Meat consumption and reduction has been a topic of debate over the last decade. On the one hand, we can see an increase in vegetarians and vegans and a raise in people`s awareness concerning the effect meat consumption has, yet simultaneously there is an increase in meat consumption (Sveriges Officiella Statistik, 2019, p. 13; Säll, 2018). The one side argues for the cost and negativities meat bring, whereas the other side emphasises the benefits. But who wins the debate and why?

The arguments against include topics such as environmental protection and climate change; health damage caused by excessive meat consumption, as well as meat production inefficiencies. Pro-meat consumption arguments also focus on health, but also on culture and personal utility, and nutritional value (Beverland, 2014; Abadie, Galarraga, Milford, & Gustavsen, 2015; Kutasi & Perger, 2015; Springmann, Godfraya, Rayner, & Scarborougha, 2016).

Assuming truth and relevancy to both sides, it is of interest to evaluate the cost and benefits in numeric terms and compare which argument may outweigh the other. This could lead to better understanding of why people may or may not consume meat. It may also provide relevant insight for policy makers, debating whether or not and how meat consumption should be limited or influenced in any way. Some countries, such as Sweden and Denmark, have in the past considered to implement a meat tax, citing lower health care costs, reduced environmental damage and heightened productivity, yet so far, they have not implemented it long-term (Beverland, 2014).

Welfare effects of policies limiting meat consumption have only been scarcely researched. The recent increase in research topics concerning meat consumption and production indicate however its current relevancy (Säll, 2018); hence a focus on welfare is warranted. What will be particularly new is the comparison between welfare and cost measurement of meat consumption, which to the author’s knowledge has not been done

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to that extent before. The focus is in particular on Sweden, due to the country’s policy maker’s high interest in the topic. In addition, there already exists literature which permits delving deeper and creating more novel and relevant research output.

The author’s motive in choosing this topic was a deep personal interest in the topic of nutrition, paired with a curiosity of sustainable practices, when it comes to food sourcing. The current global interest into meat consumption practices did contribute in choosing this subject. Furthermore, a liking to the field of economic research also greatly contributed. Sweden as a country was chosen mostly due to its topic relevancy and being a sustainability focused country. Overall, the topic sparked the author’s interest and the quantity of interesting research kept it going.

1.2. Thesis Hypotheses and Research Procedures

The overarching aim of this thesis is to see whether meat consumption poses more benefits or costs on consumers and the society they live in. For this, the thesis investigates potential externality cost of meat, as well as its utility. It further focuses on taxing meat consumption and evaluates the amount of compensation needed for consumers to regain the same utility as before taxation. Six research areas were identified and formed into hypotheses, forming the base of this thesis. These are:

Hypothesis 1: Meat consumption causes unaccounted cost (=externality cost) on society.

Hypothesis 2: Meat consumption generates personal utility to the consumer.

Hypothesis 3: Meat consumption’s demand is not perfectly inelastic.

Hypothesis 4: A tax on meat would reduce the amount of meat consumed by consumers.

Hypothesis 5: Taxing meat consumption would cause a loss of consumer utility.

Hypothesis 6: By limiting meat consumption, the reduction in a) Health Cost

b) Environmental Cost

each outweigh the utility that individuals receive from consuming meat.

The methods to answer the different questions range from investigating existing literature, to a quantitative study, and will be discussed in more detail in Chapter 4.1.3.

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Cost of Meat Consumption

On the one hand, the purpose is to investigate if and what cost meat consumption poses on society that may not be included in its price. In other words, one aims to investigate if the current price fully covers the social cost of meat. This led to the following hypothesis:

Hypothesis 1: Meat consumption causes unaccounted cost (=externality cost) on society.

Utility of Meat Consumption

On the other hand, the author wanted to investigate the utility meat brings to its consumers and showcase its value in society. Therefore hypothesis 2 was formulated as follows:

Hypothesis 2: Meat consumption generates personal utility to the consumer.

Elasticity and Taxation

In order to investigate the impact a tax on meat has on society, one has to investigate the cost and utility of meat. Also, consumer behaviour relating to a change in price needs to be discussed. Therefore, three separate hypotheses were generated.

First, consumers price elasticity will be evaluated. The hypothesis below aims to prove that any change in price will have some impact on the quantity of meat demanded.

Hypothesis 3: Meat consumption’s demand is not perfectly inelastic.

This builds the basis for the next hypothesis, investigating taxation of meat, where the aim is to prove that a tax indeed would reduce meat consumption.

Hypothesis 4: A tax on meat reduces the amount of meat consumed by consumers.

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Assuming a tax were to be imposed, the paper will also investigate whether this causes a reduction in utility for the individual consumer.

Hypothesis 5: Taxing meat consumption causes a loss of consumer utility.

Cost or Utility

Lastly, the overarching research question was stated as a hypothesis and aims to be answered.

Hypothesis 6: By limiting meat consumption, the reduction in a) Environmental Cost and b) Health Cost each outweigh the utility that individuals receive from meat.

The goal is to put numbers on the different aspects. This is done by using data from reliable secondary literature, where utility is measured, and cost is assessed. In other terms the two following research questions were identified:

RQ A: Does the reduction in environmental cost due to limited meat consumption outweigh the loss in consumer welfare caused by a reduction in their meat consumption?

RQ B: Does the reduction in health cost due to limited meat consumption outweigh the loss in consumer welfare caused by a reduction in their meat consumption?

Each hypothesis builds on the previous one and is fundamental to the outcome validity of the paper. The hypotheses aim to guide the research and strengthen the scientific approach of the paper. All hypotheses and research questions were carefully investigated and are based on a multitude of sources to come to a conclusion.

1.3. Knowledge Advancement and Limitations

As stated, the author hopes to create valuable new insights into whether and how meat consumption should and could be regulated, by comparing and quantitatively evaluating existing and new data. With this in mind, there have been certain limitations in investigating the topic at hand. On the one hand, the magnitude of the existing research,

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as well as its conflicting nature, makes it difficult to determine one clear path or solution to the given problem. In particular, the variety of opinions on the health effect meat consumption may or may not have, as well as the utility it provides, can be difficult to navigate.

Furthermore, research has been conducted in a number of different environments, making it difficult to rightfully compare. Environmental damage caused by cattle may be very different in the United States, Mexico or Sweden, due to different regulations in land usage, animal rights and feeding policies. Also, factors, such as local climate, have an impact (González-García, Esteve-Llorens, Moreira, & Feijoo, 2018).

It has also been proven that the impact on health varies greatly per region and is also tightly linked to consumer knowledge and education, as well as consumer wealth. More affluent countries may benefit more from meat reduction policies than poorer ones. In particular the cost that meat consumption poses on society due to health care cost, change tremendously depending on the local health care system. A country such as Sweden faces higher health care cost than the United States of America (Springmann, et al., 2018).

Special attention needs also be given to a potential bias of the researcher of this paper, as well as the authors of secondary literature consulted, the survey participants and lastly the very reader of this paper. As meat consumption is a highly emotional topic, a certain bias may be unavoidable. To limit the influence of the authors personal bias, a variety of secondary literature was consulted, with a focus on finding peer-reviewed and widely cited papers. The aim was also to present both sides of the argument and let the reader of the paper form conclusions of their own. Furthermore, the practical research was done numerically and quantitatively, to limit personal bias influencing research subjects and to be able to come to a more qualitative result.

These are just some of the difficulties that the author encountered during the research of this paper. The specific limitations concerning the research methodologies used will be discussed in Chapter 4.1.2. in more detail. Areas of future research, which will be partially based on research limitations, are also discussed in Chapter 6.2.

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2. Cost and Utility: Two Sides of the Same Coin?

The debate on meat consumption has been rising in recent years. One the one hand a boost in vegetarians and vegans in many countries is observable; yet, on the other hand, there is a steadily increasing demand for meat production and consumption. The debate between the two sides is one of utility as well as externality cost which meat consumption imposes on society and the call of activist groups for a public policy to regulate and curb overconsumption by the general population.

This chapter will first introduce the fundamental concepts of utility and social cost, then critically examine some of the prevalent arguments of cost and utility of meat that have been proposed recently by experts. The goal is to give insights into both sides of the argument. The reader should be able to evaluate the issue for themselves thereafter. In subsequent chapters, taxation based on the assessed externality cost and its direct effect on consumer welfare will be evaluated, whilst also assessing potential benefits. This chapter will hence serve as a knowledge foundation for the following research.

2.1. The Concepts of Utility and Externality Cost

Individual utility, while an abstract concept, is at the core of microeconomic studies. It can be defined as the “satisfaction derived from consumption” (Mankiw & Taylor, 2014, p. 58) and is usually individual to the different consumers. The individual consumer aims to maximise his or her utility with the constraints present and to evaluate all other possibilities (Mankiw & Taylor, 2014, p. 40). According to Mankiw (2016, p.

410), the role of the government is hence the maximisation of societal utility.

One important aspect of utility is that consumers focus only on themselves and not on the wider society when maximising their utility. Hence when making their consumption choices, they do not think of the effect their choices may have on their surroundings.

Similarly, producers focus first and foremost on profit maximisation when making their production decisions. This, in turn, creates externality costs, or in other words, it is creating a burden on society which has to be carried by more than those directly consuming the goods (Nicholson & Snyder, 2010, p. 356 & 575; Mankiw, 2016, p.410).

Externality costs occur when the market fails to regulate itself, and some cost imposed on society is not reflected in the price of the good. Disease, pollution and damage to the environment are common examples of such cost. Because of this wrongful pricing, the

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transaction cost, then the only way to regulate these inequalities is by governmental policies such as quotas and taxes (Nicholson & Snyder, 2010, p. 356 & 575).

To compare utility and social cost of meat consumption and its impact on society, one has to find a way to measure the two. However, there exists undoubtedly one specific difficulty with the concept of utility: while consumers can state a preference towards one choice rather than towards another, it will still be impossible to assign an absolute value to the utility of a good. That makes arithmetic calculations nearly impossible. It is, however, possible to measure and use consumers' willingness to pay for a good through pricing surveys or assess welfare loss by means of using compensating variation (Mankiw & Taylor, 2014, p. 103).

In terms of social cost, measurements have to include all different aspects that affect society and third-party individuals. This may be tricky in practice too, but much has already been discussed by researchers in recent years. Transforming such cost into a tax might give an idea on the severity of externalities, as well as the impact it could have on the consumption of goods. However, one aspect not to be forgotten is the fact that utility does experience distortion due to taxation, which represents welfare loss (Mankiw &

Taylor, 2014, p. 103).

This thesis will next list and discuss the most relevant cost points of meat consumption, followed by the utility it generates to people and society.

2.2. The Externality Costs of Meat Consumption

Meat consumption brings value to individual producers and consumers. Nevertheless, it also comes with significant costs to society which are only partially included in the price of it. These costs have been researched by many economists in recent years, such as Alfredsson (2004), Beverland (2014), Lusk & Norwood (2009) and Wirsenius et al.

(2011). Three particular areas were identified by these authors that one should focus on:

health cost, environmental cost and resource inefficiency. They all suggest to impose major expenditures and are discussed frequently in the varying literature.

2.2.1. Health Cost

One primary socially accepted reason for people to choose a vegan or vegetarian diet in recent years has been health. For instance, in the latest Veganuary survey, 38% of the participants indicated health as one of the reasons for trying to eat a plant-based diet for

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pointing towards the health benefits of reducing meat consumption and replacing it with plant-based options instead. Some of the benefits are said to be a reduced chance in getting cancer, coronary heart disease (CHD), diabetes and lower overall risk of mortality (Beverland, 2014; Feskens, Sluik, & Woudenbergh, 2013; Lusk & Norwood, 2009).

The 2020 Lancet report includes dietary risk in the top five causes of death for both men and women. This poses the question to researchers of what one can do to avoid such high numbers (Lancet, 2020a).

Figure 1: Dietary risk ranking second and third, respectively, for men and women as the cause of death (Lancet, 2020a).

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Some causes that have already been identified relate to meat consumption. For instance, red and processed meats are known to be carcinogenic. The general public learned of this when the highly publicised and discussed World Health Organization (WHO) Cancer Research report was published in 2015. This publication has been cited in many well-known newspapers since and was also a big topic of discussion on various social media platforms. However, the magnitude of its message has not reached the general population: processed and red meats actively cause cancer. People are not aware that overconsumption of white meat might also lead to similar health deficits (Alvaro, 2019).

To clarify, the central issue is overconsumption, not the occasional eating of meat in itself (Lusk & Norwood, 2009). However, in most western countries, consumer diets tend to significantly surpass healthy meat recommendations (Springmann, et al., 2018).

This, in turn, is leading to dietary related cancer rates as high as 30% for those consuming the Standard Western Diet, whereas vegetarian and vegans both seem to have a vastly lower risk level for such diseases (Alvaro, 2019).

Another health issue fostered by meat consumption is CHD. In the US, it is the only cause of death surpassing cancer, with approximately 650, 000 deaths alone in 2017 (U.S. Department of Health & Human Services, 2020). In order to reduce the cases of heart disease existing, as well as reducing the numbers of those diagnosed with diabetes, medical experts recommend an increased intake of dietary fibre, as well as a reduction in meat consumption (Nordström & Thunström, 2010; Springmann, et al., 2018).

Peñalvo et al. (2017) show two effects in their paper: on the one hand, fruits, vegetables, nuts and grains all reduce CHD, diabetes and stroke. On the other hand, processed meats, red meats and sugar-sweetened beverages have the opposite effect on human health.

Strikingly, the mortality rate for vegetarians is 20% lower than for omnivores (Beverland, 2014), and processed meats and unprocessed red meats jointly attributed to over 2 million deaths in 2020 alone. Furthermore, a significant number of those deaths occurred in wealthier countries. It has been projected that a reduction in meat consumption, paired with an increase in consumption of plants, could lead to a 6-10%

lower level of mortality (Springmann, Godfraya, Rayner, & Scarborougha, 2016;

Springmann, et al., 2018).

Besides the loss of lives, another negative factor of meat-based diets is the high costs imposed on society stemming from meat-consumption based illnesses. These costs are not currently accounted for in the price of meat. Worldwide health care costs attributable

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to meat consumption were forecasted to amount to nearly 300 billion USD in 2020. The more significant impact of these costs is unsurprisingly on high-income countries (Springmann, et al., 2018). If these costs were to be integrated into the price of meat, Springmann et al. (2018) estimated a price increase of red meat of 4% on average.

Processed meat would even increase by a full 25%, with a maximum of 111% in some countries.

2.2.2. Environmental Cost

Global warming has been a hot topic in the last couple of decades, becoming more and more relevant in our daily lives.

Therefore, experts and policymakers have put a greater focus on humanity’s contribution to global warming. Plastic and travelling have come under scrutiny already for being damaging to the environment, leading to a ban of single-use plastics in the EU (Rankin, 2019) and some countries contemplating higher taxes on aviation and emission (Wittmer, 2019). However, another one of the most damaging consumption patterns has only recently received more attention: the food system. Common approximations estimate foods to contribute between 20 to 30 per cent of all greenhouse gases (GHG) emitted and it is believed that this number will rise in the future (Beverland, 2014;

Springmann, Godfraya, Rayner, & Scarborougha, 2016).

Of course, humans cannot stop eating altogether. Nevertheless, there seems to be a case to be made towards a change in dietary consumption patterns. This is because in terms of environmental damage, meat and animal foods specifically seem to contribute to up to 80% of food-based GHG emission (Beverland, 2014; Springmann, Godfraya, Rayner,

& Scarborougha, 2016). Wirsenius et al. (2011) estimated 510 million tons of GHG are emitted per year, which is sure to have further risen since the time of writing and Caillavet et al. (2019) further argue that carbon values are often underestimated, due to older models and numbers being used. One can hence conclude that meat production poses a significant and higher threat than anticipated to our environment. This also translates into high social cost for society to bear now and in the future.

To compare concrete numbers, Wirsenius et al. (2011) concluded that beef cattle, which poses the highest weight on GHG emissions, emits 3.5kg of CO2 per metabolised megajoules (MJ) of energy, whereas pork and poultry produce 0.51kg and 0.37kg respectively. In comparison, cereals and vegetable products only produce as much as

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0.05kg and 0.02kg of CO2 per metabolised MJ of energy, which is significantly less than even the more environmentally friendly meats. There is, therefore, a case to be made for substituting at least some of the meat consumed for other alternatives, such as pulses, grains and even meat-substitutes. (Wirsenius, Hedenus, & Mohlin, 2011).

Table 1: GHG emission of animal vs plant-based sources per MJ (Wirsenius, Hedenus, & Mohlin, 2011).

Not only in terms of GHG emissions do meats create the highest contribution—also other pollution results from it, such as nitrogen and phosphorus emissions. The highest pollutants are identified to be beef and pork production. Furthermore, to produce meat, one requires a vast array of land. This is not only for direct usage, such as grazing and farms but also to produce animal feed, such as corn and soy. Hence, the consumption of meat is also a major contributor to the deforestation of the Amazonian forest and other green lands. One needs to keep in mind that these are numbers often not included when computing the externality cost of meat consumption, due to its complexity. (Säll &

Gren, 2015; Wirsenius, Hedenus, & Mohlin, 2011).

As presented above, one way to reduce a person’s or country’s environmental impact is the reduction in meat consumption, specifically beef (Säll & Gren, 2015), and to increase instead one’s consumption of plant-based foods (González, Frostell, &

Carlsson-Kanyama, 2011). According to Beverland (2014) "the mainstream adoption of plant-based diets is believed to result in less land use, lower pesticide use, and decreases in other negative environmental externalities."

In 2014, Westhoek et al. analysed that a 50% reduction in livestock could reduce GHG and nitrogen by as much as 40%. At the moment we are exceeding the healthy level of nitrogen by as much as 900 nitrogen per hectare in some countries, as well as other gases

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we emit into the atmosphere. However, as presented in the graph below, by halving our meat consumption, significant positive environmental steps could be achieved (Westhoek, et al., 2014).

Figure 2: A shift in dietary patterns could critically improve our emission levels on the environment (Westhoek, et al., 2014).

There is another aspect that has to be discussed concerning the environmental impact that our food choices create: transportation and processing. One needs to be aware that transportation of foods itself also majorly contributes to GHG emission. Due to the low impact that vegetables and fruits generate in production, the proportional impact of transportation on plant-based products is significantly higher than with meats. (Edjabou

& Smed, 2013). It is noteworthy that meat is facing two kinds of transportation costs.

Firstly, meat is often not produced in the country it is eventually consumed in (Caro, Frederiksen, Thomsen, & Pedersen, 2017) and has to be transported to its final destination. Secondly, cattle feed also often has to be shipped, which greatly contributes to emission of CO2 (González, Frostell, & Carlsson-Kanyama, 2011; Westhoek, et al., 2014).

2.2.3. Resource Inefficiencies

One other aspect to discuss concerning meat externality cost is resource inefficiency.

Resource efficiency can be defined as the maximisation of output generated from the scarce input resources we have available and wasting as little of the input in the process as possible (Nicholson & Snyder, 2010, p. 5 & 327). In the case of meat production, relevant scarce resources include land and water, as well as the desire to limit pesticide

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water, if we were to place more focus on foods such as grain and pulses, and reduce the amount of meat produced (Beverland, 2014; Lusk & Norwood, 2009).

While resource efficiency is tightly interlinked with environmental sustainability, it should be treated as its own sub-category of cost imposed by meat, as its effects spread wider than just on an environmental level. To clarify, meat production has been proven to be inefficient, as it is having the highest resource demands in all categories of food production; this is already excluding the environmental externalities (Beverland, 2014;

Lusk & Norwood, 2009). This is due to several factors. Firstly, it does seem logical that foods higher up the food chain require more energy inputs than those lower down, simply because of the need to sustain and feed the cattle (Alfredsson, 2004). Lusk and Norwood (2009) state that "for every kilogram (2.2 pounds) of animal protein produced, animals consume an average of almost 6 kilograms...of plant protein from grains and forage." The authors further argue that these kilograms fed can be spoken of as wasted calories.

This inefficiency in turn leads to an increasing need for land. There is the argument that were there less meat consumption, countries could reduce their need for farming land, fertilisers and pesticides (Lusk & Norwood, 2009). In a study by Wirsenius et al. (2011), a clear correlation between GHG tax on meat and a reduction in land usage was discovered. A tax of only 20 euros per ton of CO2 emission would already result in 2 million hectares cropland and 4.5 million hectares permanent pastureland being saved.

Another study evaluated that reducing meat by 50% could lead to a reduction of cropland from 0.23 hectares to 0.17 hectares per citizen in the EU (Westhoek, et al., 2014). This land could, in turn, be used to either plant more crops and feed other regions of the world, or else to build greenland and re-nourish the earth.

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Another aspect to discuss is that of nutritional efficiency by the general consumer. In a 2011 study by González et al. legumes and cereals were found to be up to eight-times as nutritionally efficient than animal products. In particular protein sourced was much higher for pulses (41g to 77g protein/MJ) and grains (8g to 57g protein/MJ) than for animal foods (4g to 11g protein/MJ) (González, Frostell, & Carlsson-Kanyama, 2011).

Moreover, in a study done by Lusk and Norwood (2009), the cost of nutrient production was estimated. The study shows that even the cheapest animal-based energy source is four times as expensive as the most expensive plant source, and in terms of protein source, they were at the very least more than three times pricier.

Table 2: Nutrient efficiency (measured in protein in energy) is higher for plant-based than animal-based foods (Lusk

& Norwood, 2009).

One can conclude that shifting production to more efficient foods such as pulses and grains would be a benefit to society and offer the chance also to combat malnutrition.

According to González et al. (2011), this is not a recent discovery. However, instead of a decrease in meat consumption, we can see the numbers on the rise.

2.3. The Utility of Meat

While meat consumption has some drawbacks, there is a reason for why individuals like to consume it, as well as for society to accept and foster this consumption culturally.

One can assume a connection to utility or satisfaction, generated from meat consumption. Therefore, if society were to price the externalities, one would have to analyse what this could mean for the utility of consumption. From various sources of

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literature (e.g. Abadie, Galarraga, Milford, & Gustavsen, 2015; Lusk & Norwood, 2009;

Kutasi & Perger, 2015), the following aspects have been identified: personal utility, inequality and tax regressivity and meats nutritional benefits. These aspects will be looked at in more detail to provide a full picture of the benefits at hand.

2.3.1. Personal Utility

One cannot deny that the mainstream consumer enjoys meat products and will put great value on it. According to Lusk and Norwood (2009), meat is the most valued food category for consumers. This is also reflected in quantity demanded, despite its comparably high price (if compared to, for example pulses that have a similar nutritional profile). The reasons for this are multiple.

Firstly, we can think of meat as a luxury, that represents a certain social status and sends out a message of affluence (Abadie, Galarraga, Milford, & Gustavsen, 2015). Beverland (2014) argues that "food is more than just fuel - what we eat is a powerful signifier of who we are and whom we would like to be". Hence, as long as society sees meat as a status symbol, people will be putting a higher utility on its consumption. On a side note, it is interesting to observe that a high amount of the vegan, vegetarian and flexitarian population stems from a more affluent group of society. This could be indicating that there is a shift to this way of thinking and that over time meat consumption has the potential to lose that status symbol (The Economist, 2018).

Also, meat can generally be seen as a representation of cultural identity to many. To the individual consumer, it may be a sign of one's country culture, their gender association or other institutional factors such as religion (Beverland, 2014). It is, however, possible for a culture to adapt over time, especially when steered by some external force such as a crisis or well-crafted policies (González, Frostell, & Carlsson-Kanyama, 2011).

Another argument is the need for flavourful food, which meat provides. Whilst vegetables are known to be tasty as well, if the individual's flavour pallet is not adjusted to it, the meat will surely provide a higher utility to the person (Alvaro, 2019). Similarly, form utility may be responsible for heightened satisfaction of meat consumption as opposed to some grain or vegetable products (Lusk & Norwood, 2009). Both may be adaptable over time, but if presented in one momentary instance with a meat and plant- based option, the former one will indeed provide more utility to the omnivorous person than the plant one.

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Lastly, the opportunity cost of time is a relevant aspect as well. The possibility of tastes and culture adapting over time to a plant-based lifestyle and generating the same utility from vegetable sources as meat previously provided has been discussed. It is also a fact that whilst meat consumption can generate disadvantages, these are usually in the long- term. However, consumers will usually prefer choosing their utility for the present time.

In other words, the current utility is valued higher than a potential future disadvantage or utility. This becomes relevant when discussing the long-term health and environmental impacts meat can cause. Therefore, a steak today may not keep the doctor away, but it does present a higher form of satisfaction to the individual (Kutasi & Perger, 2015).

2.3.2. Health and Nutrition

While plant-based diets are renowned for being healthier, it is not easy to assess whether it would also work on the mainstream level. The current plant-based population is, to a big part, very health-conscious. This means that they are not only eliminating meat from their diet, but also focusing on getting a variety of nutrients and limiting other unhealthy ingredients, such as sugar and processed foods. If the general population is to shift away from meat due to policy interferences, one risk is that the substitutions chosen would not be healthy goods but rather an increase in fats and sugars (Darmon, Lacroix, Muller,

& Ruffieux, 2014). Kutasi and Perger (2015) argue that "going off a harmful addiction may involve taking up another." While one cannot assume meat to be an addiction, a substitution effect certainly exists.

In past studies, a fat reduction, for instance, increased sugar and salt consumption, which also leads to many health complications, such as coronary heart disease and diabetes (Kutasi & Perger, 2015). It is also relevant to note that many of the meat-substitution products are ultra-processed foods that are, albeit often healthier than their meat-based ultra-processed counterparts, still full of additives, sugars, fats and salts.

A common pitfall of policies such as taxation is also the lack of adaptability to the individuals' needs and demands. Especially as nutritional needs vary vastly amongst people from different genders, age groups and origins, a tax on a single food group cannot take those needs into account and therefore may cause unwanted damage (Abadie, Galarraga, Milford, & Gustavsen, 2015).

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In conclusion, this means that health issues may arise for some population groups, especially those that have less knowledge or require specific dietary needs. This can cause severe damages to individuals and society (Darmon, Lacroix, Muller, & Ruffieux, 2014).

2.3.3. Food Equality

Prohibiting or regulating meat prices might also cause inequality. To start, one must realise that already without any policy interference, the food profiles of the less wealthy are higher in fats, sugars and other unhealthy foods than of the wealthier. In France, low-income consumers were found to commonly buy less fruit and vegetables, and more unhealthy products as compared to medium-income consumers (Darmon, Lacroix, Muller, & Ruffieux, 2014; Muller, Lacroix, Lusk, & Ruffieux, 2016). While it was initially assumed that by introducing taxes one could improve their nutritional profiles, the research found this not to be true. Instead, it led to an increase in the disparity between the consumer groups (Muller, Lacroix, Lusk, & Ruffieux, 2016).

One of the reasons was that lower-income consumers tended to spend a higher proportion of money on food in general and were more price-sensitive. A price increase, therefore, affected them more than the other income groups (Caillavet, Fadhuile, &

Nichele, 2019; Säll, 2018). Furthermore, the foods taxed in the past have usually been those consumed in higher quantities by the lower-income groups. This, however, might be slightly different with meat, due to its already higher-than-average price (Darmon, Lacroix, Muller, & Ruffieux, 2014). Also, Nordström and Thunström (2010) found that in Sweden the most significant benefit of food policies was obtained by the most affluent.

Another reason for the disparity between the richer and the more impoverished community may be a lack of education and nutritional knowledge. Peñalvo et al. (2017) discovered that whilst an educational effort made in the US improved the diet of its population overall, the results were a lot better amongst higher income groups. This, in turn, was creating yet another reason for the wide gap within the population.

However, one of the most common reasons for inequality may be that a tax increases prices and that the tax burden will most certainly not be entirely carried by the producer, leading to a decrease of real income for the consumers. Due to a change in regulations, producers may either add the value of the tax to their good or to avoid the tax, they may

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change the ingredients to higher-quality ones, increasing the cost of production and hence ultimately also increasing the price of the good (Kutasi & Perger, 2015). If the tax aims to shift consumers away from the good altogether, then the cost of the alternative, "healthier" diets will have to be taken into account. According to Drewnowksi, Darmon and Briend (2004), one can see an apparent increase in dietary cost with an increase in fruit and vegetable consumption.

Figure 4: Healthier diets rich in vegetables and fruits are also costlier (Drewnowksi, Darmon, & Briend, 2004).

Researchers also discussed combating such disparity by introducing subsidies at the same time as the tax. While this paper will not be focusing on subsidies as such, a quick discussion of the matter shall be included here: albeit benefitting all income groups, subsidies still seem to favour higher-income groups over the poorer ones (Muller, Lacroix, Lusk, & Ruffieux, 2016). The research by Muller et al. (2016), for instance, resulted in a decrease of cost of 4.7% for the poor and a nearly three times as high one (12.1%) for the reference group when introducing both a tax and subsidy. While this does not negate the benefits of a subsidy, it still does not improve the regressivity of food taxes and the risk of increasing disparity of social classes.

A last note needs to be directed towards the welfare of producers of meat. While the focus in this paper is on the consumers rather than the producers, one cannot ignore the fact that shifting away from meat would mean a significant restructure of the industry.

This may mean a shift in jobs, and a reduction in income or need for re-education for many farmers and other workers of the meat industry. In a paper analysing the Finnish

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agricultural model, which heavily relies on meat and milk production, a shift away from meat consumption was predicted to be harmful to the sector and economy. (Lusk &

Norwood, 2009).

2.4. Conclusion

Both sides build on valid and highly important arguments that have to be taken into account when considering interfering into the food system. Meat consumption is creating a utility to many consumers, be it due to its price-to-nutrition ratio, or the satisfaction it gives to the individual. It is an integral part of our society, both on the side of production and consumption, confirming hypothesis 2. It is however non-negotiable that meat consumption (and its production) impose high social costs and that the market is not able to regulate this on its own, as investigated by hypothesis 1. We can therefore accept both as true.

While consumers tend to prefer short-term thinking, that focuses only on their benefits, it is the role of the government to look out for society as a whole, especially for those that are at a disadvantage. By providing consumers with incentives and information to change their consumption pattern, governments can look out for the unwanted long-term side effects that may reduce societies' and ultimately, the individual's quality of living.

Thus, a policy approach may be warranted, yet will have to be carefully crafted not to create more damage than doing good. The upcoming chapters will focus on taxes as a tool for modifying consumer behaviour, as well as pricing of the discussed externalities in the model country Sweden. It will then be researched on how the consumers may react to such a tax and what implications this could have in terms of welfare.

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3. Regulation of Externalities: A Policy Approach

As presented in the previous chapter, meat consumption bears some adverse effects on society, causing inefficiency in the market. According to Nicholson and Snyder (2010, p. 570), an efficient allocation of the resources means that the social cost (private cost plus externality cost) must equal the price of the good. Only once a good is fairly priced can the consumer make an informed choice and the market will maximise its resource allocation efficiency.

Policymakers have the choice between a few tools to regulate such market inefficiencies: non-policy tools such as information campaigns; command and control policies such as permits and standards, and market-based approaches such as taxes and subsidies.

3.1. Making a Regulatory Choice: Tools and Policies 3.1.1. Information Campaign

The approach interfering the least with the individuals’ freewill and personal utility maximisation is that of an information campaign. As long as we assume the consumer will make rational decisions and have full information in the market, an information campaign might be a very valuable tool (Beverland, 2014). The aim is to inform the consumer about all the positives and negatives of the good they consume – in this case, about the adverse health, environmental and social effects that meat consumption poses.

However, some difficulties with this approach have been identified in the past.

Firstly, a lack of knowledge exists amongst consumers when it comes to nutrition. This is amplified by an overflow of news and flawed research concerning food benefits and deficits, circulating on the web and social media (Kutasi & Perger, 2015; Hill, 2020).

Due to imperfect information, even if consumers were indeed to behave entirely rational, their decision making would be flawed and misinformed. While information campaigns aim to combat this, it would take significant investment, and because of the general noise existing on online platforms regarding this topic, its success would likely be minimal.

Furthermore, the meat industry might also create counter campaigns that devalue or reduce the impact of anti-meat information campaigns. The EU alone has spent more than €60 million over the past three years promoting meats in our diets (Boffey, 2020).

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Also, meat producers themselves might use marketing tools to promote benefits of meat consumption, both emotional and rational, to consumers. This communication noise might prevent individuals from receiving any of the right information, leading to a lack of effectiveness of the campaigns.

Secondly, as stated in Chapter 2.3.1., eating provides deeply personal value and is highly connected to culture and social institutions. The emotional connection prevents consumers from acting in a manner that would be seen as fully rational from the outsider's point of view. Therefore, information campaigns have failed to create real shifts in the past, and this is likely to remain the same in the future (Beverland, 2014;

Edjabou & Smed, 2013).

While an information campaign should not be ruled out as a complementary approach and can potentially help consumers and producers to understand and appreciate the impending policy better, it seems unfeasible as the only method when trying to create change, especially at a quick pace.

3.1.2. The Coase Theorem

Another approach, which is free of governmental interference, is the Coase theorem.

This theory states that the market can regain efficiency on its own because the damaged and damaging party both see value in cooperating. Those that create the externality cost will either pay the affected party some compensation, or the affected one will pay so that the other will cease the harmful action. This depends on whichever has been estimated to be more valuable. However, the Coase theorem faces two requirements to work: first, it needs to be clear who has the legal property rights; second, there should be little to no transaction cost (Nicholson & Snyder, 2010, p. 573-575; Lambert, 2017).

However, in the case of meat consumption, neither requirement is given. Firstly, in terms of the adverse effects in health and the environment, it is not clear who has the legal responsibility for it: the producer or consumer. Even more importantly, the Coase theorem requires no transaction cost. Therefore, due to the aforementioned asymmetry of information, and the need for individuals to bargain with more prominent players, one can safely assume this not to be the case (Nicholson & Snyder, 2010, p. 575).

Therefore, while an approach where the market would manage to regulate itself would be preferable, these particular externalities will more likely require governmental interference.

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3.1.3. Command and Control Policies

To control unwanted side effects of specific goods consumption or production, governments can impose regulatory measures. The critical aspect of command and control policies is that they are more static and restrictive. Those policies come in different forms such as standards, bans, permits and caps.

Bans and other similar limitations forbid certain levels of externalities to be exceeded.

For instance, one could impose a maximum level of emission per company or forbid certain pesticides to be used (Nicholson & Snyder, 2010, p. 579; Open Textbook Library, 2018, pp. 677-681). In terms of meat consumption, this would mean regulating the individual's consumption pattern and reducing most consumers' surplus.

Consumer surplus is a measure of the added value each consumer receives when consuming a good. It is measured as the difference between the price they are willing to pay and the actual price of the good. Consumer surplus is tightly linked to utility, as can be seen in Figure 5. In an unregulated environment, an individual consumer faces its utility curve and budget constraint (U1 and I in the graph) and chooses to consume the quantities of the represented goods at the tangency of those two lines. If a ban or limit of one good were to be introduced, the consumer would fall to a lower utility curve (U0).

If one wants to prevent this reduction in utility or surplus, individuals have to be compensated by the amount that would propel them back onto the original utility curve.

In this case, if there was an absolute ban, where the consumer would have to spend all their goods on “other goods”, the so-called compensating income variation would be the distance between A to B. This equals the loss in consumer welfare that individuals face (Nicholson & Snyder, 2010, p. 103-106).

Figure 5: The impact of bans on consumer surplus and Individual’s utility (Nicholson & Snyder, 2010, p. 103).

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In terms of meat production, a ban or cap could be implemented on production, for instance, limiting the number of cattle a farmer may slaughter per year. What would such a policy, however, mean for welfare and consumption? It would create a significant deadweight loss, and prices would likely be higher. This leads to a decrease in consumer surplus, and whilst there is an increase in the producer surplus, there will also be an increase in deadweight loss. The deadweight loss will also represent the loss of some suppliers that are forced from the market, simply for lack of production capacity.

Figure 6: Imposing a ban would reduce the output levels and create a deadweight loss (FEG) and with no price control shift some of the consumer surplus to the producer as well (Nicholson & Snyder, 2010, p. 324).

The most common regulatory approach is permits. The government decides upon a maximum acceptable level of the externality, that may be imposed on society. For this quantity, the production and consumption are believed to provide higher value than the externality it generates. Sometimes, it may even not generate any externality, until a certain quantity of production is exceeded. (Nicholson & Snyder, 2010, p. 579). The individual producers are then permitted to produce a certain amount of this externality via issued permits. These permits are usually tradeable. This allows a more efficient firm, for instance, to sell their excess to other companies that may require higher amounts (Shepard, 2014). This seems to be a common approach in terms of emission regulation, to the point that there are markets such as the European Union Emission Trading System set up for this purpose alone (Open Textbook Library, 2018, p. 686- 691). One benefit is that the government is in control of the total amount of emission. It can higher or lower it centrally, depending on what they deem suitable. (Shepard, 2014) However, this benefit of governmental control might also be its most significant deficit.

One concern is that governments and their agencies might not be acting in the publics

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best interest, having been (legally or illegally) manipulated by some. Even when they do have the population’s best interest in mind, it might be challenging to make a fully informed and efficient choice. As presented in Chapter 2, the externality cost of meat consumption, for instance, depends on a multitude of factors, some which are hard to account for. This lack of knowledge poses a threat to those regulatory policies.

(Lambert, 2017).

Furthermore, Zywicki (1999) argued that command and control policies might lead to a lack of competition and entrepreneurship. This is further amplified by the fact that implementing some of these policies could be proportionally more costly to smaller companies, thus eliminating them from the competition. This fact is also visible in the deadweight loss, visualising a reduction in supply. Bigger companies will then be able to benefit from such policies, and imperfect competition may be created (Zywicki, 1999). Lambert (2017) therefore reasons that using a tax instead may encourage companies to create further efficiencies and reduce their output potentially even below the limit set by the cap. In any case, a tax is a way to internalise the externality cost of a good’s consumption and/or production. A correctly priced good in turn can lead to the elimination of market inefficiencies (Lambert, 2017).

3.1.4. Market-based Policies

While there is an ongoing debate on whether governments should intervene at all, economists have been suggesting using market-based policies, such as taxation and subsidies instead of command and control ones (Cremer et al., 1998). In particular, the Pigouvian tax aims to tax either production or consumption based on the amount of externality cost they produce, to value the good at its full social cost. This is believed to be a more dynamic system as it restores the efficient market equilibrium and allows the market to flexibly react to those incentives rather than being fully regulated (Open Textbook Library, 2018, pp. 681-686; Frank, 2008). Furthermore, taxes have proven to be a less costly system, often even generating revenue to the imposing agency (Frank, 2008).

Ultimately, taxes increase the market cost of a good. The Pigouvian tax aims to internalise externality cost into the good’s final price and have those creating the damage pay the price for it in turn (Kutasi & Perger, 2015; Cremer et al., 1998). As a heightened price disincentives negative externality, a tax is assumed to recreate market efficiency

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can see the original marginal cost curve (MC) before internalising the externality cost and then the marginal social cost curve (MCS) which is composed of the private cost plus the externality cost combined. As the initial market outcome produces a too high quantity at a too low price, one may be including the externality cost in the price by imposing a tax (t). It is important to note that this tax is to be set at the efficient market optimum Q‘ instead of the externality-ignoring equilibrium, as seen at Q. (Nicholson &

Snyder, 2010, p. 578; Snyder et al., 2015, p. 510).

Figure 7: The effect of imposing a Pigouvian Tax to combat externality inefficiencies. (Adapted from Nicholson &

Snyder (2010, p. 578)).

In the case of meat consumption, such a tax would mean an increase in price for meat products. This, in turn, will reduce its quantity demanded. If we assume that each additional unit of meat poses the same externality cost, then a reduction of consumption would mean a reduction in the overall externality cost imposed on society. However, the extent of the consumption reduction is also dependent on consumers price elasticity (Kutasi & Perger, 2015). However, estimating the concrete value of such a tax is as tricky as with estimating the size of other policies. The final imposed tax in practise may therefore not be a real Pigouvian tax, but instead it is based on the concept of using taxation to combat externalities. This in turn means that such tax could cause effects such as a deadweight loss (Choi & Johnson, 1992). Still, it is a more flexible tool than regulative counterparts. If the externality cost outweighs the value of production or

tax

Q‘ Q

S = MC S‘ = MC‘ = MCS

D P

P‘

Price Cost

Quantity (output)

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good. Similarly, if the good is of higher value to them than the tax they have to pay, they may decide to keep consuming or producing. It leaves the market players a choice (Frank, 2008).

Lastly, taxes may also serve as an incentive for market players to innovate. As every unit of negative externality reduced will result in a real saving of money, firms and even individuals may start finding more efficient ways to produce and consume goods. This may not be the case with an absolute cap or ban, where after reaching the legally obliged point, there is no further incentive to reduce the externality cost. Therefore, taxes serve as a better motivator (Zywicki, 1999).

In summary, one can say that taxation has many benefits over the other tools as:

A. Governments can use the revenue it generates to fund transaction costs and counter the externality costs.

B. Specifically, Pigouvian taxes, instead of prohibiting consumption, prices goods at their full value (social cost). If the good at the new price provides enough utility to the individual, they will still purchase it. Otherwise, they may choose to substitute. In either case, the market will operate more efficiently, and the players will still make their own decisions.

C. It is more equitable across larger and smaller companies than equivalent regulations that may cost the same in absolute, but not relative terms.

3.1.5. Consumption versus Production Taxes

When imposing a tax, the government needs to decide who is taxed and what the tax is being based on. In terms of meat production and consumption, one could either tax the production (such as the emission levels it generates) or the consumption of meat.

Generally speaking, a tax on production would lead to a more efficient outcome for the market by having the potential to fully bridge the gap of private and social cost (Wirsenius, Hedenus, & Mohlin, 2011). However, previous research has made several arguments favouring a consumption tax.

Firstly, if one were to tax the production side, it would be difficult and therefore costly to control how much emission or externalities the different producers generate. This would result in the need for agencies to monitor producers, which would likely lead to high additional cost that would not occur if consumption were to be taxed instead (Edjabou & Smed, 2013; Wirsenius, Hedenus, & Mohlin, 2011).

Hlavní práce73950_berv04.pdf, 13.1 MB Stáhnout

Master’s Thesis

2020 Valerie Friederike Berger

University of Economics, Prague

Positive and Negative Impacts of a Meat Tax on Society: the Case of Sweden.

Table of Contents

Table of Figures

List of Tables

List of Abbreviation, Terms and Definitions

1. Introduction

2. Cost and Utility: Two Sides of the Same Coin?

3. Regulation of Externalities: A Policy Approach