Consumption taxes on meat are increasingly being discussed as a potential intervention to mitigate the environmental damages from livestock farming and meet the European Union’s sustainability targets. Amid high inflation and rising food prices, however, there is a concern that higher meat prices will disproportionately affect poorer households, as they generally spend a larger share of their earnings on food. In a new study, published in the journal Nature Food, researchers from the Future Lab 'Inequality, Humand Well-being and Development' at PIK find that meat taxes can be designed so that low-income households benefit overall.
The research team, led by David Klenert at the Joint Research Centre of the European Commission, conducted microsimulations with EU-wide household expenditure data to compare the various options to design a meat tax.
“The most decisive question for lowering the burden on low-income households is how the revenues from meat taxation are being used”, says PIK co-author Franziska Funke. Channelling the revenues back to consumers as monthly or annual per-capita transfers – much like the ‘climate dividend’ – reverses the distributional impact, meaning that low-income consumers benefit on average. Lowering value-added taxes on fruits and vegetables, on the other hand, only dampens the regressive effect. Beyond revenue use, the research team finds considerable differences between different tax designs, such as raising value-added taxes on meat, or adjusting tax rates for different meat types based on their emissions intensities.
The authors stress that distributional impacts are but one aspect to consider when designing food policies, and that they are small overall. Complementary measures are required to ensure a smooth transition towards more sustainable food systems. “In the end, price interventions on meat and other emissions-intensive foods will likely be needed to meet environmental targets in the food sector. Improving the distributional fairness when designing meat taxes can be crucial for garnering sufficient support for such policies”, says Funke.
