Is Meat Too Cheap? Towards Optimal Meat Taxation

Abstract

Livestock is known to play a significant role in climate change and to negatively impact global nitrogen cycles and biodiversity. However, economically efficient policies for regulating meat production and consumption are under-researched. In the absence of first-best policy instruments for the livestock sector, second-best consumption taxes on meat can address multiple environmental externalities simultaneously, while improving diet-related public health. Here, we review the empirical basis for the ‘social costs of meat’ and study rationales for regulatory efforts to tax meat in high-income countries from the perspective of public, behavioural and welfare economics: (i) multiple environmental externalities, (ii) adverse effects on one’s own health, (iii) animal welfare, (iv) learning curves for 'alternative protein technologies', and (v) distributional effects. We conclude that meat is significantly underpriced and provide preliminary estimates of the environmental social costs associated with meat consumption. We identify several directions for future research towards optimal meat taxation.

Keywords: Environmental taxation, second-best regulation, livestock, food policy

JEL Classification: H23, Q18, Q50