The Livestock Levy: are regulators considering meat taxes?

Executive summary of The Livestock Levy.

The full report is available to FAIRR’s investor members from 12 December 2017. It will be available to the public in April 2018.

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Executive Summary

Practically every government in the world faces challenges when it comes to balancing their budgets, and an increasingly attractive target for revenue creation is a tax on goods deemed to be unhealthy or damaging to the environment or both. For example, over 180 countries now impose a tax on tobacco, 60 jurisdictions tax carbon and at least 25 tax sugar.

This report explores whether meat may be the next product on this list.

In the global livestock production sector, sustainability megatrends and changing dietary patterns driven by a growing global middle class are creating enormous challenges. Population growth has driven up up global meat consumption by over 500% between 1992 and 20161 and this trajectory is likely to continue in the future, especially in emerging markets. For example, demand for meat produced in Asia alone is predicted to grow a further 19% in the twelve years to 2025.

However meeting this growing demand has proven a difficult endeavour for the global livestock industry, and in recent years the sectors has been linked with a range of environmental, health and social problems. This includes emerging evidence connecting meat consumption with:

  • greenhouse gas emissions that exceed emissions from the transport sector;
  • an increasing incidence rate of global obesity and associated higher risks of type 2 diabetes and cancer;
  • increasing levels of antibiotic resistance;
  • threats to global food security and water availability; and
  • soil degradation and deforestation.

Could taxation of meat products be a way to mitigate these global challenges? The pathway to taxation typically starts when there is global consensus that an activity or product harms society. This leads to an assessment of their financial costs to the public, which in turn results in support for some form of additional taxation. Taxes on tobacco, carbon and sugar have followed this playbook.

For example, a 2015 report from the World Health Organization (WHO) classifying processed meat as carcinogenic echoes similar reports on the harmful effects of tobacco and sugar; while the work of the University of Oxford quantified the potential cost savings from reductions in meat consumption, echoing the UK’s Stern Review in 2006 – which first made the case to invest now to mitigate climate change or risk paying much more later.

Meat taxes are already on the agenda in Denmark, Sweden and Germany, and although no proposals have advanced into actual legislation, long-term investors should take note of the compelling arguments being made, especially in Denmark and Sweden. It was in the Nordics that the first carbon tax was introduced in 1990.

Meat taxation is not a short-term risk for investors. Yet large pension funds and asset managers would be remiss not to put it on their agenda. As the international community works to implement the Paris Agreement and the UN Sustainable Development Goals, governments and other international institutions will need to create a pathway to a more sustainable global food system – meat taxation may well feature on that road.