Assessing the Potential of Tax Policies in Reducing Environmental Impacts from European Food Consumption

Abstract Food consumption generates significant environmental externalities that remain insufficiently addressed by public policies. This paper explores the global environmental footprints induced by food consumption in the European Union (EU27) based on a multi-regional input-output model and assesses the potential of tax policies for mitigation. Using household expenditure data, we estimate country-specific demand systems on food products and link these to the footprints for the policy analysis. We find that removing current VAT reductions on meat products has the potential to decrease food consumption-related greenhouse gas (GHG) emissions, water consumption, land use, biodiversity loss, nitrogen and phosphorus footprints of EU27 household food consumption by 3.5 to 5.7 percent. A GHG emission price of approximately 52 EUR/tCO2eq on all food products leads to equivalent emission reductions with higher associated environmental co-benefits. Mean net welfare costs of the two policies amount to 12-26 EUR/year per household. JEL Classification: C54 , D12 , D62 , H23 , Q18 , Q56 , Q58