For those of you who have read my blog enough, you will understand that the title of today's blog entry is both a pun with the word "flatulence" and sarcasm. I am not seriously congratulating Denmark for being the first country to tax livestock flatulence, a tax that will be in effect in 2030. I understand that the Danish government's intent with this 300 kroner tax (or about $43) per metric ton of carbon dioxide equivalent is an attempt to reduce methane emissions and mitigate climate change.
After all, methane traps about 87 times more heat over a 20-year cycle than carbon dioxide does. According to the International Energy Agency, methane has been responsible for about 30 percent of the rise in global temperatures since the Industrial Revolution. Plus, cattle are the largest per-unit emitters of greenhouse gases (GHGs) when it comes to food production (Oxford).
At first glance, it seems like a methane tax on livestock flatulence would be something worth targeting. Aside from collecting government revenue, the other main function of a tax is to disincentivize behavior. In this case, that would be disincentivizing methane emitted from livestock flatulence. However, I have a few concerns with this methane tax.
Climate change is not a crisis. I have explained before why we need to be skeptical about climate change fear-mongering. Climate change is in fact a manageable problem and that we should learn to adapt to the reality of changing global temperatures. For argument's sake, let us assume with the proceeding questions that an apocalypse would ensue unless we take further action.
What is the price elasticity of cattle? Price elasticity of demand is a wonky, economic term referring to sensitivity of the consumer as a result of a price change. If a price goes up and it significantly reduces the amount consumed, then the good or service has elastic demand. If there is little to no change of consumption as a result of the price change, then it is inelastic. Since the main goal of this methane tax is to reduce methane emissions from livestock flatulence, it is preferable that cattle is an elastic good.
I could not find the price elasticity of beef for Denmark. However, I did find data on a neighboring country that is also the largest importer of Danish beef: Germany. According to this research paper (Roosen et al., 2022; Table 4), beef has an elasticity of 1.49, which is higher than pork (1.17) or poultry (1.15). If the tax ends up driving consumer prices enough, it could mean that consumers substitute beef for pork or poultry. Elasticity can also change over time. In the United States, the price elasticity for beef had historically been 0.75 (Andreyeva et al., 2010), which would suggest a more inelastic demand that would be sub-optimal for this type of methane tax. If there is a strong substitution effect between red meat and white meat (the latter of which emits much less GHGs), then there could be a justification for this methane tax. The elasticity has implications both for the economy and for carbon emissions.
How much will this tax reduce GHG emissions? This is a trickier question to answer because Denmark is the first country to implement a methane tax on livestock. Research from agribusiness groups Alltech and Archbold suggests that the carbon sequestration performed with cattle grazing neutralizes the methane emissions from the livestock flatulence, as does the British-based Sustainable Food Trust. If it is true that the cattle grazing emits fewer carbon emissions on net, then this tax is unnecessary because such an effect would undermine the justification for the tax.
There is another factor in this: carbon versus methane. As a technical paper from atmospheric physicists from Princeton and York Universities shows (Harper and van Wijngaarden, 2019), carbon makes up more of the atmosphere than methane. Although methane is 30 times more efficient than carbon dioxide at capturing heat, carbon dioxide is also increasing in the atmosphere 300 times more quickly than methane. This would mean that methane is contributing to about a tenth (i.e., 30/300) of the global warming than compared to carbon dioxide. That being the case, I would question how effective this tax would be if implemented worldwide.
What would happen to global temperatures if the European Union halted all GHG emissions? This hypothetical question comes from the Right-leaning Heritage Foundation. It is not a matter of this specific policy or about Denmark ceasing GHG emissions. We are asking what would happen if all GHG emissions were to cease today on an entire continent. Answer: It would reduce global temperatures by 0.12 degrees Celsius by 2100. This is similar to what would have happened if every country committed to the Paris Agreement last decade. Answer: a reduction of global temperatures by 0.2 degrees Celsius.
Economic considerations. If beef has greater price inelasticity of demand, then all the Danish government is doing is increasing the cost of eating. The tax also affects Danish farmers. Professor Joseph McFadden, who is a dairy cattle biologist at Cornell University, said that imposing these regulations on Danish farmers when the technology to safely reduce enteric methane emissions at scale does not exist is premature. This sort of regulation would do little to protect the future of farming, which is important because people need to eat. It would also affect "our food mosaic and dietary heterogeneity," which affect cultural contributions.
Conclusion. A methane tax on livestock flatulence is a novel policy. It could end up doing nothing to help the environment while harming the economy in a way that sin taxes cause unintended consequences. If it functions more like carbon taxes, which have been found to not harm the economy, then this methane tax could similarly be a net positive. Part of me would like to remain agnostic until there are more data to confirm which direction.
Given the hype around climate change and how the libertarian part of me generally feels about new tax, I am inclined towards skepticism that this will work. There is more than the economic aspect to consider. I have questioned from multiple angles whether this methane tax is necessary or if it will even contribute to a net decrease in GHG emissions. Furthermore, it would not matter if all of Europe went on a plant-based diet or if it developed a zero-carbon footprint today. The impact on global temperatures would be statistically insignificant. While I await the data to more empirically know what the impact is, I will not be surprised if this tax does very little, if anything, to mitigate the problem the tax was meant to address.
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