Paolo Sckokai (Università Cattolica, Piacenza) Simulating the impact of a carbon tax on food in five European countries

This paper investigates the effect of several taxation schemes on the level of GHG emissions from food consumption in four EU member states (MS) (Finland, Italy, Spain, Sweden) and the United Kingdom (UK). Along with the environmental aspects of the outcomes, the paper provides evidence of changes in diets through mean adequacy/excess ratios and welfare effects via a cost-of-living index. We follow a common approach to data collection and aggregation, demand estimation (EASI (Exact Affine Stone Index) demand systems) and policy simulation, thereby providing comparable results across all five countries. Results show that the reduction in GHGE differs substantially across countries, tax schemes and rates. In terms of nutrients intake, virtually all taxation schemes have a rather small impact on the quality of the diets, but such small trends tend to differ across countries. In addition, the welfare cost of the compensated scheme is small but not negligible. These findings open some questions regarding how a common unique European fiscal policy aiming at climate mitigation could be the best option on reaching the policy goals, or a more flexible design, where the tax is calibrated by each member state, can be more effective.