Environmental Regulation and Sustainability in the Food Sector: Exploring the Impact of Carbon Taxation on Diets, Health and Trade in UK

Abstract

This thesis is structured around the elaboration of two studies that seek to advance our knowledge on the environmental and nutritional effects of environmental policies targeting food markets. Food consumption causes negative externalities that regulation aims to influence. Carbon taxes are an important tool, because they can be designed to reduce greenhouse gas (GHG) emissions associated with food products. However, environmental impact and nutritional quality are not equivalent measures of foods. Fresh fruits and vegetables are low in fats and GHG, and meat is high in both, but both may be low in specific micronutrients; conversely, soft drinks are widely considered unhealthy, but are low in GHG. Manipulation of environmental regulations which impacts on food markets may have an influence on the nutritional status and health of the population. This thesis seeks to extend our current understanding of food policies by exploring the link between environmental regulation of food markets and the nutritional quality of population diets. This is achieved using a modelling approach based on micro-simulation of the effects of imposing hypothetical carbon taxes on foods and drinks prices on consumption, health, and trade. To analyse how food consumption changes in the presence of a carbon tax, an Almost Ideal Demand System was applied using data from the UK Living Cost and Food Survey. Two price interventions were tested: a simple carbon tax, scenario (A), where prices were increased proportionally to the carbon content of foods; and a Bonus-Malus tax, scenario (B), where carbon tax revenues were recycled into the economy in the form of a flat carbon subsidy. The resulting structural parameters were then used to estimate after-tax food consumption behaviours. Health data from the UK National Diet and Nutrition Survey were used to simulate changes in body mass index (BMI), glycated haemoglobin (HbA1c), glucose and blood cholesterol concentrations in each scenario. Results show that the dietary changes induced by the tax reduce the GHG emissions of diets, with some beneficial health effects. To analyse the effects of carbon taxes on the trade of food products, a structural gravity model was applied to Eurostat commodities import data. The model regresses trade flows on country size, distance, import prices and a multilateral resistance term, which captures the level of integration of a country into the world economy. This study shows that the imposition of carbon tariffs would reduce UK emissions derived from the European import of dairy and meat products by more than 30.4 MtCO2-eq. This reduction comes at the cost of lower trade flows, especially those for meat products.