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Future meat tax ‘highly probable’

An investor group vocal about environmental issues says food companies and their financial backers should use an internal ‘shadow price’ to account for future costs applied to protein production.

Meat could find itself in the company of tobacco, carbon and sugar – commodities that have become subject to behavioral or ‘sin’ taxes – due to the negative effects it has on the environment and public health, according to an investor group.

The warning comes from Farm Animal Investment Risk & Return, an initiative founded by Jeremy Coller, chief investment officer of Coller Capital, and supported by investors managing over $4 trillion of assets.

In a recent white paper, FAIRR asserted that the growing evidence of the meat industry’s harmful effects make the imposition of a behavioral tax “increasingly likely” if countries are to fulfill their commitments to the Paris Agreement. According to the UN’s Food and Agriculture Organization, the livestock industry is responsible for 14.5 percent of global greenhouse gas emissions.

“Given the growing consensus on the negative effects of this industry – meat consumption and production –  it’s clear that policymakers are starting to think of the pathway to taxation and see if that could help curb some of the detrimental effects,” FAIRR director Maria Lettini told Agri Investor.

“Once investors see the implications of a marginal tax increase you are able to have a more meaningful discussion around where meat prices need to be”
Maria Lettini, FAIRR

Asked how effective a tax on meat might be, Lettini replied: “It won’t eliminate consumption altogether for many facets of the population, but it is a reminder that there is a growing scientific consensus that it’s absolutely harmful to your health and a tax is likely to be one of several mechanisms that can help reduce the detrimental impacts of consumption.”

The revenue that a government would generate as a result of a meat tax could be used to incentivize farmers to produce other alternative proteins.

“In Mexico, for example, the sugar tax revenue has been spent on installing clean drinking water fountains in areas of poverty and high sugary drink consumption,” said Lettini. “So, we expect there might be other similar measures that would accompany a meat levy so that it’s not a regressive tax that hurts the poorest in society.”

While FAIRR sounded the alarm over measures that are looking increasingly probable, it acknowledged that they are not imminent.

“We don’t know what’s going to happen in the market, but we want investors and other actors and players in the market to engage on this issue,” Lettini said. “We think it’s important to anticipate what might be coming down the pipeline and how it may affect the value of portfolios – something investors talk about all the time, especially when it comes to regulation and taxation. So, we’re taking a first stab at having this discussion and we would expect it would be part of a debate that will be ongoing.”

Carbon copy

In its report, FAIRR encourages food companies to use an internal ‘shadow price’ of meat to account for future costs, in the same way many use internal carbon pricing.

“What we’d like to see is some scenario analysis, first and foremost occurring in investment portfolios,” Lettini said.

“That’s a good first step. We’re doing some of that work when we’re looking at the risk of antibiotic resistance,” she added, referring to a project launched in March in collaboration with charity ShareAction, which calls on restaurants and fast-food companies to adopt timelines for reductions in antibiotic use in livestock.

“Once investors see the implications of a marginal tax increase you are able to have a more meaningful discussion around where meat prices need to be and what the real impact on consumption is. The hope is that can translate into lower risk in portfolios.”

According to the report, which cites research from the University of Oxford, $1.6 trillion could be saved in health and environmental costs by 2050 if animal proteins were eliminated completely from global diets.