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Research article - Peer-reviewed, 2021

Refunding of a climate tax on food consumption in Sweden

Gren, Ing-Marie; Hoglind, Lisa; Jansson, Torbjorn

Abstract

This paper examines the implications of imposing a climate tax on food consumption in Sweden combined with refunding of the tax revenues to farmers for selected agricultural activities enhancing ecosystem services: restoration of drained peatland (carbon sequestration), maintenance of grassland (biodiversity), and construction of wetlands (nutrient regulation). A partial equilibrium model of the agricultural sector is used to assess economic and environmental effects. The results show that the introduction of a climate tax corresponding to the existing Swedish CO2 tax of 115 euros per tonne carbon dioxide equivalent reduces total emissions from food consumption by 4.4% without any refunding of tax revenues. Refunding with payments for all ecosystems enhances the carbon sink by an amount equivalent to 57% of CO2e emissions from food consumption, and results in net benefits in the tax refund system for the agricultural sector as a whole, but is regressive where farmers in regions with relatively high incomes receive proportionally much of the net benefits.

Keywords

Climate tax; Food consumption; Tax refunding; Partial equilibrium analysis; Sweden

Published in

Food Policy
2021, Volume: 100, article number: 102021
Publisher: ELSEVIER SCI LTD