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26/08/2019

Taxing and Managing Meat: An Integrated Approach to Tackle Climate Change

By admin

By Maria Alejandra Serra Barney, Nathalia Cortez Gomez, Lorena Perez Roa and Melanie Auvray (Alumni Tilburg Law School)

taxing meat report

A few months ago, a team of four master students from Tilburg University participated in the Geneva Challenge 2018 on Climate Change. Our proposal aimed to tackle greenhouse gas emissions of the livestock industry, by creating a Global Tax Meat Scheme, that would allow countries from all over the world to have a profound transition to a cleaner industry while achieving a change on consumer’s behavior.

 

Climate Change is one of the biggest challenges of our generation. Action and cooperation from every country is needed, as well as from every sector and industry. While several actions to mitigate Climate Change have been developed in the most acknowledged pollutant industries, such as transportation, mining, or product manufacturing, the severe environmental impacts of the livestock industry have managed to remain in the shadows. Livestock industry alone is responsible for 14.5% of the annual worldwide Greenhouse Gas (GHG) emissions of Carbon Dioxide (CO2), Methane (CH4) and Nitrogen Dioxide (N2O), exceeding the emissions produced by the entire global transportation sector[1]. Nevertheless, a survey developed by Chatham House along with the Glasgow University in 2014[2], revealed that livestock sector is not recognized by people as a contributor to climate change[3]. As a matter of fact, one-quarter of people considered that ‘meat and dairy production contributes either little or nothing to climate change’[4].

 

Accordingly, and contrary to popular belief, the livestock industry is responsible for a large amount of the global Greenhouse Gas (GHG) emissions, which are generated through animal physiology (enteric fermentation, respiration and excretions), animal housing, feed crops, manure handling, processing of livestock products and bi-products, transportation and land use for livestock production (deforestation, desertification)[5]. This should not come as a surprise, considering its strong place in the economies of both developed and developing countries, as the main supplier of global calories, proteins, and essential micronutrients[6]. Likewise, livestock production is a good alternative in some developing countries that have difficulty growing crops and need to ensure the nutrition of their population[7], however relying almost exclusively in livestock products entails risks for human health and food security itself. The consumption of meat in developed countries is five times higher than in the developing countries[8], which increases the risk of colorectal cancer, pancreatic cancer and prostate cancer[9]. According to the World Health Organization (WHO), red meat (beef, veal, pork, lamb, mutton, horse and goat) has been classified as Group 2A: “probably carcinogenic to humans”; and processed meat (‘hot dogs’, ham, sausages, corned beef, beef jerky, canned meat and meat-based preparations and sauces) as Group 1: “carcinogenic to humans”[10], just as tobacco smoking and asbestos. This is why the WHO stresses the importance of the reduction on consumption of processed meat[11], which makes the leading role that meat products have in food security nowadays questionable.

 

In addition, the increase in the global temperature will have a direct impact on the health and life of livestock animals[12]. According to experts, the rise in the temperature will enable the acceleration in the growth of pathogens and parasites[13], which might generate shifts in disease spreading, outbreaks of severe diseases or even introduce new ones[14], increasing the risk of morbidity and death of livestock. Therefore, relying on livestock products to guarantee the food security in the world might lead to a food crisis in the future.

 

For environmental, health and food security reasons, livestock production should be limited and regulated. However, when it comes to international environmental treaties and agreements, even though there is a commitment and a mandate for countries to reduce GHG emissions, livestock industry is not really targeted, even though the projections indicate that animal product consumption will continue to increase[15]. Indeed, UNFCCC and Kyoto Protocol only formulate a fragmented set of rules’[16] and the Paris Agreement gives general recommendations that prioritize food security rather than targeting livestock industry. Regarding the health and food security issues related to the livestock industry, some countries are already using taxation to encourage healthy eating habits on its population, for instance by raising the prices of sugary soft drinks or sweets. Nevertheless, this approach has never been used on livestock products that, as it was explained before, are known to cause several health issues when consumed in excess.

 

In this sense, a study on the results on taxing beef, pork and chicken[17] in Denmark, succeeded to prove that a possible tax on meat would reduce GHG emissions between 10.4% and 19.4% for an average household[18]. However, we believe that these figures are not enough. Our proposal for the Geneva Challenge 2018 consisted in the establishment of a Global Meat Tax Scheme, which would consider the application of taxes in developed countries and levied on the consumers in order to directly induce changes in meat consumption. It should be collected by national authorities which must ensure that tax revenues are given back to specific actors so they can invest in the development of eco-efficient technologies to support technological improvements of the livestock industry management, or to invest in high protein food alternatives[19]. Likewise, governments shall cooperate with international organizations in order to promote and support the transition into cleaner technology and farming processes in developing countries .

To make sure that tax revenue funds are safe and utilized solely for the intended purposes, we suggest the utilization of blockchain technology, which would enhance the security of the scheme, guaranteeing the transparency of all transactions being made, and as a consequence promoting trust among governmental entities and individuals. Likewise, States would be under the monitoring and supervision of an international authority, which would assess the compliance of the States and the adequate utilization of the funds.

 

We invite you to read our full project report for further explanations on this “Global Meat Tax Scheme” and its complementary adaptation and mitigation measures which would allow countries from all over the world to have a profound transition of the industry to cleaner livestock management while achieving a change on consumer’s behavior.

 


[1] M. Rojas-Downing et al, Climate Change and livestock: Impacts, adaptation and mitigation. (Climate Risk Management, 2017) 152

[2] Rob Bailey, Antony Froggatt and Laura Wellesley, Livestock – Climate Change’s Forgotten Sector Global Public Opinion on Meat and Dairy Consumption (2014) <https://www.chathamhouse.org/sites/files/chathamhouse/field/field_document/20141203LivestockClimateChangeForgottenSectorBaileyFroggattWellesleyFinal.pdf > accessed  16 April 2018

[3] Rob Bailey, Antony Froggatt and Laura Wellesley, Livestock – Climate Change’s Forgotten Sector Global Public Opinion on Meat and Dairy Consumption (2014) <https://www.chathamhouse.org/sites/files/chathamhouse/field/field_document/20141203LivestockClimateChangeForgottenSectorBaileyFroggattWellesleyFinal.pdf > accessed  16 April 2018

[4] Rob Bailey, Antony Froggatt and Laura Wellesley, Livestock – Climate Change’s Forgotten Sector Global Public Opinion on Meat and Dairy Consumption (2014) <https://www.chathamhouse.org/sites/files/chathamhouse/field/field_document/20141203LivestockClimateChangeForgottenSectorBaileyFroggattWellesleyFinal.pdf > accessed  16 April 2018

[5] M. Rojas-Downing et al, Climate Change and livestock: Impacts, adaptation and mitigation. (Climate Risk Management, 2017) 151.

[6] Philip Thornton, Mario Herrero and Polly Ericksen, Livestock and climate change (2011) Livestock Exchange Issue Brief 3

[7] Ibid

[8] Ibid

[9] World Health Organization, Q&A on the carcinogenicity of the consumption of red meat and processed meat (2015) <http://www.who.int/features/qa/cancer-red-meat/en/> accessed 22 April 2018

[10] Ibid

[11] Ibid. Cf: “The IARC Working Group considered more than 800 different studies on cancer in humans (some studies provided data on both types of meat; in total more than 700 epidemiological studies provided data on red meat and more than 400 epidemiological studies provided data on processed meat)”

[12] Alessandro, Nardone et al., Effect of climate changes on animal production and sustainability of livestock system (2010) LIVEST SCI. 57, 69 <10.1016/j.livsci.2010.02.011> Accessed 15 April 2018.

[13] C.D. Harvell et al., Climate warming and disease risks for terrestrial and marine biota (2002) Science 296 <https://people.ucsc.edu/~cwilmers/ENVS220/Harvell%20et%20al%202002%20Science.pdf> Accessed on 23 April 2018

[14] P.K. Thornton et al., The impacts of climate change on livestock and livestock systems in developing countries: A review of what we know and what we need to know (2009) ILRI <https://www.sciencedirect.com/science/article/pii/S0308521X09000584> Accessed on 25 April 2018

[15]  European Parliament, What if animal farming were not so bad for the environment (2017) <http://www.europarl.europa.eu/RegData/etudes/ATAG/2017/598619/EPRS_ATA(2017)598619_EN.pdf> accessed on 05 May 2018

[16] Bob O’Sullivan and Charlotte Streck, Forestry and Agriculture under the UNFCCC: A Jigsaw Waiting to be Assembled? (The Oxford Handbook of International Climate Change Law, 2016)

[17] Sarah Sall, Ing-Marie Gren, Effects of an environmental tax on meat and dairy consumption in Sweden (2015) Food Policy 41

[18] Louise Edjabou, S. Smed, The effect of using consumption taxes on foods to promote climate friendly diets and the case of Denmark (2013)  Food Policy 39, 84-96.

[19] Kelechi E Nnoaham et al, Modelling income group differences in the health and economic impacts of targeted food taxes and subsidies (2009) OJLS


26/05/2015

Enforcement of the EU ETS in the Member States: Further improvements needed

By Jonathan Verschuuren (TLS)

Although the EU Emissions Trading Scheme (EU ETS) has been operating now in three trading phases for ten years and has been extensively covered by legal research, there has been remarkably little attention for the enforcement of the ETS. Although, generally, we have seen an increasing centralization of the EU ETS, monitoring and enforcement still are largely in the hands of the emissions authorities in the states in which the EU ETS operates: 28 EU Member States plus Norway, Liechtenstein and Iceland. As part of the EU funded FP7-project ENTRACTE (Economic iNsTRuments to Achieve Climate Targets in Europe), we did an ex-post evaluation of the legal implementation of the EU ETS at Member State level with a focus on compliance. We wanted to know whether the effectiveness of the compliance mechanism of the EU ETS has been improved over the years and what further improvements (if any) are necessary. We reviewed the relevant EU law in each of the three phases, reviewed previous evaluations and relevant research projects, and evaluated the implementation of the EU ETS in selected Member States, both through existing sources and through interviews with key players in the compliance mechanism at Member State level. The Member States that we studied were Germany, the Netherlands, Hungary, Greece, Poland and the UK.

The EU ETS is the largest trading program in the world designed to combat global climate change.  The theory behind emissions trading is that a market mechanism is established in order to mitigate greenhouse gasses. After a cap is set and potential polluting firms have obtained allowances to emit, they can either (1) reduce their emissions and sell their allowances by for example investing in technological innovation; (2) use their allowances in order to cover their emissions; or, (3) increase their emissions by buying additional allowances on the market. The crucial importance of a well-developed and operationalized compliance chain has been neglected in the original design. In fact, a striking paradox of the EU ETS is that while the idea is that the market should be the place to regulate greenhouse gas (hereafter: GHG) emissions, the system only functions if it operates in a highly regulated context. Market participants must have the confidence that the system is transparent and consistent, and that it guarantees a level playing field for all actors in the 31 participating States because every firm complies with the rules. Effective enforcement of the rules is, therefore, crucial.

The EU ETS legislation originally left a considerable amount of discretion to Member States. This particularly included operational elements of emission trading, such as registration, monitoring, verification, reporting and enforcement issues. Only after European law enforcement agencies signalled that in some European countries carbon trading fraudsters may have accounted for up to 90% of all market activity, with criminals pocketing billions, the compliance issue received increased attention. Moreover, different strategies for ensuring compliance among Member States give rise to distortions of the market for greenhouse gas allowances. The effectiveness and reliability of the ETS, therefore, to a significant extent depends on the effort of each of the Member States. Lack of compliance of only a few or even a single Member State can harm the functioning of the ETS in the entire EU.

We, as well as other researchers in the consortium (see the London School of Economic’ report on compliance), found that compliance with the EU ETS is high.  Most infringements are caused by genuine mistakes and lack of knowledge, not by deliberate actions to evade obligations. The majority of offences concerns the operation of an installation without holding the required permit, exceeding the deadline for submitting the emission report or not monitoring in accordance with the monitoring plan. It is also believed that the verification process pays off: many mistakes are discovered by private verifiers and subsequently rectified. Since prices of allowances have been very low, the majority of allowances are surrendered and not traded. Hence, the EU ETS has not been tested to the full yet, and it remains to be seen whether compliance will be as high in a market under stress (with high prices due to limited availability of allowances).

There are many indications that current enforcement activities will not suffice in a market under stress, although there a big variations among countries. The number of staff employed in the national emissions authorities, for example, differs enormously, ranging from 4 to 5 in Greece and Hungary to 150 in Germany, 40-50 of whom are devoted to inspecting compliance by installations, i.e., checking emission reports, monitoring reports etc. No need to explain what this means for effective enforcement. The biggest loophole that we found in our evaluation is the absence of site visits. Site visits are not yet part of the standard enforcement strategy of most Member States we studied. Only the UK and the Netherlands have a well-developed blueprint for conducting regular site visits on the basis of a risk assessment. There is a considerable risk that non-compliant behaviour will remain undetected when inspectors rely on data provided by the “paper work” that goes with the EU ETS in its  automated system. In the UK, the competent authority regularly conducts site visits as part of its enforcement strategy; 5% of the operators are audited each year. Operators receive notice of these audits since their purpose is more to check than to inspect, although formally the regulator could use its power of entry to perform an unannounced inspection. Regulators in England and Wales have developed a common format for reporting the results of site visits, which are entered into an electronic database. The details include a summary of the visit, any instances of non-compliance detected follow-up actions that have been agreed with the operator.  The findings of the site visit may also be shared with other government bodies. Non-compliance is explicitly recorded to create a database of historical performance for future reference. Follow-up varies from a phone call or a visit to slightly more invasive forms such as a warning. By comparison, in Germany inspection was until 2013 mainly an administrative process done behind the desk at the emissions authority.  This is true for most of the EU Member States. Germany has very recently changed its policy and now officers of the ETS authority do joint inspections together with officers responsible for the enforcement of regular environmental permits, thus benefiting from the experience and knowledge on past performance of the individual company that the latter usually has.

There is not enough space here to cover all the elements of the enforcement system in the Member States that can be improved. Overall, we concluded that Member States can learn a lot from each other’s attempts to close loopholes and fix weak spots in the compliance mechanism. Overall, more efforts should be undertaken to harmonize enforcement practices of the national competent authorities responsible for the enforcement of the EU ETS. This is not easily achieved. Our research clearly shows that compliance assistance is regarded as the most important element of the compliance cycle of the EU ETS: helping companies to apply with this complex regulatory instrument. Such compliance assistance is best offered at the national level in the national context. In addition, we think that the EU, with the extensive legislative framework for the EU ETS that was developed over the years, has exhausted its legislative powers in this area. Therefore, other forms of harmonization (e.g., network based peer review) need to be explored.

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