Current dietary habits contribute immensely to climate change as a result of the large amount of greenhouse gas production. Demand-side measures have been proved to be efficient to reduce greenhouse gas emissions. This study aims at assessing the impact of introducing a Pigovian CO2 equivalent tax on food demand, welfare and diet quality in Spain. Alternative tax policy scenarios have been considered, which, in essence, reflect alternative social cost of emission or alternative tax magnitudes. The methodological framework has been based on expenditure as well as own and cross price elasticities calculated from estimating a complete EASI food demand system. Results suggest that that the price increase as a consequence of the tax, reduces the consumption of the food products associated with higher CO2 equivalent emissions, has a positive impact on human health as the quality of diet approximates to the WHO recommendations. On the negative side, the tax affects more lower income groups. Governments should be aware about the trade-off between the reduction of CO2 equivalent emissions and the negative consequences on citizen’s welfare.
|Publication status||Published - 15 Jun 2017|