Friday, December 5, 2008

The environment, cows, and the subsidies we pay

There has been some interesting recent reporting on the environmental impact of animals.

The New York Times has an article on CO2 from meat production based on the data from an FAO report. For more information, check out my article out now in Ecological Economics on the environmental impact of meat production.

Greg Mankiw, an economist and blogger I follow closely, has also noted a recent MSNBC story on an EPA idea to tax cow emissions. Note the comments below the video that the farmer interviewed has recieved numerous subsidies from the US government over the last few years.

The title of Mankiw's blog post, A Pigovian Tax on Cows, refers to the economist Arthur Cecil Pigou, who argued that externalities, costs that affect other people but don't affect producers directly, need to be taxed. Taxes on emissions, such as the EPA is suggesting, are used to bring into closer alignment the realized and externality costs of production, making the price consumers pay, and the quantity they buy, closer to the social optimal.

Of course, when we subsidize industries with externalities, the production quantity and the socially optimal quantity go way out of wack. I have a working paper that argues just that for the meat industry. Livestock producers in OECD countries have recieved $213 billion in subsidies from 1993 to 2002. I find that these subsidies mean an extra production of meat of 36%, or about 9 million tonnes, of beef products, per year.

Thats at least 130 million metric tonnes of CO2 equivalent greenhouse gases from production per year. Over the 10 years I look at, subsidies contributed over 1.3 billion tonnes of greenhouse gases, which is 4% of the total worldwide production of greenhouse gases in 2007.

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