The Telegraph Article on beef tax   

Meat should be taxed to help tackle global warming, a leading think-tank has suggested, as it 
urged ministers to also reduce the amount of meat served in schools and hospitals. Proceeds 
from a tax on meat could be used to subsidise healthier alternatives that are less damaging to 
the environment, such as fruit, vegetables and tofu, researchers from Chatham House said.  
 
In a report, the think-tank argues that the livestock sector has been “almost completely 
overlooked” in efforts to tackle climate change, despite the fact it accounts for about 15 per 
cent of global greenhouse emissions – the same proportion as direct emissions from cars, 
planes, trains and ships combined.   
 
Beef and lamb production are the worst for the environment, with emissions generated both in 
the production of the large quantities of animal feed and from the digestive systems of cattle 
and sheep directly. 
 
• Hate wind farms? Eat chicken not beef 
 
A carbon tax on meat would be one of the “most effective” policies to reduce meat consumption, 
the researchers said, and would also bring public health benefits, as average Britons eat about 
twice the amount of meat that is thought to be healthy. 
 
The researchers acknowledged the policy would be one of the most unpopular options for 
reducing meat consumption but said focus group research suggested that “governments 
overestimate the public backlash that would follow from price increases and limits on food 
choices”. 
 
Public procurement also presented a major opportunity to influence diets by reducing the 
amount of meat and offering more vegetarian alternatives in places such as school, hospitals, 
prisons and the armed forces, they said. 
 
Current global pledges to tackle climate change by cutting emissions – primarily in the power 
and transport sectors - are forecast to put the world on track for 2.7C warming this century. 
 
According to the report, limiting global meat consumption to healthy levels could provide 
one-quarter of the further emissions cuts needed to limit warming to the 2C level that 
scientists say should not be exceeded if the world wants to avoid the most dangerous effects of 
climate change. 
 
 
 
 
 
Microeconomics IA 1 
​
Negative externalities of consumption (NEC) occur outside the market, meaning that they 
affect people who are not directly involved in the consumption of a good or service. They are 
also known as spillover effects (Spillover costs in this scenario). A demerit good is a good that 
when consumed leads to socially undesirable effects i.e pollution. Beef is a demerit good and 
this gave rise to a NEC. Naturally there are solutions to this problem and the article suggests a 
tax to be placed on production of Beef. This would be an indirect tax, which is supposed to 
reduce demand of the good.  
 

 
The producers keep producing the good as they regardless of the harm to society as their 
benefit is higher. In the presence of negative externality in consumption, the marginal social 
benefit (MSB) is less than the Marginal Private benefit (MPB). That is why the MSB curve lies 
below the MPB. The socially optimal quantity again is Qsocial at the MSC = MSB point, A, and 
the price is Psocial. 
 
However, in the absence of any intervention, the quantity supplied and demanded is Qprivate 
at the point of intersection B of the MPB curve and the MPC = MSC curve, and the price here is 
Pprivate. Thus, there is an overproduction of the commodity (Qprivate > Qsocial) as compared 
to the socially optimal level. 
 
 there is a welfare loss (shaded region) since between Social and Qprivate, MSC > MSB and the 
market is thus not Pareto optimal ( Conditions which create allocative efficiency). We observe a 
negative-externality of consumption between MPB and MSB (Black arrow). 
 

 
A solution mentioned in the article is an indirect tax, in the graph above a tax half the value of 
the externality has been implemented, Producers put most of the tax burden on the consumers; 
making the price Ptax. In most scenarios, a tax in itself will not internalize the externality 
which is why the tax pulls the demand down to Qtax, halving the externality. The DWL to 
society is cut down, meaning that society loses less and demand is closer to the socially optimal 
level.   
 
Taxes on beef do have positive effects on the environment to some extent, but In reality food 
consumption isn’t as closely related to price as believed. Most demerit goods have inelastic 
demand, when demand is inelastic, the percentage decrease in quantity demanded is smaller 
than the percentage increase in price (due to the tax). Therefore, it is possible that imposing a 
tax on on beef works to increase government tax revenues while not significantly decreasing 
the quantity demanded of these goods. This could mean that in order to achieve Q opt, a very 
high indirect tax would have to be imposed. It is estimated that a 40% tax would decrease 
consumption by a measly 15%. 
 
The implementation of a tax on beef comes with many stakeholder effects. Consumers will be 
worse off as they would end up paying higher prices for the same quality, The high prices of 
beef will force some consumers to shift to lower quality/ processed cuts leading to an increased 
chance of cancer, making the consumers worse off and the producers worse off due to lower 
revenue. This would undermine the health efforts by the government (wasting tax revenue). In 
the long run producers will try to reduce cost of production by producing lower quality and 
processed cuts of beef, or shifting to underground black markets where untaxed beef can be 
illegally sold; this will make some consumers shift to indirect substitutes like chicken and 
pork, resulting in a decrease of beef consumption but increase in chicken and pork 
consumption, still creating negative effects in the long run. The article talks about consumers 
in the UK who are already heavily taxed, another tax will cause short term issues like public 
backlash, resulting in loss of trust in the government.  
 
The article talks about how a tax in itself would completely solve the issue, this is not realistic 
in most scenarios as the good is inelastic, other methods needs to be used with taxes to truly 
make an impact in the long run.The government could implement a policy which limits the 
amount of cows per farm to the socially optimal level. tax revenue should be used by the 
government to implement negative advertising for beef consumption and promoting healthier 
alternatives like fake meat (soy substitutes).