Posts Climate, Economy, Environment

People and planet need new, sustainable and healthy diets and taxes may seem an obvious tool for changing our harmful eating habits. However, research shows taxes are not a silver bullet, which guides us towards sustainable choices. Policy instruments are needed, but they must be based on evidence, says Xavier Irz, research professor from Natural Resources Institute Finland (Luke).

Xavier Irz, economist and expert on food markets, has a busy timetable while finalising his research article on sustainable diet choices in Europe. Irz is based in Helsinki, Viikki Science Centre, where he has studied the factors affecting consumer choices since 2008.

– Diet choices are never simple. There are many slogans connected with food, like good for your health, good for the planet. But they are just slogans and can be misleading, Irz points out.

Research shows taxes are not a silver bullet, which guides us towards sustainable choices, says Xavier Irz. Photo: Veikko Somerpuro

Irz digs into consumer choices with econometric modelling, using observations on which foods people actually purchase. He emphasises that models have their caveats and limitations, however, they help us to build a picture of the impact of different political instruments.

Hot debate over meat – also in science

Irz is very aware of the difficult debate over meat. Photo: Erkki Oksanen

During Irz’s career, the public debate over the environmental and health issues of food has accelerated. In Finland, meat tax and vegetarian food awake controversial arguments, while international research reports about climate and biodiversity tell their worrying results and call for radical changes in our lifestyle, including our diet.

Irz is very aware of the difficult debate over meat. During the recent economic struggle in the meat sector, some research partners even deemed the studies of meat taxes too controversial.

– As a scientist, it is of course hard for me to understand that something should not be studied. We should look at all options and discuss them. It is up to politicians to make the decisions, but they should be based on scientific evidence. And researchers should be there to provide the evidence, Irz says.

Healthy choices do not come easy

What do we actually know about food taxes and their effect on consumer choices? Irz goes back to 2017 and his analysis on sugar taxes in Finland. Back then, the European Commission demanded Finland to remove the tax on sweets and soft drinks. It awoke a long debate over replacing the tax with another tax on the sugar content of foods.

The evidence showed that the tax on sugar would not necessarily guide consumers to healthy choices, but, for example, the consumption of crisps could unexpectedly increase.

Therefore, Irz emphasises that in case of meat tax, we should carefully look at what is consumed instead of meat.
– We easily assume that taxing red meat would result in good environmental and health effects, because the consumption of fruits and vegetables would increase. Instead, the outcome could be that consumers would eat more candy bars, moving towards energy dense but nutritionally poor foods. They have a lower environmental impact per calorie, but they are also unhealthy.

Irz comes back to slogans in the food market. He points out that the win-win situation of the environment and health is not always the case, even though the idea is popular.
– If we look at what people are currently consuming in terms of greenhouse gas emissions and health, quite often there are trade-offs. That is why we need to study these substitutions carefully. Even us scientists do not understand them very well yet. They are difficult to anticipate.

Small tax, small change

Nonetheless, the studies on differentiated food taxes produced a robust result: a tax rate lower than 20% typically results in small changes in diets, as well as small sustainability benefits.

The health effects of the carbon tax are not self-evident. The tax would reduce the consumption of unhealthy foods, but also, in many cases, the intake of important nutrients like vitamins. Photo: Yrjö Tuunanen

Irz brings up a consistent finding in the studies of food markets: the demand for individual food is inelastic. One percent increase in the price will reduce the demand, but less than one percent.
– One important result is that low tax will have a low impact on consumption. For a clear change, we need a high tax, Irz says.

Irz’s project on the carbon tax of food showed similar results. The scientists used the European Union forecasts of carbon prices in the study. With the mid-term projection of 15 euro per ton of carbon dioxide, which would correspond to about 18% tax rate for the most carbon-intensive foods in Finland, the greenhouse gas emissions of diet would shrink only by two percent. If the price of the carbon was 200 euro per ton, the reduction would be eight percent.

The results concerning Finland showed that most of the positive climate impacts of the carbon tax could be achieved by applying the tax on red meat, rather than all foods.
– Our results show that taxes must be carefully targeted, Irz says.

However, the health effects of the carbon tax are not self-evident.
– The result is somewhat ambiguous. The tax would reduce the consumption of unhealthy foods, but also, in many cases, the intake of important nutrients like vitamins. Meat is quite nutritious, we need to keep that in mind. We cannot clearly conclude that carbon tax would improve diet quality, which is an interesting result, Irz ponders.

More information needed

When discussing new food or carbon taxes, Irz wishes to bring up the questions of how to use the tax revenues and how taxes affect different social groups.
– The issues of social justice and fairness are very important. I am sensitive to this, because in France, my home country, the yellow vest riots started from the idea of imposing a new carbon tax on transport fuel. In the rural areas without public transport, it was seen as very unfair. The price of food is also very important for people with low income, Irz emphasises.

Well targeted information campaigns are effective. However, the messages need to be well targeted indeed. Photo: Erkki Oksanen

Carbon tax revenue could, therefore, end up in the bottomless trunk of the state, or, it could be directed to solutions tackling climate change. According to Irz, taxes should be used to develop sustainable innovations in the food sector. This could facilitate the transition to low carbon economy and make the taxes politically feasible.

Irz’s group has also studied how food choices respond to information and found out that well targeted information campaigns are effective.

However, the messages need to be well targeted indeed. The study revealed, that when the French were urged to use less animal products, greenhouse gas emissions increased. The surprising result occurred, because the consumers used less dairy, as expected, but also increased their consumption of meat.
– This is another example of policy instruments that lead to unintended consequences. This is not always the case, but my message is that before implementing policies, we need a through empirical assessment of their effects, Irz underlines.

And one more thing Irz brings up: taxes should not be used as a punishment.
– There is something very appealing for certain groups in sin taxes. It appeals to deep values, that if you do something wrong you need to be punished. I think it is a wrong way of looking at this. We need to see taxes as an instrument to change behaviour, not to slam people.

Animals have their place in circular economy

To tackle the climate change, fast actions are needed. Diets change slowly, however. According to Irz, diets should still be changed and measures used to guide them in a sustainable direction.
– Absolutely, action is needed to develop demand-side mitigation strategies, as acknowledged in the forthcoming IPCC’s  Special Report on Climate Change, Desertification, Land Degradation, Sustainable Land Management, Food Security, and Greenhouse gas fluxes in Terrestrial Ecosystems.

– Taxes can be one policy instrument, but we must remember that they are not a silver bullet. Small taxes bring small changes. We must also bear in mind that taxes are connected to choices and costs. All changes are not win-win situations, even though politicians sometimes want to believe they are, Irz summarises.

Finally, the domestic animals will also be part of the future society, according to Irz.
– In a sustainable food system, nutrients are recycled. So, animals are needed. My next challenge is, therefore, to combine the research of diet choices with the models of agricultural production and land. The aim is to achieve an even better analysis of how adjustments in diets can contribute to sustainability transition, Irz concludes.

Text: Marjatta Sihvonen

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