A new study from the Potsdam Institute for Climate Impact Research (PIK) indicates that implementing a climate fee on food could lead to a significant reduction in greenhouse gas emissions from agriculture in Germany, while also promoting social fairness. By pricing foods that produce high greenhouse gas emissions, the study estimates that over 8.2 billion Euros could be generated annually. If these funds were redistributed back to households through a lump-sum compensation plan, it could relieve financial pressures on low-income families and promote more sustainable eating habits.
Agriculture contributes to 8 percent of Germany’s total greenhouse gas (GHG) emissions. Julian Schaper, a guest scientist at PIK and the study’s lead author, states, “There is potential to cut emissions by 22.5 percent, or over 15 million tonnes of GHG each year, if the social costs of carbon are included in food pricing.” The German government aims to lower its annual GHG emissions from the current 62 million tonnes to 56 million tonnes by 2030, according to the Federal Climate Change Act enacted in 2019.
The social cost of carbon refers to the projected economic harm caused by emitting one additional tonne of carbon dioxide into the atmosphere. A climate fee of around 200 euros per tonne of GHG would primarily impact products like meat and dairy. For example, prices for yoghurt and milk might rise by about 25 cents per kilogram, while beef prices could increase by more than 4 euros per kilogram.
Using a demand model that accurately reflects how German households would react to price changes, the researchers analyzed the potential impacts of GHG pricing on consumption patterns and corresponding emissions. “Consumers are likely to shift their purchases towards less carbon-heavy foods like vegetables. Implementing a climate fee would not only aid in emission reduction but could also foster more sustainable consumption practices,” said PIK researcher Max Franks, who co-authored the study.
The anticipated 8.2 billion euros from the climate fee would be returned to the public as a climate dividend, significantly benefiting lower-income households, while slightly increasing costs for wealthier families. “This redistribution approach can create a social balance that may enhance acceptance of such policies,” Franks added.
The study’s authors believe that the combination of a climate fee and dividends holds great promise for gaining public support. They emphasize the need to clearly convey that these measures are effective in lowering emissions, that all generated funds are returned to the community, and that specific assistance is provided for low-income households.
