Denmark’s Grand Experiment or the New Global Model?
Carbon taxation, the much debated approach to reducing greenhouse gas emissions, is on its way to becoming reality in Denmark. With goals to introduce livestock levies by 2030, this marks the first tax of its kind for the agricultural sector. Producers will directly pay the tax, not consumers. By taxing farmers for carbon emissions, theoretically, the farmers can change production methods to pay a lower tax.
The decision is garnering both praise and backlash locally and abroad. This may be the experiment that answers lingering questions about how to measure emission reductions as well as the effectiveness of taxing farmers for their carbon emissions. Will other countries follow suit or is this a hard line in the sand that will create more division than collaboration?
Denmark’s Double Whammy
The news must certainly feel like a blow in Denmark where farmers are currently contemplating the impact of China’s anti-dumping probe investigating the European Union’s pork industry. For a nation where 50% of the land is devoted to agriculture, potentially downsizing and reconfiguring both the pig and cow industries would greatly impact the economy.
Already European farmers have protested taxes, rising operational costs and environmental rulings that impact their industries, making this no small move on the part of the government. Projections estimate that hog and cattle production will decrease by 20% under the new structure. It will affect farm families as well as livestock feed producers, processing plant workers and the price consumers pay at the grocery store.
How Are We Measuring Success?
Carbon taxing supports the downsizing of herds much more than it supports innovation. In order for the structure to be fair the tax is collected per animal and not calculated by how a farm operation works to offset or diminish emissions. Tax funds are intended to be allocated for the development of innovative planet friendly ideas and environmental initiatives to reclaim wetlands and restore soil. Funding these projects through carbon taxing could create new jobs in Denmark that also support green momentum. It could usher in a new era of collaboration between market sectors in Denmark and between nations.
Looking at the plan from multiple angles, carbon taxing does allow for farmers in Denmark to shift waste management, feeding and sequestering practices to do what they can to reduce emissions without sacrificing herd numbers. But, this is difficult and the impact is unknown. It also doesn't free up options for farm families who don’t have the resources to make use of the often expensive innovative ideas that could help reduce emissions. If the goal is simply to have fewer livestock animals in Denmark, carbon taxing could make swift work of this. But, a large majority of the agricultural population worry that the tax will completely eliminate innovation and wish the plan made real options available and accessible to farmers without a high risk of losing their herds.
The Global Response
Denmark has a legally binding commitment to reduce their carbon emissions 70% by 2030. Carbon taxing in their manufacturing sector yielded great results. In fact, the tax eliminated 65% of carbon emissions while also increasing manufacturing productivity by 35%. The hope is that this similar model will yield the same results in the agricultural sector. Cattle herds may be smaller, but production will become streamlined. Funds from taxes will eventually move the country closer to net zero as livestock emissions become offset by land reclamation initiatives. And if it works here it could be the model other nations mimic.
However, raising animals is vastly different from assembling machinery or refining chemicals. While Denmark works to downsize livestock herds and reduce emission, the demand for beef, dairy products and pork still remains in place. Denmark’s carbon emission may decrease, but could be increased in another region of the world by a different country looking to fill the gap made by Denmark's smaller herds. Globally, emissions from livestock could stay the same even if Denmark reduces theirs. Maybe business will simply relocate to a place where carbon taxing for livestock doesn’t exist.
Will the World Follow Suit?
Denmark’s Taxation Minister believes their model will inspire other countries to follow suit. That environmental groups, the food industry representatives and farmers were able to come to an agreement at all speaks to a form of collaboration other nations might desire to model. However, while the EU and the U.S. have voluntary programs, Denmark’s taxation is mandatory; which seems to separate it from creativity and innovation.
It will change the economic landscape and prompt consumers to become more knowledgeable about supply chain logistics and where their food comes from; a dynamic that Denmark hopes has a ripple effect elsewhere. The tax payment itself, $100 per cow, will be offset by other farm tax breaks, essentially neutralizing the impact and merely creating a fund for sustainable projects. However, meat prices are expected to increase in Denmark as a direct result of carbon taxing and smaller livestock numbers. Will it be consumers who absorb the full cost of the levies?
Like many reports suggest, carbon taxing in the ag sector is a grand experiment, certain to come with unforeseen dynamics including consumer response, global market shifts, and continued questions around measurable success. Is this collaboration the innovation needed, or the wrench in the wheel of momentum?
Comentarios