Taxes > Subsidies

Ars Technica summarizes a paper whose authors looked at ways of slowing down deforestation for cattle raising in the Amazon. They consider two options:

You can get a reduction forest clearance by taxing land on which cattle is pastured conventionally or by subsidizing land on which cattle is pastured semi-intensively. Both work, but the tax saves slightly more forest, and thus offers more greenhouse gas abatement.

And cattle ranching is the leading cause of deforestation in the Brazilian Amazon. Seventy percent of formerly forested land, and 91 percent of land deforested since 1970, is used for livestock pasture. It is possible, however, to graze cattle in what’s called a semi-intensive system, in which livestock feeding is based on a combination of pasture grazing and harvested forages. When utilized properly, this system can double the productivity of pasturelands compared to conventional land management practices.

The new paper models the impacts of two policies: a tax on land-intensive grazing, and a subsidy for semi-intensive grazing.

The authors looked at on the effect this would have on prizes and how those would propagate:

The authors also incorporated different trade scenarios to examine how international movement of cattle products and beef consumption would be affected by the tax or the subsidy.

and find that a tax is the superior option:

The tax ended up raising the price of beef, which discouraged all livestock raising, including the adoption of the semi-intensive system. But the tax did save forest because the higher beef prices discouraged both exports and domestic consumption.

Under the subsidy, the decreased cost of beef production in Brazil led to increased exports and beef consumption. Even though less forest was cleared for each unit of beef produced, this ultimately caused continued deforestation and greenhouse gas emission.

The same holds for CO2 emissions – cap-and-trade is an attempt to subsidize low-CO2 production but unless one withdraws certificates, “dirty” production at some point becomes too cheap – and subsidies for the production of electricity from renewable resource – the subsidies mean that the price for electricity falls because new capacity goes online but non-renewable capacity isn’t pushed out, meaning that there’s not motivation for industry to use less electricity. We see this in effect in the EU and Germany, respectively.

Tax ecologically destructive production instead!

This entry was posted in anthropogenic climate change, environmental sustainability, science-based policy. Bookmark the permalink.

2 Responses to Taxes > Subsidies

  1. tiffany267 says:

    Or, you could stop having the State steal people’s wealth and just encourage people to stop eating animals in the first place. But that would be too logical for this blog.

    • tokugawa98 says:

      Care to elaborate how “the state steals people’s wealth”?

      Apart from that: I am fully in agreement that a reduction in meat consumption would be the best solution (although one needs to make sure that deforestation isn’t then done in the name of soy and ethanol farming).
      But the question would remain: how do you nudge people in this reaction? And again, taxing meat (or putting tariffs on it) would work better than subsidizing vegetarian alternatives.

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