Published on March 1st, 2018 | by Jesper Berggreen0
Danish Environmental Economics Council Calls For Tax On Cows — Cars Are Off The Hook
March 1st, 2018 by Jesper Berggreen
The Danish Environmental Economics Council has released its yearly report and it shows that reductions in greenhouse gas emissions are least costly in the agricultural sector.
The EU quota system on greenhouse gas emissions dictates that Denmark must reduce emissions by 39% by 2030 in the so-called non-quota sector, i.e. agriculture, transport, and buildings. The agricultural sector is summarized in carbon dioxide equivalents, including gases like methane, perfluorocarbons, and nitrous oxide. The transportation sector includes all types of vehicles. Buildings’ primary emissions are related to heating and producing building materials like concrete.
The report shows the cheapest way to obtain the largest quantitative emission reductions. Reduction costs in agriculture turns out to be relatively low, due to the fact that they are not directly regulated in the first place.
The report suggests that taxes in the agricultural sector be raised dramatically, which some media translated to a “tax on cows.” This is over simplifying things, but it actually does make some sense because passenger cars with internal combustion engines are already heavily taxed (which is also why EVs are slightly taxed to make sure nobody buys them and destroys the tax income from ICE-cars). Thus, further reductions of emissions from cars will be economically very costly as opposed to applying a tax to the some 500,000 dairy cattle in the country, and use that money to convert “farts to fuel,” so to speak.
The report shows that it will cost $40 per 1 ton CO2e (equivalents) reduction in the agricultural sector compared to $500 per 1 ton CO2 further reduction in the transportation sector.
With the agriculture, transport, and building sectors responsible for approximately one-third of all emissions each, it would perhaps make sense to tax the agricultural sector more. However, the government is not keen to implement this kind of taxation on the agricultural sector, with the argument that too many in the industry would go bankrupt, which in turn would spur heavy costs in government compensation.
“If the council had chosen to analyze a more targeted promotion of electric cars, they would have found far lower costs of making the shift in the transportation sector … in the longer term through a general reorganization of car taxation”
Well, at least this report shows very clearly that we should be careful to not only talk about electric cars saving the world, but to take in all available information and compare all the bits and pieces. Not an easy task, but necessary nonetheless.