Carbon pricing internalises the costs of climate change: in a nutshell, products with higher footprints cost more.
Around $100 (€94) per tonne of greenhouse gas (GHG) emissions is widely regarded as the minimum price required to spur enough investment in reductions to keep global warming under 2°C, the target set out in the Paris Agreement. Indeed, two thirds of the national pledges made in the deal refer to carbon pricing.
Consultants at Ecofys and the Generation Foundation therefore calculated the impact this carbon price would have on the cost and consumption of goods and services across a range of sectors.
Food would become only 3% more expensive, on par with clothes, furniture and appliances, they estimated. Fuel for heating and cooking, by contrast, would rocket more than 50%.
As a result, carbon pricing might not lead to significant changes in overall consumption patterns for food, the analysts concluded. This modest shift in prices overall doesn’t mean that a carbon price couldn’t affect diets, however.
Carbon pricing could help induce changes to diets with a higher “greenhouse gas productivity” – the value created per unit of GHG emitted – the authors suggested. That’s fine in theory, but in practice the policy wouldn’t be an easy one to implement because of the sector’s complex value chains.
“Given the differences in GHG productivity between value chains, carbon pricing has the potential to incentivise a shift from less to more GHG productive diets,” the consultants reported. “This potential is hampered by the dispersed nature of where the emissions take place, the relatively high share of methane and [nitrous oxide] emissions that are difficult to measure and the relatively low impact on consumer prices.”
To overcome this, more large food companies could act as “aggregators of greenhouse gas emissions”. As such, firms would use internal carbon pricing approaches to support low carbon actions not only for their own operations but also for those in the supply chain, where the majority of GHGs are often emitted. Some businesses are already making progress: for PepsiCo recently announced that it has worked with potato suppliers to reduce their GHGs by 50%.
Assessing ways to incentivise supply chain decarbonisation using carbon pricing will be part of the next stage of their three-year project, said Ecofys and the Generation Foundation.
Research published in November assessed the impact that a carbon tax – one form of carbon pricing – could have on the cost of different foods and consumption levels. The price of high carbon products could rise up to 40%, the researchers said, with consumption falling 10%, bringing considerable environmental and health benefits.
Interest in such a policy is rising, not least because of the current focus on sugar taxes. However, critics argue it would be a far more controversial, costly and complicated policy.