Pay as you eat dairy, eggs and meat. Internalising external costs of animal food products in France, Germany and the EU27

Animal products are a substantial ingredient of current European diets, but their production and consumption is associated with a wide range of environmental problems: global warming, eutrophication of soils and waters that lower biodiversity, emissions of ammonium that are formed into secondary aerosols harming human health and extensive land use that comes at the expense of nature and biodiversity.
These effects impose ‘external costs’ on society as they are not (fully) reflected in the price of the animal products. The external costs form the unpaid bill of consuming animal products. In this study, we estimated the external environmental costs of animal products: meat (both from beef, veal and dairy cows), pork, chicken, eggs and (hard) cheese. It reveals that external costs can be substantial, ranging between the € 0.34 for a litre of milk to over € 10 per kg of beef. These external costs are primarily caused by emissions of greenhouse gasses plus ammonia from manure handling and application as fertiliser (plus artificial fertiliser) for growing crops for feed.

In this study, we have investigated three policy measures to pass these environmental costs through to consumers:

1. 1. An excise levy on animal products.
   2. An emission trading scheme (ETS) for the sector.
   3. Removal of the lower VAT tariff on animal products.

Each of these schemes is feasible from a legal perspective and can be implemented, although the levy and the EU ETS need more scrutiny with regard to practical design questions such as where the taxation point should be and how imports/exports should be addressed in the scheme. The easiest measure to implement would be the removal of the lower VAT tariff for animal products in EU Member States. Various countries, such as Bulgaria, Denmark and the three Baltic States, have not granted lower VAT tariffs for meat or dairy. Other countries could follow their lead. This would reduce meat consumption by about 10% for beef and 8% for poultry and pork. Although easy to implement, a higher VAT rate for animal products would have the drawback that it does not fully cover the external costs of meat consumption. For that, additional measures could be considered on top of the VAT increase, or as a substitute.

This project includes a main report (available for download on this page) and two sub-reports:

• Pay as you eat dairy, eggs and meat. External cost estimates and policy options to internalise them in Germany
• Pay as you eat dairy, eggs and meat. External cost estimates and policy options to internalise them in France

To view other reports on the external costs of meat and other foods see The true price of meat and A sustainability charge on meat