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Refunding of a climate tax on food consumption in Sweden

Ing-Marie Gren, Lisa Höglind and Torbjörn Jansson

Food Policy, 2021, vol. 100, issue C

Abstract: This paper examines the implications of imposing a climate tax on food consumption in Sweden combined with refunding of the tax revenues to farmers for selected agricultural activities enhancing ecosystem services: restoration of drained peatland (carbon sequestration), maintenance of grassland (biodiversity), and construction of wetlands (nutrient regulation). A partial equilibrium model of the agricultural sector is used to assess economic and environmental effects. The results show that the introduction of a climate tax corresponding to the existing Swedish CO2 tax of 115 euros per tonne carbon dioxide equivalent reduces total emissions from food consumption by 4.4% without any refunding of tax revenues. Refunding with payments for all ecosystems enhances the carbon sink by an amount equivalent to 57% of CO2e emissions from food consumption, and results in net benefits in the tax refund system for the agricultural sector as a whole, but is regressive where farmers in regions with relatively high incomes receive proportionally much of the net benefits.

Keywords: Climate tax; Food consumption; Tax refunding; Partial equilibrium analysis; Sweden (search for similar items in EconPapers)
JEL-codes: H23 Q25 Q28 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.foodpol.2020.102021

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