Stockholm (NordSIP) – According to a new report by the FAIRR Initiative released during London Climate Action Week, the increasing momentum for a carbon tax on farm animal emissions would directly impact the meat industry, if it were to materialise into actual policy action.
The FAIRR Initiative is a global network fo investors managing over $20 trillion of assets. According to its estimates, carbon taxes could cost a set of 40 leading meat companies up to $11.6 billion of earnings before interests, taxes, depreciation and amortisation (EBITDA) by 2050. This is equivalent to an average impact of 5% of each company’s revenue.
‘The Livestock Levy: Progress Report’ reviews several policy discussions on this topic across the globe. One country that is leading the rest is New Zealand, which is set to be the first country to include livestock in its emissions trading scheme. Other case studies reviewed by the report include Germany’s 2019 tax rate increase proposal on meat products to 19%, a review of the Nertherlands’ discussion on the establishment of a “fair meat price” tax, and the EU’s Green Deal. The report also considers how progressive legislation may tie incoming revenues from meat taxes to specific societal benefits such as lower prices of fruit and vegetables or support to farmers to help transition to more climate-friendly produce.
“There’s increasing consensus that we cannot achieve the Paris Climate Agreement unless we deal with factory farming – a sector emitting more greenhouse gases than all the world’s planes, trains and cars put together”, Jeremy Coller, Founder of FAIRR and Chief Investment Officer of Coller Capital said. “That’s driving gathering momentum in policy circles to apply carbon taxes to the meat industry. The New Zealand government has legislated to measure and price emissions from farms from 2025, and there is a clear risk for the sector that other regulators will follow suit. Investors are starting to price this market event into their long-term valuations of meat companies, using FAIRR’s Climate Risk Tool. A root cause analysis of the COVID-19 pandemic is likely to show the urgent need for the meat and fish industry to improve biosecurity and screening practices. Who pays? In the post-COVID landscape, there is a risk that governments may stop subsidising animal agriculture, and start taxing it instead.”
Alongside this report, FAIRR also re-released its Coller FAIRR Climate Risk Tool, enabling investors to apply these findings and other potential climate risk costs to their long-term valuations of food companies. Using IEA World Energy Outlook projections, the tool concludes that the meat sector could face carbon tax costs of up to US$53 ton/CO2-e in North America and Europe and US$27 ton/CO2-e in all other geographies by 2050.