By Faridat Salifu
A new study by the Potsdam Institute for Climate Impact Research (PIK) proposes that imposing a climate fee on food could substantially lower greenhouse gas emissions in German agriculture while addressing income inequality.
The research indicates that a well-structured pricing system on high-emission foods, paired with climate dividends for households, could both meet climate targets and generate over €8.2 billion annually.
Agriculture in Germany is responsible for approximately 8 percent of the nation’s total greenhouse gas emissions.
The study reveals that applying a climate fee to greenhouse gas-heavy food products could reduce emissions from the sector by 22.5 percent or more than 15 million tonnes of CO2 each year.
This reduction could help Germany meet its target of reducing total emissions from 62 million tonnes to 56 million tonnes annually by 2030, as set by the Federal Climate Change Act.
The climate fee would target foods with high carbon footprints, such as meat and dairy, which would see prices rise by around €4 per kilogram for beef, and by about 25 cents per kilogram for yogurt and milk.
The study’s authors argue that by reflecting the social cost of carbon in food prices essentially factoring in the environmental damage caused by greenhouse gas emissions the incentive to consume lower-carbon options like vegetables would increase.
“Pricing food based on its carbon impact could reduce emissions while also encouraging consumers to shift towards more sustainable food choices,” said Max Franks, a PIK scientist and co-author of the study.
The research shows that consumers would likely adjust their purchasing habits, buying less meat and more plant-based products as a result of price adjustments.
Moreover, the study suggests that the €8.2 billion generated from the climate fee could be redistributed to consumers in the form of climate dividends.
This lump-sum compensation scheme would provide financial relief, particularly to lower-income households, helping to offset the increased cost of higher-carbon food products.
Wealthier households would bear a larger share of the cost, but the redistribution would ensure that all households benefit from the climate dividend, promoting fairness.
“This redistribution is key to gaining public support for the policy,” Franks noted, emphasizing that it would help maintain social equity and create a sense of balance in the transition to more sustainable food systems.
The study’s authors believe that a transparent approach, where the revenue from the climate fee is returned to the public and targeted at supporting those most affected, could foster widespread acceptance of the measure.
The proposal comes at a time when many governments are exploring ways to tackle emissions in hard-to-reach sectors like agriculture.
The PIK study highlights the potential for combining environmental goals with social benefits, suggesting that a climate fee on food could be a win-win solution that encourages both climate action and social fairness.
As the conversation around climate policy intensifies, the study advocates for clear communication and public engagement to ensure broad support for such initiatives.