Reducing the environmental impact of food consumption through fiscal policies: The case of Spain

Abstract

This study examines the environmental impacts of human food consumption from an economic policy perspective, investigating how fiscal policy can mitigate the environmental footprints associated with this consumption. Focusing on carbon emissions (CF), water use (WF), and food loss and waste (FLW), the analysis uses Spain as a case study to estimate price elasticities of footprints (how footprints respond to a 1% price increase in each food category). Optimization techniques are applied to evaluate fiscal food policies based on social preferences for footprint mitigation. Main findings are: (i) increasing the price of specific food categories can lead to unintended increases in some footprints, (ii) generalized VAT increases have a moderate impact, with up to 3% reduction in CF and less than 0.5% reduction in WF and FLW for a 20pp VAT rise, (iii) optimal taxation and subsidy achieve greater reductions, with up to 18% in CF and 11% in WF when social preferences prioritize mitigation of CF and WF, respectively, and (iv) targeted policies may have nutritional trade-offs, such as reducing essential micronutrients or increasing unhealthy components such saturated fats and sodium, emphasizing the need for balanced policy design.