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ECONOMICS IS A discipline concerned with the allocation of scarce resources. In theory, markets are a good way to organise economic activity and can provide an efficient allocation mechanism.
When they are perfectly competitive, the market outcome is efficient. The price of the good reflects the cost of producing it, and goods are allocated to those who value them the most, as measured by consumers’ willingness to pay.
In practice however, market failures often lead to inefficient outcomes. Externalities are one of the many reasons why markets fail.
An externality occurs when the production or consumption of a good has an impact on bystanders, in other words on individuals who are external to the market, neither producing nor consuming the good.
The impact on bystanders can be positive or negative, but given they are not participating in the market, they don’t pay for any positive impacts and are not compensated for negative ones. A positive production externality, for example, occurs when firms engage in research and development. The resulting knowledge spillovers can benefit other firms in the industry and beyond.
Young children on long-haul flights are an example of a negative consumption externality; they can negatively impact fellow passengers by crying or kicking the seat in front of them.
When negative externalities are present, the quantity of the goods produced and sold is too high. Without any market interventions, producers only consider their own private costs in deciding how much to produce. Unless they are compelled to do so, the cost to bystanders is not taken into account. The resulting market price no longer reflects the true societal cost of the good, it is too low, and the good is overproduced.
A market-based solution to the problem of negative externalities is to tax the good. This internalises the external cost, increases the price, lowers the quantity consumed, and increases the efficiency of the market.
This is the theory behind the application of carbon taxes to goods such as fossil fuels. Co2 emissions are a classic example of a negative externality. They are a harmful by-product of the consumption and/or production of certain goods, and negatively impact society through climate change.
In recognition of the economic case for taxing goods with negative externalities, the Irish climate action plan includes incremental increases to carbon taxes on fuels, up to €100 per tonne of carbon dioxide by 2030.
There is a lack of economic reasoning however in the current policies in place for the agricultural sector. Globally, food production accounts for over a quarter of global greenhouse gas emissions. In Ireland the agricultural sector is the highest emissions sector, responsible for 37.5% of our total emissions.
In general, meat and dairy products are more carbon intensive than plant based foods, and beef is the most carbon intensive of all agricultural products.
Hannah Daly recently outlined how unstainable beef production is, and how many policies, such as subsidies that make up 139 per cent of cattle farm incomes, are to the detriment of our environment.
It is completely counterintuitive to heavily subsidise a carbon-intensive product such as beef. Given the negative externalities associated with meat production, and particularly beef consumption, many economists would argue that rather than subsidising production, a meat tax is more appropriate.
A recently published paper estimates that the average global environmental external cost of beef production is between US$5.75 and US$9.17 per kilogram, depending on how it is produced.
These figures are actually a conservative estimate as they don’t include the external costs of biodiversity loss and the health effects from livestock-related air pollution. There is a clear case for taxing beef rather than subsidising its production, although public support for taxing meat would likely be low.
A meat tax may not be politically feasible, but subsidies could be diverted into more sustainable food production, albeit such reform would need to be at an EU level. At government level, substantial public funding currently provided for campaigns to increase the demand for meat products, such as Bord Bia advertising campaigns and ministerial trade missions abroad, could be reallocated to more sustainable investments.
A Boston Consulting Group report published last year highlighted that investing in plant based alternative proteins gives the highest emissions savings per dollar invested across all sectors. The report also forecasts that with current trends, these alternative proteins could account for 22% of global protein consumption by 2035.
An ESRI study found that in Ireland almost half of young adults who currently eat meat plan to eat less in the future, and 30% intend to eat a plant based diet.
Consumer demand at home and abroad is shifting towards more sustainable diets, and Government policies should support rather than attempt to slow down this transition. It is inevitable that Ireland will eventually have to move away from intensive animal farming.
We will have to make changes eventually, so why not move early and gain a competitive advantage? Planning for this transition and reallocating funds towards more sustainable plant based food production would allow us to be leaders in this market, while reducing emissions in line with our ambitious targets.
Many governments, including our own, argue that agricultural subsidies are needed to ensure food security. In reality however, subsidies are usually applied in order to provide a competitive advantage in global markets. In Ireland, 85% of beef produced is exported, as are 85% of dairy products.
Not only is the vast majority of the food we produce exported, we are reliant on global food markets to support production. Our reliance on imported animal feed was highlighted recently when Russian ships were allowed to deliver grain to Ireland, receiving a special exemption from the EU ban on Russian imports.
If we really want to ensure we have food security, we need to move towards more sustainable food production. Investment in the agricultural sector should not be focused on maintaining the status quo, but rather on how we transition away from intensive animal farming.
We will no doubt have to do so eventually – why wait until it’s too late?
Dr Emma Howard is an Economist and Lecturer at Technological University Dublin.
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This is genuinely a ridiculous article. Firstly author intertwines irish vs world vs USA to make points. Also using matrix’s when it comes to co2 only accounts for efficiency rather than actual co2 amounts . The fact is that although beef farming is so called economically inefficient they are generally lowly stocked in Ireland at about 1.3 lsu/ha . 1.3lsu is about the optimum rate for carbon sequestration on permanent pastures. Getting rid of beef farmers or not supporting the status quo will mean beef farmers will move to dairy industry either by doing so themselves or by selling or leasing to dairy farmers . The economic co2 matrix’s may look better but you will actually produce more carbon.
Do we want to reduce carbon? Or make an economic model look better
@Shane O’Neill: The fact of the matter is we’re importing Feed from Russia (don’t mention the war) to feed animals that are sold to china. Makey no sense apart from more money.
@Shane O’Neill: This is genuinely a very good article and proves that farmers are only looking out for themselves, helped by the likes of the C.A.P. Economically, I get the small farmer. In an age where we have growing food waste and Food banks and spiralling costs, the farming community still go cap in hand to Govt/E.U. to basically increase their massive subsidies to overproduce. 85% of food being exported and Ireland still getting massive fines because we can’t meet Carbon emission targets. E.G. There is no desire / planning from farmers / Govt / EU to fill the hole that say the Ukrainian shortage of wheat etc has brought us, animal feed is imported, instead of being made here. The EU know the quantities of each crop and meats needed in EU to fulfil requirements but instead of allocating those requirements ( at least in theory) to each EU country to reduce food waste, lower food costs and increase efficiency, they subsidise, which ironically continue to add to the cost of food poverty because of the waste and the the additional costs of transport, emissions and fines.
I will continue to enjoy and eat beef no matter what these quacks tell me. If they’re arguing that some plant based, processed crap flown thousands of miles is better for me than grass fed irish beef, they have lost the plot. Her justification in trying to interfere in the market is precisely the reason why health, housing and education is a mess. You start interfering in free market activities and suddenly you notice how you lose control and markets tank. Of course, modern day Keynsian economists just print more money, governments then spend more and we take on more debt so this makes perfect sense in the clown world we live in. I will say however thst subsidies do pose problems in any market place but not for the reasons this “economist” outlines.
@An Drew Bearla: Agriculture is not a free market. If it was there would be no farming of any kind in Europe. If you read the article you can see that she is not advocating eating some plant based processed crap flown thousands of miles but supporting our own farmers to produce more food through producing more plant based food. I’m no expert on agriculture but that is what she is advocating.
@Nicholas McMurry: the article states that a Boston consulting group argues that plant based crap yada yada yada. So yea. The aurhor does argue we should be eating plant based crap flown thousands of miles because very little of that crap is produced here. I already remarked on the problem with subsidies of any kind and I will agree 100% with you there. All subsidies are akin to scams and will hurt the consumer and tax payer in the long run. Ideally, if you cant function in a market without a handout, you shouldn’t be in business. However the world hasn’t worked like that since the 1920s.
Great article. Nicely researched and clearly argued. 100% agree that now is the time to act, and give our farmers the best opportunity to make the transition.
This is genuinely a ridiculous article. Firstly author intertwines irish vs world vs USA to make points. Also using matrix’s when it comes to co2 only accounts for efficiency rather than actual co2 amounts . The fact is that although beef farming is so called economically inefficient they are generally lowly stocked in Ireland at about 1.3 lsu/ha . 1.3lsu is about the optimum rate for carbon sequestration on permanent pastures. Getting rid of beef farmers or not supporting the status quo will mean beef farmers will move to dairy industry either by doing so themselves or by selling or leasing to dairy farmers . The economic co2 matrix’s may look better but you will actually produce more carbon.
Do we want to reduce carbon? Or make an economic model look better?
This is genuinely a terrible article. Firstly author intertwines irish vs world vs USA to make points. Also using matrix’s when it comes to co2 only accounts for efficiency rather than actual co2 amounts . The fact is that although beef farming is so called economically inefficient they are generally lowly stocked in Ireland at about 1.3 lsu/ha . 1.3lsu is about the optimum rate for carbon sequestration on permanent pastures. Getting rid of beef farmers or not supporting the status quo will mean beef farmers will move to dairy industry either by doing so themselves or by selling or leasing to dairy farmers . The economic co2 matrix’s may look better but you will actually produce more carbon.
Do we want to reduce carbon? Or make an economic model look better.Keep the status quo in Ireland
Closing the stable door after the horse has bolted, comes to mind
Would ya stop. Beef is too dear as it is.
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