Carbon Taxes and Cattle: Evidence From Canadian Feedlots
39 Pages Posted: 5 May 2018
Date Written: April 19, 2018
Unilateral environmental regulation such as carbon taxation continues to raise concerns over leakage and adverse competitiveness effects. The implications of a carbon tax is especially important in Canada, a country currently implementing a nation-wide carbon price. Still, little is known about the quantitative implications of carbon pricing on the agricultural sector. Carbon taxes are shown to have both cost and output effects for cattle producers and a carbon tax of $40/tCO2e is estimated to reduce producer surplus by $4.67/cwt for feedlots. Of this lost producer surplus, only $3.45 is recovered in tax revenue by the government. Econometric models further demonstrate that it is unlikely that Canadian feedlots will be able to pass-through any carbon tax related costs and instead will bear the full incidence of the tax.
Keywords: Carbon Tax, Cattle, Excess Burden, Feedlots
JEL Classification: H23, Q1, Q5
Suggested Citation: Suggested Citation