Agriculture contributes significantly to greenhouse gas emissions, but is often excluded from carbon pricing frameworks. This column analyses how different tax policies can be used to address emissions in agriculture, while considering the impact on producer competitiveness and distributional effects across households. It shows that demand-side tax measures, such as VAT adjustments based on greenhouse gas emissions, can balance environmental and socioeconomic concerns. To avoid adverse distributional consequences on lower-income households, such a policy should be combined with a revenue recycling mechanism.
Source : VOXeu
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