The Case for an Animal Welfare Levy

Meat, money and externalities

Meat consumption imposes externalities on farmed animals. According to basic economic principles, such negative externalities can be addressed through corrective measures, such as taxation, which align private costs with the broader social costs. This raises a novel policy question: should meat be taxed to account for its impact on animal welfare, and if so, what would be the appropriate level of taxation?

Various political bodies, reports, and scholars have advocated for a meat tax, primarily to address its environmental impacts. However, taxing meat for animal welfare reasons has also gained traction. The European Court of Auditors suggested implementing a tax on meat to account for animal suffering in transport. In Germany, an expert commission appointed by the Minister of Food and Agriculture proposed an animal welfare levy, known as the Tierwohlabgabe. This levy would apply to the kilogram of meat sold, with the revenue directed toward improving farm husbandry conditions. A recent study suggests that this initiative has some political support in Germany. In particular, it finds that animal welfare is a stronger motivator of public support than climate change. However, a significant challenge remains: the lack of a scientifically validated method to design and compute the levy.

The rationale for a new levy

In our paper, “The animal welfare levy”, we precisely tackle this challenge by offering an economic rationale and an initial calculation for the animal welfare levy. At the core of our economic model lies the central assumption that animals hold moral standing, i.e., their welfare constitutes a component of social welfare. In essence, this approach adopts a non-anthropocentric perspective, aligning with a longstanding philosophical tradition in the field of animal ethics.

We show theoretically that the animal welfare levy can be understood as a so-called Pigouvian tax, something similar to an environmental tax. This levy is precisely designed to account for externalities on animals, namely the costs or benefits associated with the birth and life of animals raised for meat production. Central to this theoretical analysis is the notion of a “life worth living”, which helps us understand the exact purpose of the levy. That is, the levy is not intended to compensate animals for their suffering or to generate funds for improving their living conditions. Instead, its goal is to provide appropriate incentives to the consumers to encourage or discourage the consumption of animal products, depending on whether the life of these animals is deemed worth living.

Moreover, this paper addresses two challenges absent from the Pigouvian taxation literature in economics. First, taxing meat affects the number of animals produced and consumed, raising complex population ethics questions under a non-anthropocentric setting. The difficulty lies in comparing welfare across different population sizes, which is far from straightforward. This is highly unusual in economics, as policy scenario analyses typically compare situations with the same number of individuals in each scenario, varying only the consequences for those individuals. Relying on the literature in philosophy and social choice, we address this difficulty by exploring and comparing the level of the levy under different normative settings.

Second, evaluating the externality on animals poses practical difficulties. Relying on traditional human willingness-to-pay (WTP) to monetize the externality is inappropriate, as our approach adopts a non-anthropocentric perspective. At the same time, using animals’ WTP seems inappropriate, as animals lack income, and even with an alternative metric, it remains unclear how to compare the preferences of animals and humans on a common scale. Instead, we propose a novel method to estimate animal welfare in monetary terms. This method is inspired by the quality-adjusted-life-years (QALYs) used in health economics.

Making intensive animal farms unprofitable

The main findings are as follows. Under total utilitarianism – the most commonly used normative framework in economics –  the levy is a subsidy if an animal’s life is deemed worth living and a tax if it is not. Importantly, the levy varies under different normative settings, highlighting the critical role of population ethics in pricing externalities in this context.

Calibrating the levy for most commonly farmed animals in France (chickens, pigs and cows), we show that the impact of the animal welfare levy is much larger than that of environmental taxes, even under fairly conservative assumptions. In particular, we illustrate the large difference in the estimated animal welfare levies across different types of meat. The taxes are considerably higher for chickens and pigs than for cows. Even with conservative assumptions, the calibrated tax levels are substantial, rendering most intensive animal farms unprofitable.

Taxes also vary significantly within each animal category. We account for different rearing conditions of broilers and estimate a tax of over 30 euros per “standard” chicken – i.e., one raised under conventional intensive conditions – compared to a more modest 2-euro tax per organic chicken. Our results stress the need to have heterogeneous levels of taxation based on the rearing conditions of the animal (as opposed to a homogeneous tax such as the Tierwohlabgabe proposal) that reflect the externalities imposed on the animals and that generate appropriate incentives for producers.

Quality vs. quantity

This analysis has a basic policy implication. In most countries, animal welfare regulations primarily rely on legislative tools such as norms and guidelines. These measures aim to establish a minimum standard of animal welfare (that is usually both practical and not overly restrictive for the meat industry). However, our research underscores the importance of incorporating meat taxation into the broader framework of animal welfare regulation. A tax on meat helps mitigate the externalities associated with farmed animals by directly influencing their numbers. In sum, regulating animal welfare is not only about improving the quality of animal lives but also about addressing the quantity of animals raised for consumption. Taxation is the appropriate instrument to tackle the quantity aspect.

Animal welfare vs. the environment

Finally, we find that animal welfare levies often run counter to environmental taxes. While pork and chicken meat should be heavily taxed, beef might even warrant a subsidy. In France, cows raised for meat are typically kept on pastures, and their lives are estimated to be worth living. This finding highlights a critical policy dilemma: a climate policy focused on a “methane tax” targeting beef could unintentionally harm animal welfare. Consumers might substitute beef with pork or chicken, potentially increasing the demand for intensively farmed animals. This tension between environmental goals and animal welfare underscores a profound tradeoff. Prioritizing animal welfare by allocating more resources to livestock, such as land and feed, would likely increase environmental impacts.

This unfortunate conflict between environmental sustainability and animal welfare poses a fundamental challenge that our societies are likely to confront in the future. In particular, this conflict might gain prominence in the coming decades considering the increasing pressure on the food system resulting from the increase in global population and average wealth. Furthermore, the issue becomes even more complex when considering the welfare of wild animals. Since meat production is a major driver of biodiversity loss globally, reducing meat consumption is expected to lead to an increase in wild animal populations. If the welfare of wild animals is greater than that of farmed animals – a plausible assumption in many cases – this would justify even higher levels of taxation. Overall, this highlights that adopting a plant-based diet is often the best choice for both the environment and animal welfare.