Global Effect of the EU Food Carbon Tax on Food Industries and Products: Case Study of Brazil

Abstract: Several researchers suggest an introduction of a food carbon tax in EU to reduce food emissions following the European Green Deal, but taking into account food international trade, such action in EU could raise global food prices and results in possible decline in food production in some regions, thus reduce people's welfare, which is not in line with the global Sustainable Development Goals. Given that existing studies mainly focus on the local environmental, social, and economic effects of a carbon tax, our paper takes a further step by studying the possible global effect of the EU food carbon tax on food industries and products with Brazil as a case. By generating multi-regional Input-Output model in the food international trade scenario for both industrial and products level, we find that although at the industrial level, Brazil's final demand for final goods of agriculture, fishing, and food processing industries decrease, and domestic outputs decline by 47%, 88% and 84%, respectively, after the EU food carbon tax, at the product level, effect on Brazil's domestic demand and output is highly insignificant, even that most food products experienced a global short-run price rises. Hence, Brazil does not need to be overly concerned that an EU food carbon tax will cause serious social impacts in its region through the food sector.