Using behavioral nudges (labeling) in order to shift UK consumer preferences away from ruminant-heavy diets

By Joel Ramlill

This piece is the first of a series of assessment submissions from Warwick Economics’ Introduction to Environmental Economics module for first-year students.

Executive Summary

Food production is a major factor of greenhouse gas (GHG) emissions with just under a quarter of all GHG emissions coming from deforestation and agricultural emissions from livestock, soil and nutrient management (IPCC, 2014: 814). This is about twice as much as automobile pollution. (Houlton, 2017). More importantly, ruminants (cattle, buffalo, sheep, etc.) have a profound effect on GHG emissions due to their high methane output. Global ruminant supply chains account for 5.7 gigatonnes CO2-eq per annum alone (FAO, 2013: 83), forming roughly 15.8% of global GHG emissions (Carbon Brief, 2017).

There is a distinct lack of policy in place to change consumer attitudes towards lowering ruminant consumption in most nations. In fact, government programs in countries such as the US, Australia and the EU (the authority largely in charge of the UK’s agricultural policy at the time of writing) actually promote excessive meat consumption (mostly cattle) through subsidies, regulation and legislation designed to keep prices artificially low (Simon, 2017). Therefore, a policy using paternalistic libertarianism in order to “nudge” consumers away from ruminant consumption is essential to tackling this significant issue.

Context and importance of the problem

The problem of ruminant consumption is of utmost importance. As discussed above, ruminants’ global supply chain account for roughly 15.8% of global GHG emissions and Western diets often frame their meals around a meat element (De Boer and Aiking, 2017: 239). Moreover, as China’s middle class – the world’s largest – gets hungrier for red meat (Mao, 2016: 63), the need to address this problem becomes more and more serious.

The main problem concerning the overconsumption of ruminants is that consumers often lack information regarding their environmental impact and therefore significantly underestimate it (Camilleri et al., 2019: 54) – this lack of information being an example of market failure. Because of their underestimation of the environmental impact, consumers over-consume ruminants, entailing an externality. As Keohane and Olmstead define it, “an externality occurs when the actions of one individual have a direct, unintentional and uncompensated effect on the well-being of other individuals.” (Keohane, 2008: 80).  In this case, it is a negative externality of consumption whereby the Marginal Private Benefit (MPB) of eating ruminants is higher than the Marginal Social Benefit (MSB). This is seen in diagram 1 below.

Diagram 1

Therefore, consumers eat more ruminants than what society deems optimal, resulting in allocative inefficiency. This allocative inefficiency means that too many resources are allocated to the production of the good: ruminant meat in this case. This negative consumption externality therefore results in a negative production externality. The overallocation of resources to the production of ruminant meat means that too much ruminant meat is produced resulting in the huge environmental damage of this overproduction. Combined with this is the fact that cattle raising in itself is also a negative production externality. The external costs of the environmental damage that ruminants cause – extremely high water consumption, deforestation to create pastures, and critical methane emissions – are not internalized by the farmers who breed them and sell them down the line. In fact, as discussed above, farmers are often given subsidies which help keep the overproduction high and damage the environment further. This means that the Marginal Social Cost (MSC) is far greater than the Marginal Private Cost (MPC) resulting in significant market failure. This is seen in diagram 2.  In other words, this is a very nuanced relationship: the negative consumption externality dramatically increases the existing negative production externality.

Diagram 2: Negative Production Externality

This situation has huge financial costs. The EU grants on average 21’000 EUR in subsidies to each cattle farm under its Common Agricultural Policy (European Commission, 2016: 2). This license to overproduce diverts already limited government funds away from other causes, embodying the opportunity cost of funding this harmful activity. For example, the EU could spend more money on subsidies to promote renewable energy as an alternative. Or even, rather than spending billions funding renewable energy incentives, simply limiting these subsidies and changing consumer preferences away from ruminants will have a far greater impact and at a far lower cost, actually bringing in revenue from lowering the subsidies paid out.

Not only that, but failure to curb climate change will result in huge economic downturn as well. Failure to do so will result in a 3°C increase in temperature by the end of the century (compared to pre-industrial levels) which the EU estimates is likely to cost the bloc 190 billion EUR in damages each year (Ciscar, 2014: 19). Curbing the effects of climate change can be in done in a far more cost-effective way if EU member states are willing to cut subsidies to cattle farms (perhaps subsidizing a switch to plant-based protein farming) and focus on shifting consumer preferences away from ruminant based diets.

Critique of policy options

Currently there is no real effort to move consumers away from ruminant consumption in the UK, apart from a few advertising campaigns by activist groups such as “Go Vegan” or PETA, which often target only the ethical side of not eating all animals, not just ruminants.

One approach often proposed in the literature is one of ensuring the Global Carbon Pricing proposed by Cramton et al. (Crampton, 2017) includes the environmental damage caused by agriculture, and especially ruminant consumption or Goodland’s food conversion efficiency tax (Goodland, 1997). Both of these effective excise duties or “sin taxes” would help internalize the externality caused by meat consumption and production by putting the external cost on the consumers and producers. It is possible to illustrate this using the negative externality of production brought about by the consumer’s overconsumption of the good. This is seen in diagram 3.  

Diagram 3: Effect of a Tax on Ruminants

This would significantly reduce ruminant meat production and thereby help reduce the devasting environmental impact these animals have. This may, however, conflict with the United Nations Food and Agriculture Organization’s (FAO) definition of sustainable diets as those which are healthy, have a low environmental impact, are affordable, and culturally acceptable (FAO, 2012: 7) – the last item potentially being the sticking point. As a general rule, individuals do not appreciate being told what and what not to eat by their governments, believing that diet belongs firmly in the private sphere (De Boer and Aiking, 2017: 239). This is the case despite health being very much in the public sphere in many ways, with most industrialised nations’ healthcare being funded through government spending to varying degrees. This kind of taxation would certainly spark controversy as consumers would feel as if their choices were being severely limited. This is because simple taxation of this sort fails to grasp the importance of information provision in successful behavior and preference shaping. Moreover, this kind of indirect taxation is actually regressive as the less well-off members of society would pay proportionally more of their salary to cover the cost of these meats. For all these reasons combined with the fact that these measures would likely cause resentment amongst the extremely powerful European farm lobbies at a time where the political stability of the European Union is in question, taxation on ruminant meat is simply not viable at this point.

Policy recommendations

Putting in place a sudden tax on ruminants is simply unfeasible because of how the majority of the UK population eats. De Boer and Aiking argue that changes to the ‘framing’ of traditional meals could be the answer. As Western meals usually consist of staples, “typically potatoes, a vegetable and a protein component, typically meat”, our framing of a traditional meal always involves meat (De Boer and Aiking, 2017: 239). Shifting that frame is key. They emphasise education as a way to combat this framing, effectively ‘nudging’ consumers towards more ‘flexitarian’ diets. This shifting of the norm is echoed by De Bakker who pushes for a reframing of meatless, low cost, healthy and sustainable meals as “normal” and those who eat them – vegetarian, flexitarian, or other – as “normal” (De Bakker, 2012). Again, this approach involves ‘nudging’ people to the reality that eating less meat is the new norm for the 21st century West.

The specific policy recommendation that is being proposed by this paper is to shift the norm and fill the information gap in consumers’ minds by relabeling certain foods on the grounds of libertarian paternalism. To be clear, this policy is libertarian as it does not impede consumers from picking up environmentally damaging ruminant meat (nor does it increase the cost of doing so), but also paternalistic as it nudges consumers towards better decisions about their health but more importantly the environmental impact in this case. Consumers are used to “highly standardised meat products, commonly sold in supermarkets and de-animalised to avoid reminding customers about the link between the meat dish and the killing of an animal” (De Boer and Aiking, 2017: 242). The policy recommendation is a clear, well designed label on the packaging of all food products disclosing the environmental impact of the food in question. This is similar to the gas mileage sticker example advanced by Thaler (Thaler, 2008: 192) where the clear redesign helped consumers towards the better environmental outcome. Labelling climate-friendly options has been tried before, as shown in a Swiss university’s food services where this policy worked (Visschers, 2015: 481).

A little sticker (about half the size of a credit card) could be placed on food products with two key pieces of information: the environmental impact of eating the food and a guideline on the maximum frequency you should be eating the food in order to have the lowest environmental possible environmental impact whilst still being able to consume the food. This would be done along the lines of a Mediterranean diet, which has a very low environmental impact similar to vegetarianism (Houlton, 2017), whilst still including all forms of meat but ruminants in very small quantities. Finally, a third piece of information will be the color of the label, reflecting a summary of the total environmental impact of the food so consumers can judge it at a quick glance and in a simple manner. Four colors along the lines of the now famous European Energy Label will be the markers from most environmentally friendly to least: green, yellow, orange and red. That way, even if consumers cannot be bothered to read the label, they will be able to see quickly the general environmental impact.

For the more precise figure on the label, we would use Camilleri’s ‘light-bulb minutes’ as opposed to another measure of carbon output in order to facilitate the understanding of the environmental degradation in terms of a familiar unit (Camilleri et al.,2019), As Camilleri demonstrated, labelling food products in this manner (cans of soup in his case – some with beef, some without) caused consumers to shift to lower-emission foods. Here are some simple examples of the labels (these lightbulb figures are complete guesses and should not be used as a reference, only as a guide to how the label would look):

These labels should have the effect of moving UK consumer attitudes away from environmentally damaging foods. By ‘Nudging’ consumers towards the socially optimal outcome without infringing upon their freedom of choice, policy-makers could effectively push consumers gradually to choosing diets that rely much less on ruminant consumption. Thereby shifting MPB toward MSB as the Marginal Private Benefit of eating environmentally damaging meat (ruminants) would decrease over time as consumers would choose less ruminant meat due to being informed of their damage to the environment by the sticker.  This is seen in diagram 4:

Diagram 4: Effect of Nudge Labelling on Equilibrium Quantity

This decrease in equilibrium quantity will lead to lower production, reducing the negative externalities of production as well.

Conclusions

A quarter of all GHG emissions comes from deforestation and agricultural emissions from livestock, soil and nutrient management. Roughly 15.8% of all GHG emissions come from ruminant supply chains alone. Taxation is not currently a feasible option as it would infringe on people’s right to choose what they eat, whilst the libertarian paternalism option proposed of informative labels can bring consumers’ attitudes in line with environmental goals by providing them with information on the environmental damage of ruminants. This would significantly lower the negative externality of consumption linked to ruminants as well as the associated negative externality of production of ruminant agriculture.

Header Image: Photo by Leon Ephraïm on Unsplash

Bibliography

Camilleri, Larrick, Hossain, Patino-Echeverri, 2019. Consumers underestimate the emissions associated with food but are aided by labels. Nature Climate Change, Volume 9, pp. 53-58.

Ciscar, J., 2014. Climate Impacts in Europe The JRC PESETA II Project , Luxembourg: Publications Office of the European Union.

Crampton, P., 2017. Global Carbon Pricing: The Path to Climate Cooperation. Cambridge, Massachusetts: The MIT Press .

European Commission, 2016. Farm economy focus by sector CATTLE FARMS IN THE EU Based on FADN data up to 2016 preliminary data, Brussels: European Commission.

Food and Agricultural Organization of the United Nations (FAO), 2013. Greenhouse gas emissions from ruminant supply chains- A global lifecycle assessment, Rome: s.n.

Goodland, R., 1997. Environmental sustainability in agriculture: diet matters. Ecological Economics , Volume 23, pp. 189-200.

Hausfather, Z., 2017. Analysis: Global CO2 emissions set to rise 2% in 2017 after three-year ‘plateau’. [Online] Available at: https://www.carbonbrief.org/analysis-global-co2-emissions-set-to-rise-2-percent-in-2017-following-three-year-plateau [Accessed 1 April 2019].

Houlton, M. A., 2017. University of California- Climate Lab. [Online] Available at: https://www.universityofcalifornia.edu/climate-lab [Accessed 19 February 2019].

Intergovernmental Panel on Climate Change, 2014. Agriculture, Forestry and Other Land Use (AFOLU), Cambridge: Cambridge University Press.

Joop de Boer, Harry Aiking, 2017. Pursuing a Low Meat Diet to Improve Both Health and Sustainability:How Can We Use the Frames that Shape Our Meals?. Ecological Economics 142 (2017) 238–248, Issue 142, pp. 238-248.

Keohane and Olmstead, 2007. Markets and the Environment. Washington DC: Island Press.

Mao, D. L. H. Y. Z. X. L., 2016. Consumption Patterns and Consumer Attitudes to Beef and Sheep Meat in China. American Journal of Food and Nutrition, 4(2), pp. 30-39.

Simon, David Robinson, 2013. Meatonomics: How the Rigged Economics of Meat and Dairy Make You Consume Too Much–and How to Eat Better, Live Longer, and Spend Smarter. San Francisco: Conari Press. pp. 164.

United Nations Food and Agriculture Organization, 2012. Sustainable Diets and Biodiversity Directions and Solutions for Policy, Research and Action, Rome: United Nations.

Vivianne H.M. Visschers, M. S., 2015. Does better for the environment mean less tasty? Offering more climate-friendly meals is good for the environment and customer satisfaction. Appetite, Issue 95, pp. 475-483.

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