Demand for plant-based milk and effects of a carbon tax on fresh milk consumption in Sweden

Abstract

A hypothetical carbon tax on the carbon footprint of fresh milk products from animals (cow’s milk) and plant-based substitutes (rice milk, oat milk, soy milk, almond milk) was applied to estimated price and income elasticities for Swedish household expenditure on these products. Overall aims were to (i) to estimate fresh milk consumption patterns in Swedish households and (ii) simulate the direct distributed effects of a carbon tax on fresh milk. The results indicated that fresh milk consumption in Swedish households is affected mainly by price and income, rather than by sociodemographic characteristics of the household. The estimates revealed a substitutional relationship between plant-based milk on one hand and low-fat and standard milk on the other, while there was a complementary relationship between plant-based and reduced-fat milk. The effects of a carbon tax were simulated based on damage cost and price. The results indicated that introduction of a carbon tax would decrease the carbon footprint of dairy fresh milk, but would increase the carbon footprint of plant-based milk because of the institutional and complementary relationship between the different categories of fresh milk. Thus levying a carbon tax on fresh dairy milk, rather than on plant-based milk, would be more likely to promote climate-friendly fresh milk consumption.