Tackling methane-belching cows is a taxing business

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Taxing methane-belching cows certainly puts the wind up farmers. Their opposition recently forced New Zealand to backtrack on plans to tax ruminants’ emissions. Now Denmark has reached agreement on a similar levy. It is dubbed a “terrifying experiment” by farmers’ organisation Bæredygtigt Landbrug.

As is common with green policies, feelings run high on both sides. For proponents of the new levy, there is no alternative to addressing emissions from the agricultural and forestry sector. Left unchecked, the sectors are set to account for 46 per cent of Denmark’s total greenhouse gas emissions in 2030, according to a government-appointed expert group. “Burping” cows emit the potent, albeit shortlived, greenhouse gas methane. In the short run, the world’s cows do more damage to the climate than its cars.

But no good deed goes unpunished. There are risks associated with unilateral actions. The higher costs imposed on Danish farmers are likely to result in a loss of market share to foreign producers whose emissions are unchecked.

Aggrieved farmers might wonder why Copenhagen did not tax Danish consumers instead. That would have shielded domestic producers from unfair competition. One reason is that demand for climate-damaging foodstuffs is likely to be relatively insensitive to price increases. Another is that Denmark is a big food exporter. Hence a consumer tax would have to be swingeing to have the same effect on Denmark’s emissions as a production tax. 

Moreover, a consumer tax would be applied at a uniform rate for all meat products of a certain type. That would prevent farmers from benefiting financially from moves to reduce their environmental footprint. One option, say, is using Amsterdam-listed DSM-Firmenich’s Bovaer. Adding a quarter teaspoon of this feed additive, which suppresses a methane-producing enzyme, can reduce a dairy cow’s methane emissions by 30 per cent.

Bovaer is attracting growing interest. It has just won approval in the US, where it will be launched by its partner Elanco Animal Health, and it has been tested in over 100 farm trials across 20 countries, including by farmer-owned Arla Foods. But Jefferies assesses its long-term market penetration at just 2 per cent. At an estimated price of $110 a year per dairy cow, extensive take-up may depend on government support, taxes or the sector’s inclusion in emission trading schemes.

Yet loading taxes or other restrictions on farmers is politically difficult. Brussels’ recent climbdown over agricultural emission curbs followed a bout of manure dumping, hay bale burning and motorway blockades. Denmark deserves credit for its move. But other countries won’t be rushing to follow its lead.

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