Market regulations targeting emissions from the European Union's milk industry - An Environmental Economic Thesis

Abstract

The objective of the thesis is to investigate how two different emission tax levels can change the greenhouse gas emissions from the European Union’s milk industry. The two different tax levels are an EU ETS price of 25.85 euros per tonne of emissions and a Pigouvian tax of 42 euros per tonne of emissions. The results indicate that an implementation of an EU ETS price level would reduce the emissions from milk production by 11.7 million tonnes of CO2eq., representing 0.26 percent of the European Union's total greenhouse gas emissions. Under a Pigouvian tax, the reduction would be 19 million tonnes of CO2eq. emissions, representing 0.43 percent of the European Union’s total emissions. The decrease in the demanded quantity of milk was assumed to be replaced with a substitute, in this case, oat drink. The total emissions reduction would then be 8.36 million tonnes CO2eq. under an EU ETS price and 13.58 million tonnes of CO2eq. emissions under a Pigouvian tax.