Farmyard fart tax to combat climate change – a novel solution from the New Zealand government!

The government of New Zealand, a country notorious for having more sheep than people, has proposed a creative way to fight the impending climate crisis – a tax on the flatulence produced by cattle and sheep! Yes that is right, no need to read it again, farmers will be taxed for their livestock burping and farting!

Whilst it might sound crazy at first, the plan is actually very clever and will significantly internalise some of the additional costs of raising cattle and sheep.

The New Zealand meat industry is big business, with lamb and beef exported all over the world. This requires millions of cows and sheep, and every one of them burps and farts just like us! The difference is that their emissions produce huge quantities of methane, a greenhouse gas which contributes significantly to global warming. One estimate from the Associated Press calculates that methane from livestock rearing accounts for 5.5% of all greenhouse gas creation from human activity.

The tax, which is due to take effect from 2025, will ensure that farmers pay the external cost of methane emissions. This will then provide funds for the government to offset emission by planting trees and research technological solutions to capture the methane. They are also looking into subsidising those farmers who switch their livestock diets to one that does not produce methane.  

The plan has been mocked around the world, but not by economists! Negative externalities are rife in all industries and any government policy which can correct these market failures should be lauded not laughed at. So as economics students, let’s all say a well done to the government of New Zealand – we see the method in your methane madness!