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Sugar tax could sweeten a market failure

This column in Nature by Adam Briggs, public-health researcher at the University of Oxford, discusses the new UK sugar tax which the FCRN wrote about in our last newsletter.

In it he argues that the sugar tax, which will be implemented in the form of a levy on sugary-drinks manufacturers, can be a very effective way of tackling childhood obesity in the UK and that it could also have a positive effect globally by encouraging other companies to also reduce sugar contents in drinks. The problem as highlighted by Biggs lies in the way that companies may decide to change the price of their taxed (and untaxed) products, if at all:

industry may choose to keep the sugar content of its drinks the same and either absorb the tax or pass it onto the consumer across their product ranges. This would mean no relative price increase on sugary drinks and so probably no drop in consumption.”

He also argues that the tax is really a way to tackle what is often referred to as a negative externality, which can be described as a market failure in which the full cost of a product to individuals and society is not included in the price. Another food related area that Biggs argues that taxes can be applied to (also highlighting a negative externality) is greenhouse-gas emissions; he argues that taxing food that is responsible for high greenhouse-gas emissions when it is produced and transported could benefit the health of both people and the planet.

Read the full column here.

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