bstract: Given that lifecycle greenhouse gases (GHGs) emissions from wasted food are comparable to that of entire road transport, managing excessive food demand is essential for achieving climate change mitigation goals. A textbook solution to GHGs emissions is levying a corrective tax, but there is limited empirical evidence on how and why households would respond to such taxes. In this paper, I study the effect of a small food waste tax (on average $0.05 per KG) in South Korea on grocery purchase behavior, which is one of the primary household abatement strategies. By exploiting a plausibly exogenous variation in each municipality’s food waste tax due to the central government’s mandate, I first show that the policy reduces per household annual grocery purchases by 44KG (or 5.3%), where the effect is driven by a reduction in perishable items. The second part of the paper investigates the explanations as to why such a small tax has such a large effect on grocery purchases by testing theoretical predictions from a household production model a la Becker (1965). Using pre-tax period grocery demand elasticity, I find that the price effect of the tax explains only 5% of the 44KG reduction while the rest can be explained by the “movement of the curve” effect. To pin down the driver of the demand shift, I test whether the tax induces (1) substitution to relatively cheaper production input, (2) reduction in nutrition intake, and (3) productivity gain. In the last part of the paper, I show that the net GHGs reduction from the tax translates into removing 576,000 passenger vehicles from the road even after considering leakage by linking grocery purchases to food-item-specific GHGs emissions intensity. The findings indicate that a small tax on food waste can be an effective climate change mitigation tool by inducing environmentally advantageous upstream behavior changes.

Speaker: Seunghoon Lee