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Reforming Value-Added Taxes to Support Organic Agriculture: General Equilibrium Evidence from Germany

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  • Krumbe, Falk
  • Feuerbacher, Arndt

Abstract

Promoting organic agriculture is a key policy of the Farm to Fork Strategy as well as the national agricultural strategy of Germany. In this study we provide a detailed analysis of the organic and conventional markets in Germany. Using a unique dataset we analyze the role of organic agriculture not only in production, but also in consumption, trade and its relation to other industries. A policy experiment is conducted using a CGE model to analyze the effects of a VAT reform for organic products. We model the removal of all VAT on organic products. We show that such a reform would lead to a substantial increase in organic production and consumption. The increased demand for organic produce is primarily met by domestic production. In terms of household groups, medium income households benefit the most in absolute terms, while upper medium and high income households benefit the most in per capita terms. The reform is nevertheless not substantial enough to reach the ambitious goals of the European Union of turning 25% of agricultural land organic by 2030.

Suggested Citation

  • Krumbe, Falk & Feuerbacher, Arndt, 2026. "Reforming Value-Added Taxes to Support Organic Agriculture: General Equilibrium Evidence from Germany," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404375, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404375
    DOI: 10.22004/ag.econ.404375
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