Monetizing the externalities of animal agriculture: insights from an inclusive welfare function

Animal agriculture encompasses global markets with large externalities from animal welfare and greenhouse gas emissions. We formally study these social costs by embedding an animal inclusive social welfare function into a climate-economy model that includes an agricultural sector. The total external costs are found to be large under the baseline parameterization. These results are driven by animal welfare costs, which themselves are due to an assumption that animal lives are worse than nonexistence. Though untestable-and perhaps controversial-we find support for this qualitative assumption and demonstrate that our results are robust to a wide range of its quantitative interpretations. Surprisingly, the environmental costs play a comparatively small role, even in sensitivity analyses that depart substantially from our baseline case. For the model to find that beef, a climate-intensive product, has a larger total externality than poultry, an animal-intensive product, we must simultaneously reduce the animal welfare externality to 1% of its baseline level and increase climate damages roughly 35-fold. Correspondingly, the model implies both that the animal agriculture sector is much larger than its optimal level and that considerations across products ought to be dominated by animal welfare, rather than climate, effects.