by - Health and environmental factors are some of the main estimated hidden costs in the agri-food system, according to a recent report from the Food and Agriculture Organization of the United Nations.
- Released ahead of the climate conference, COP28, the report highlights the need for an urgent transformation of food systems, which is also on the COP28 agenda.
- The total hidden costs of India’s agri-food system amount to $1.12 trillion in 2020.
A recent report reveals that the global agri-food system, while having benefits in terms of nutrition and livelihoods, has hidden costs, such as those related to health and the environment. These are added when estimating the value of the agricultural process of production, distribution and consumption to society.
He State of agriculture and food The report, published by the Food and Agriculture Organization (FAO) in early November, quantifies hidden costs (a cost that is not reflected in the market price of a product or service) at $12.7 trillion. in 2020 purchasing power parity (PPP). PPP is a theoretical exchange rate that equalizes the purchasing power of different currencies.
The global hidden costs of the agri-food system in 2020 are estimated to come from greenhouse gas and nitrogen emissions, water use, land use change, unhealthy dietary patterns, malnutrition and poverty, among others. others, according to data from 154 countries. By evaluating the hidden costs and benefits of agri-food systems, the report aims to provide inputs for decision-making aimed at the sustainability of these systems.
Agri-food systems refer to the journey of food from farm to table, including when it is grown, fished, harvested, processed, packaged, transported, distributed, marketed, purchased, They are prepared, eaten and disposed of. According to the report, the majority of hidden costs (more than $9 trillion or 73% of the total $12.7 trillion of hidden costs in 2020) are health-related costs resulting from lost productivity due to unhealthy dietary patterns. The other hidden costs suggested by the report include environmental costs, valued at $2.9 trillion (about 20%), and social costs, associated with poverty and malnutrition, which constitute about 4% of total costs. hidden costs. For environmental cost estimates, the report analyzed data on greenhouse gases (GHGs) emitted throughout the entire food value chain, covering food and fertilizer production and energy use, emissions of nitrogen, the use of blue water and the change in land use at the agricultural level. To analyze social costs, the report considered distributional failures in the supply of available food and moderate poverty among agri-food workers. Factors that contribute to unhealthy diets, leading to obesity and non-communicable diseases (NCDs), were used to estimate healthcare costs.
Of the hidden environmental costs, which the report says are likely underestimated, more than half are due to nitrogen emissions, primarily from runoff into water and ammonia emissions into the air, the report notes. Other contributors include greenhouse gas emissions that affect climate change (30%), costs associated with land use changes (14%) and water use (4%).
The FAO report comes ahead of the UN climate conference, COP28, where world leaders meet in Dubai to negotiate strategies to mitigate climate change. COP28 dedicates a day to food systems and the COP28 presidency has urged countries to sign a leaders’ declaration that recognizes the need to transform the food system.
When asked about the timing of the report, David Laborde, Director of the Agri-Food Economics Division (ESA) at FAO, told Mongabay India: “COP28 will bring debates on food systems to the fore. We want to ensure that food security and nutrition are not forgotten. Our objective, based on this report and the publication of another document at the COP, is to show that food security, nutrition and climate actions are complementary.”
He further added: “We cannot achieve food security and nutrition tomorrow if we do not take serious mitigation and adaptation measures today.” He reported that the upcoming FAO report will provide a roadmap to achieve UN Sustainable Development Goal 2 (end hunger and achieve food security by 2030) without exceeding the 1.5 degree Celsius threshold.
He State of agriculture and food 2023 The report presents true cost accounting (TCA) as an approach to estimate hidden costs and reveal the hidden impacts of agri-food systems on the environment, health and livelihoods. TCA goes beyond market exchanges to account for all flows to and from agri-food systems, including those not captured by market transactions. The report used several national data sets to reach its conclusions. These data sets include the FAO Substantive Statistical Data Corporate Database (FAOSTAT), the World Bank’s Global Development Indicators, the Global Burden of Diseases Database, and the Ecosystem Services Valuation Database. .
“By valuing the climate costs associated with food production, distribution and consumption and agricultural protection, the use of real cost accounting helps achieve greater transparency,” says FAO’s Laborde, speaking about the use of accounting actual cost analysis (TCA) to estimate hidden costs. “To this point, having more information for policymakers, investors and consumers can help make better decisions, including on climate matters. However, the TCA is just a tool; It does not replace political will or behavioral change.”
Integrate hidden costs into policy decisions
The report’s findings suggest that hidden costs vary in scale and composition across income levels. The majority of these costs come from upper middle-income countries (39% of total hidden costs) and high-income countries (36%). Lower middle-income countries contribute 22% of hidden costs, while low-income countries account for 3%.
The report highlights that productivity losses resulting from dietary patterns that lead to non-communicable diseases (NCDs) are the largest contributors to damage to the agri-food system in all but low-income countries. The next major factor that contributes to hidden costs is environmental costs. In lower middle-income countries, the social costs of poverty and malnutrition contribute more significantly to hidden costs.
The report also provides an estimate of hidden costs for each country. “The countries with the highest net hidden costs are the largest food producers and consumers in the world: the United States of America represents 13% of the total quantified hidden costs, the European Union 14% and the Brazil bloc, the Russian Federation, India and China (the BRIC countries) represent 39%,” he says.
In India, the report highlights, the total hidden costs of agri-food systems amount to 1.12 trillion dollars, compared to the United States and China, where the hidden costs are 1.58 trillion and 2.55 trillion dollars, respectively.
Of the $1.12 trillion in hidden costs, environmental costs related to climate, water, land and nitrogen use total $77.4 billion, $36.3 billion, $24.1 billion and $144.2 billion. , respectively. Among social costs, the cost of poverty among workers in the agri-food sector amounts to 157.4 billion dollars and the cost of diseases related to malnutrition is 15.3 billion dollars. In the health category, the cost of diseases related to dietary patterns is $668.6 billion. The analysis emphasizes the need for a comprehensive approach to address economic impacts on the environment, society and health.
FAO’s David Laborde says the hidden costs of agri-food systems (environmental, social, health and diet-related), equivalent to 10% of global GDP, should be a strong call to action. Transforming the agri-food system offers great opportunities to address these various costs at the same time, he said, setting the example that adopting healthier diets will be beneficial for people and the planet.
Among the challenges posed by integrating hidden costs into decision-making processes, one of the most important is a lack of political will, the report says, noting that “decision makers face conflicting objectives, and addressing The hidden costs of agri-food systems may require significant changes to current production and consumption practices, which may encounter resistance from governments, businesses, producers and consumers, who may prefer the status quo for fear of high transition costs or changes in habits, culture or traditions.” Another challenge is resistance to change, which can arise for a variety of reasons, one of which is trade-offs that can have a long-term impact. For example, the use of agrochemicals to increase production can reduce poverty but also lead to ecological degradation over time. These challenges add complexity to policy decision-making.
“There is no path to achieving a global temperature of 1.5°C, feeding the world and safeguarding nature without urgently transforming the ways we produce, transport, process, distribute and consume food and use our land,” said Wanjira Mathai, CEO. for Africa and Global Partnerships at the World Resources Institute (WRI), in a virtual press conference on Food and Agriculture at COP28, on November 27. “This could unlock $4.5 trillion a year in new business opportunities. The focus on food and nature at COP28 is welcome, but requires more than warm words: there must be decisive action, with clear targets, timelines and funding, and a focus on local communities to adapt.”
Cover image: Hidden costs in agri-food systems vary in scale and composition depending on income levels. Most of these costs come from upper middle-income countries and high-income countries. Photo by Neil Palmer (CIAT/CCAFS)/Flickr.
