895. Environmental, Health, and Social Costs of Food

Our agri-food system serves a dual purpose. On the one hand, it provides food for the world's 8 billion people and livelihoods for more than 1 billion. However, the current unsustainable practices of this system fall short of providing a healthy diet for all and contribute to both climate change and the degradation of natural resources. As our survival depends on the health of our planet, it is imperative that we rethink our food system. Unfortunately, many key stakeholders in the public, business, and government sectors remain unaware of the economic, social, and environmental sustainability implications of the food choices they make every day. This lack of awareness is largely due to the hidden costs associated with the negative environmental, economic and social impacts of the agri-food system, costs that are not reflected in market prices.

On November 6, the Food and Agriculture Organization of the United Nations (FAO) released the 2023 edition of The State of Food and Agriculture (SOFA). This report attempts to estimate the true costs of the agri-food system by introducing the concept of hidden environmental, health and social costs of the agri-food system and presenting a methodology for accounting for these costs.

Although previous efforts have been made to assess the hidden costs of the agri-food system, this report differs by disaggregating these costs at the national level using readily available data. It aims to provide a comparable overview of these costs across countries. Initial country estimates will be presented this year, followed by detailed policy recommendations for transforming the food system in next year's report.

The report provides a country-by-country assessment of 154 countries and finds that globally, hidden costs in the agri-food system exceed $10 trillion in 2020 purchasing power parity dollars ($12.7 trillion), equivalent to about 10% of global GDP in 2020 purchasing power parity.

Most of these hidden costs were concentrated in upper-middle-income countries (39%, or $5 trillion) and high-income countries (36%, or $4.6+ trillion), while low- and middle-income countries contributed 22% and 3%, respectively.

A significant portion of these hidden costs, 73% or $9 trillion, were health-related. These costs were associated with diets that include excessive consumption of processed foods, fats, and sugars, leading to obesity and noncommunicable diseases, as well as a decline in labor productivity. High-income and upper-middle-income countries faced particularly high health costs.

About 20% of the total hidden costs, equivalent to $2.9 trillion, were associated with environmental factors related to agricultural production, representing about one-third of the value added by the agricultural sector. These environmental costs were predominantly nitrogen-related, including water pollution and greenhouse gas emissions, followed by greenhouse gas emissions (30%), land use change (14%), and water use (4%).

Hidden social costs were closely linked to poverty and malnutrition, and although they accounted for a smaller share of total hidden costs ($0.5 trillion), they accounted for more than 50% of total hidden costs in low-income countries.

Low-income countries bore the largest share of the hidden costs of the agri-food system as a percentage of national income: 27% in low-income countries, compared with 12% and 8% of GDP in middle-income and high-income countries, respectively. In low-income countries, the hidden social costs associated with poverty and malnutrition stood out.

These hidden costs of the agri-food system have a negative impact on the well-being of current and future generations. Often, those segments of society that do not benefit from the economic activities that generate these costs tend to bear the greatest burdens. Urgent action is needed to identify and mitigate these hidden costs while maximizing the benefits of a food system that can sustainably provide nutritious food.

While acknowledging that these estimates are preliminary, the report underscores the urgent need to take hidden costs into account when making decisions about transforming agri-food systems. It calls for investment in data collection and capacity building to support coherent decision-making and policy formulation, particularly in low- and middle-income countries, as well as innovation in research and data collection methods.

Reference
FAO. 2023. the State of Food and Agriculture 2023. Revealing the true cost of food to transform agrifood systems. Rome. https://doi.org/10.4060/cc7724 en

Contributor: IIYAMA Miyuki (Information Program)