Today’s global food systems carry a hidden price tag: at least USD 10 trillion annually in environmental, health, and social costs, according to both the FAO’s The State of Food and Agriculture 2023 and Food System Economics Commission’s (FSEC) The Economics of the Food System Transformation. Globally, food systems cost more in GDP than they contribute and play a driving role in exacerbating poverty, malnutrition, and climate change. A recent IFPRI policy seminar took a deeper look at the food system’s hidden costs and how policymakers, development practitioners, and private sector actors can come together to both lower these costs and transform food systems to be more sustainable, healthy, and inclusive.
Johan Swinnen, Director General of IFPRI and Managing Director of the CGIAR Systems Transformation Science Group, and Maximo Torero, FAO Chief Economist, opened the event by highlighting the implication of the consistent $10 trillion estimate produced by both reports. The fact that two separate credible reports, using different methodologies and frameworks, converged on the same number gives that estimate a high level of confidence. In other words, while it seems shockingly large, the $10 trillion estimate is likely accurate.
Achieving food system transformation to reduce these costs and meet both food security and climate change targets will take strong political will, both speakers emphasized. This will include repurposing some current public expenditures, such as those on agricultural subsidies, to better support the building of sustainable food systems and the protection of the poorest and most vulnerable populations. Ensuring the effectiveness of such repurposing requires an understanding of the true cost accounting of food today.
“What we do today affects tomorrow,” Torero said.
Policymakers will also need to consider both global and national impacts of country-level policies, as well as be willing to balance the needs of the “winners” and “losers” of food system transformation: those for whom such transformation will lower the price of healthy foods and those for whom prices may increase.
Andrea Cattaneo, FAO Senior Economist, also emphasized the need for true cost accounting to systemically measure the costs and benefits of food system transformation and use those measurements to improve decision-making. According to the 2023 SOFA report, Cattaneo said, the hidden costs of food systems are highly relevant for all countries, regardless of economic status. Health costs, specifically productivity losses driven by both undernutrition and non-communicable diet-related diseases, are the highest source of hidden costs in all regions with the exception of least developed countries, where social costs—i.e., poverty—pose the highest burden. LDCs also face the highest burden of costs relative to GDP at 27 percent.
Cattaneo provided examples of some levers that could help drive food system transformation in a more sustainable, equitable direction. These include supply chains, consumption trends, research and development and inspection services, and private sector investment. The 2024 SOFA report will focus more on ways to address hidden costs through these and other levers.
Even if countries abide by the policy commitments made in their Nationally Determined Contributions (NDCs), the outlook for 2050 under the current food system trajectory is grim, according to Caterina Ruggeri Laderchi, FSEC Director. An estimated 640 million people will remain undernourished, while as many as 1.5 billion people would experience obesity—a 70 percent increase from today. In addition, agriculture and food systems will still be contributing substantially to greenhouse gas emissions and climate change, with widespread deforestation and pollution destroying biodiversity, increasing the release of greenhouse gases, and posing serious public health risks.
However, Laderchi emphasized that a brighter future is possible with the right policy priorities. These include:
- Shifting consumption patterns toward healthier diets
- Repurposing current agricultural subsidies
- Targeting new tax revenue to support the creation of a more sustainable, healthy, and equitable food system
- Investing in new technologies
- Prioritizing the poorest and most vulnerable populations
She re-emphasized that these priorities will come with trade-offs, including higher food prices for some populations and the need for better job opportunities outside of agriculture. Managing these trade-offs will require systemic change and a multi-sectoral perspective, as well as an estimated $200-500 billion annual global investment. Doing so successfully, however, could reduce hidden food system costs by as much as $5 trillion per year. These priority policies also have the potential to turn food systems into net GHG sinks rather than GHG drivers, reduce malnutrition, and reverse land degradation.
Jessica Fanzo, Professor of Climate and Food at Columbia University, agreed with the importance of shifting diets toward healthier foods. Non-communicable diseases like heart disease and diabetes claim 8 million lives per year, while 735 million people per year experience lost productivity as a result of undernutrition. In addition, production of animal source food products places a serious burden on the environment, driving methane emissions, deforestation, and encroachment on natural land to provide pastures. A shift toward healthy diets could bring as much as 70% of the estimated hidden food system cost reduction, according to Fanzo.
“Consumer choice can have a profound impact,” she said.
However, ensuring access to such a healthy diet remains incredibly nuanced and complicated. In high-income countries, much of the health benefits will stem from reducing consumption of animal products and increasing consumption of plant-based foods, while in some middle- and low-income countries, populations need to increase their consumption of animal products in order to achieve proper nutrition.
To enable successful consumption shifts, policies to address diets, livelihoods, and environment will need to be bundled, and both governments and private sector actors will need to provide incentives, innovation, and investment, Fanzo emphasized.
Danielle Resnick, Senior IFPRI Research Fellow, continued the discussion of effective policy design, stating that transparency, timing, and attempting to diffuse costs will be critical in stimulating support for needed food policy reforms. For example, policymakers should earmark transfers to make the benefits of reform more visible for both producers and consumers, as well as clearly show the linkages between issues such as agriculture and climate change in order to get broader support. Policymakers can also use “honeymoon periods” to push through more difficult reforms or build strong feedback loops by frontloading reform benefits to overcome aversion to later losses. By providing some of the benefits up front, or at least leading with less onerous costs, difficult policies can still generate stronger buy-in.
“Policies don’t occur in a vacuum,” Resnick said. Strong governance, including public-private partnerships and strengthened multi-sectoral coordination among key political institutions, will be critical to establishing the foundation needed for sustainable food system transformation.
The seminar sounded a hopeful note in the end—while difficult, food system transformation to better protect both people and planet is possible. But more empirical analysis and data is needed to take a true cost accounting of current food system costs and to determine the most effective policies for the path forward.
Sara Gustafson is a freelance communications consultant.