Comparative Hidden Costs Of The Food System Economic Commission Current Trends And Food System Transformation Pathways To 2050

Abstract

Based on hidden costs from greenhouse gas (GHG) emissions, nitrogen (N) pollution, lost and returned habitat from land-use change, poverty, and productivity losses from obesity, undernourishment, and noncommunicable diseases from dietary intake, the Food System Economic Commission (FSEC) food system transformation pathway started in 2020 would provide a reduction in hidden costs worth, on average, 3.5 trillion of GDP PPP in present value 2020 USD PPP (Purchasing Power Parity) per year from 2020 to 2050 compared to a current trends food system pathway. The FSEC food system transformation (FST) pathway and the current trends (CT) pathway assume a similar economic development outside the food system based on the IPCC Shared Socioeconomic Pathway 2 (SSP2). If economic development follows SSP1 for the food system transformation pathway and economic development for the current trends pathway follows SSP2, then the comparative hidden cost reduction is worth an average of 5.1 trillion of GDP PPP in 2020 USD PPP per year from 2020 to 2050.

Generated Summary

This study, a background report for the Food System Economic Commission (FSEC), investigates the potential to reduce hidden costs within the food system through a food system transformation (FST) pathway. It contrasts this pathway with a current trends (CT) pathway, both modeled in collaboration with the Potsdam Institute for Climate Research (PIK). The research utilizes the MAgPIE partial equilibrium model to assess changes in greenhouse gas emissions, nitrogen pollution, land use, and poverty headcounts across 153 countries. Additionally, the study incorporates the Environmental Change Institute (ECI) model to calculate years of life lost (YLL) due to dietary intake. The core objective is to compare hidden costs, considering environmental, health, and social impacts, under the FST and CT scenarios, with particular attention to the potential for reducing costs associated with food production and consumption. The study acknowledges that the FST pathway is not a cost-benefit analysis, but rather an assessment of the potential reduction in hidden costs, and calls for additional analyses to compare the costs of the transition with the benefits of the FST pathway.

Key Findings & Statistics

• The FSEC food system transformation pathway, initiated in 2020, is projected to reduce hidden costs by an average of 3.5 trillion USD PPP per year from 2020 to 2050, compared to the current trends pathway.
• Under the FST China reduces potential productivity losses from obesity and noncommunicable disease by 30% between 2020 and 2050, worth 300 billion USD PPP per year, and also expected external costs and risks of nitrogen pollution by 30% under FST over 2020 to 2050, worth 100 billion USD PPP to GDP PPP per year.
• In Brazil, the FST is expected to transition from nearly 300 billion USD PPP per year in GHG emissions, N pollution, and habitat loss damages to 200 billion of avoided damages through carbon sequestration and ecosystem services in 2050.
• The 5th to 95th percentiles for FST net environmental costs in 2050 range from 1 trillion USD PPP in benefits to 0.5 trillion USD PPP in costs.
• Sub-Saharan Africa (SSA) faces a triple economic burden of 540 billion USD PPP by 2050 under current trends.
• Environmental hidden costs in SSA account for 240 billion USD PPP, while productivity losses from dietary intake account for 190 billion USD PPP.
• The FST in SSA reduces costs of dietary intake by half and eliminates environmental costs.
• The global hidden cost reduction under FST is not uniform over the period 2020 to 2050, with the largest acceleration in hidden cost reduction in the early period.
• The total reduction of ~104 trillion USD PPP in hidden costs under FST from 2020 to 2050, at an average of ~3.5 trillion USD PPP per annum.
• The average annual hidden cost reduction under FST over 2020 to 2050 is estimated to have less than a 5% chance of being less than 2 trillion USD PPP and a 5% chance of exceeding 5.7 trillion USD PPP.

Other Important Findings

• The study highlights that the primary reason for a lack of accounting for these costs is that they are generated by present food system activities that contribute value add to the present year’s national accounts, but the costs are borne beyond national borders or distributed into the future.
• The study incorporates the shared socio-economic pathway (SSP) 2 for the current trends pathway and considers both SSP1 and SSP2 for the food system transformation pathway.
• The research identifies a right skew in the hidden cost distribution of the current trends pathway in 2020 and 2050, which shifts to a left skew in the food system transformation scenario, indicating a change in economic risk.
• The reduction from “environmental” hidden costs associated to production (reduction in greenhouse gas (GHG) and reactive nitrogen (N) emissions, reduction in lost habitat from land use changes and increase in returned habitat from abandoned agricultural land) and “health” hidden costs associated to undernourishment or over-consumption (reduction in years of life lost (YLL)).
• The FST in 2030, by reducing land-use and nitrogen run-off costs, translates into a right skew in the hidden cost distribution in 2020, 2030, and 2050 towards a left skew towards lower hidden costs.
• The costs are called hidden food system costs by the Food System Economic Commission (FSEC).

Limitations Noted in the Document

• The study acknowledges limitations in estimating marginal costs of GHG emissions, ecosystem services loss, and N pollution.
• Uncertainty in YLL costs were not available, and income shortfall from the World Bank poverty line showed limited uncertainty in variation in GDP PPP pass through rates.
• The estimates are not full risks in hidden cost and hidden cost reduction since the marginal damages from burden of disease and poverty are estimated with limited uncertainty and quantity estimates were not modelled with uncertainty.
• The most uncertain cost category is the value of returned ecosystem services from abandoned cropland and pasture.
• The assumption on substitutability of goods and services provided by ecosystems and produced capital is therefore “weak”.
• GHG social cost modelling relies on the 2020 update to the US EPA IGWG-SCGHG simulations.
• Damages from reduced environmental flows from blue water consumption are not included.
• Nitrogen cost modelling involves benefit transfer from the European Nitrogen assessment.
• Valuation in the ESVD database does not use a consistent damages methodology.
• Moderate poverty does not incorporate all economic consequences of income inequality.

Conclusion

The study concludes that the food system transformation (FST) pathway has the potential to significantly reduce hidden costs associated with the food system. The FST pathway, by incorporating 15 Food System Measures, presents an average annual hidden cost reduction of 3.5 trillion USD 2020 PPP per year between 2020 and 2050 compared to current trends. The analysis emphasizes the potential for improvements in environmental, health, and social outcomes under the FST pathway. The research indicates a shift in economic risk, with the FST reducing the likelihood of high hidden costs and increasing the probability of positive environmental benefits. A significant finding is the potential for environmental cost neutrality by 2050, globally, with the FST, with the greatest impacts coming from the reduction of environmental costs such as reduced GHG emissions and nitrogen pollution. The study highlights the importance of considering both the costs and benefits of transitioning to the FST pathway. The study underscores the role of the FSEC’s vision in achieving a more sustainable and equitable food system. In particular, the study points out the importance of productivity gains and avoided burden of disease through dietary change, with China and India highlighted for potential gains. In contrast, Sub-Saharan Africa faces a triple economic burden of poverty, malnutrition, and environmental damages under current trends, which are avoided under FST. The study’s insights offer support for continued research and policy development related to food systems. The key takeaway is the potential for substantial economic, environmental, and social gains through the adoption of food system transformation strategies.