Regional Analysis Of Hidden Costs Of The Food System Economic Commission Current Trends And Food System Transformation Pathways To 2050: India Key Figures

Generated Summary

This document analyzes the hidden costs of India’s food system and explores the potential for transformation to 2050. The study, conducted by the Food System Economics Commission, examines current trends and pathways to reduce the economic burden associated with food production and consumption. The research employs a cost-benefit analysis, assessing the impact of various factors, including greenhouse gas emissions, nitrogen pollution, and dietary health, on India’s economy. The Food System Transformation (FST) pathway, which involves fundamental changes in food production and consumption, is evaluated to determine its potential in mitigating these hidden costs. The methodology includes the use of the IPCC shared socio-economic pathway 2 (SSP2) for economic and population growth forecasts and a land-use partial equilibrium model. The study aims to quantify the benefits of transitioning to a more sustainable and healthy food system, offering insights into policy implications and potential economic gains for India.

Key Findings & Statistics

• The current hidden costs in India, including those from greenhouse gas emissions, nitrogen pollution, and habitat losses, are estimated at 1.5 trillion USD 2020 PPP annually (Figure 1S).
• Correcting for the purchasing power denied due to these hidden costs, India’s GDP would be 16.1% lower (1.5 trillion USD 2020 PPP represents 16.1% of India’s 2020 GDP) (page 4).
• The Food System Transformation (FST) pathway could reduce accumulated Indian food system hidden costs over 2020 to 2050 by 26% (Figure 1S top panel).
• The avoided hidden costs amount to 296 billion USD PPP per year on average (Figure 2S bottom panel and Figure 3S middle panel).
• By 2050, annual hidden costs could be reduced by 57% under FST compared to the baseline scenario (page 4).
• The avoided costs from implementing FST are still increasing in 2050 and likely continue to grow for some decades after 2050 (page 4).
• Productivity improvements from healthier diets could provide roughly 2/3rds of the avoided costs (195 billion USD 2020 PPP per year) (Figure 3S middle panel).
• Avoided damages from GHG emissions, reactive nitrogen surplus, and habitat losses contribute equally to average annual avoided hidden costs (Figure 3S middle panel).
• Under FST, the 95th percentile of production hidden costs reduces from 440 billion USD PPP in 2050 under the baseline scenario to 133 billion USD 2020 PPP (Figure 6S left and middle panel).
• The avoided cropland expansion under FST occurs in earlier decades, while savings from mitigating nitrogen surplus increase and become the main category of savings by 2050 (Figure 3S right panel).
• On the consumption side, transition to healthy diets is introduced linearly over the period, consequently labor productivity improvements increase over the period from a proportion of 58% of avoided costs in 2030 (142 billion USD 2020 PPP) to 77% in 2050 (372 billion USD 2020 PPP) (Figure 3S right panel).
• By 2040, benefits from change to healthy and sustainable diets increase, providing increasing confidence that avoided costs will exceed 320 billion USD PPP per year by 2050 (Figure 1S bottom panel and Figure 2S third from bottom panel).
• Avoided damages from GHG emissions (34 billion USD 2020 PPP), reactive nitrogen surplus (34 billion USD 2020 PPP), and habitat losses (31 billion USD 2020 PPP), make equal contributions to average annual avoided hidden costs (Figure 3S middle panel).
• The largest global environmental benefits under FST to 2050 come from South and Latin America, and changing agricultural practices and avoiding deforestation in Sub-Saharan Africa as production expands and intensifies.
• Poverty decreases steadily over the period in line with economic growth and continued transition of the Indian economy away from an agricultural base.
• Economic risk from uncertain costs of GHG emissions, nitrogen surplus and lost ecosystem services decrease under FST.
• The avoided hidden costs from implementing FST are still increasing in 2050 and likely continue to grow for some decades after 2050.

Other Important Findings

• The study identifies that food production and consumption in the current year create costs that will be borne in the near- and long-term future.
• The Food System Transformation (FST) pathway assumes fundamental changes in food production and food consumption between 2020 and 2050.
• India has a high share of land surface and laborers utilized for agriculture, and incentives such as input subsidies. FST measures for agriculture such as habitat sparing for biodiversity intactness, payment of nitrogen mitigation measures, payment for carbon sequestration, and changing labour input prices based on minimal wages, produces large flux in land-use over the next decade.
• The FSEC hidden cost analysis includes large uncertainty in environmental prices for GHG pollution, N pollution, and lost or returning ecosystem services.
• Combining the flux in land-use with uncertainty in the marginal costs such as carbon sequestration versus livestock methane production, produces large uncertainty ranges for the avoided hidden costs over the period 2020-2030 where most restructuring of land-use occurs (Figure 1S bottom panel).
• The main pathways to damages from reactive nitrogen surplus include lost productivity from air pollution due to volatilized ammonia from synthetic fertilizer application and manure and damage to ecosystems from nitrate run-off from cropland and pasture.
• Contributions to avoided costs are not constant over the period 2020 to 2050.
• Poverty decreases steadily over the period in line with economic growth and continued transition of the Indian economy away from an agricultural base.
• Economic and population growth under IPCC shared socio-economic pathway 2 (SSP2) was used.
• India and China avoiding a western-style trajectory of obesity and overconsumption of sugars, salt, and processed foods is one of the main global economic benefits of FST (Figure 5S).
• Nitrogen surplus mitigation and avoided cropland expansion in India and China are also major global benefits under FST.

Limitations Noted in the Document

• The FSEC hidden cost analysis includes large uncertainty in environmental prices for GHG pollution, N pollution, and lost or returning ecosystem services.
• Combining the flux in land-use with uncertainty in the marginal costs such as carbon sequestration versus livestock methane production, produces large uncertainty ranges for the avoided hidden costs over the period 2020-2030.
• Economic risk from uncertain costs of GHG emissions, nitrogen surplus and lost ecosystem services decrease under FST.
• The economic and demographic growth forecast used for the FSEC analysis needs to be long-term to apply appropriate discounting to the hidden costs.
• The conclusions that FST reduces hidden costs by 2050, and that annual hidden cost reduction by 2050 exceeds 320 billion USD 2020 PPP, are robust to the modelled uncertainty in the marginal costs of GHG, N emissions, and ecosystem services.

Conclusion

The study underscores the significant economic burden of hidden costs associated with India’s food system, emphasizing the need for transformative changes. The research reveals that these costs, stemming from factors like greenhouse gas emissions, nitrogen pollution, and unhealthy diets, currently amount to a substantial portion of India’s GDP. The Food System Transformation (FST) pathway is presented as a viable solution, promising substantial reductions in these hidden costs through fundamental shifts in food production and consumption practices. The analysis highlights that by implementing FST, India could significantly decrease its accumulated food system hidden costs by 2050. The measures within the FST framework include changes in agricultural practices, such as habitat sparing and nitrogen mitigation, as well as improvements in dietary habits. A key finding is the increasing confidence in the benefits of FST over time, with projections indicating that the avoided costs will continue to grow. The study emphasizes the importance of addressing environmental impacts and promoting healthy diets to achieve these savings. Moreover, the research notes that poverty reduction is expected to occur in tandem with economic growth, further supporting the benefits of the FST pathway. In conclusion, the document provides a comprehensive assessment of India’s food system challenges and offers a roadmap for sustainable and economically beneficial transformation. The findings suggest that by adopting the FST pathway, India can not only mitigate the hidden costs associated with its current food system but also create a more resilient and prosperous future. The study’s insights have implications for policy-making, advocating for the implementation of measures that promote environmental sustainability, improve public health, and foster economic development. The analysis shows how a transition to more sustainable food systems can lead to both economic and environmental benefits, setting the stage for future research and policy interventions.