Hidden costs of agrifood systems

Lord, S. ;

Hidden costs of agrifood systems

An update to the methodology for the State of Food and Agriculture 2024

Year of publication 2024

Place of publication Rome, Italy ;

Pages 56 p.

Author Lord, S. ;

Publisher FAO ;

Product type Booklet

ISBN 978-92-5-139297-3

Full item page

To cite or share https://doi.org/10.4060/cd3007en

Synopsis (short abstract) The State of Food and Agriculture 2024 report by FAO refines the global estimates of hidden agrifood system costs across 156 countries, introducing a typology of six agrifood system types rather than geographic classifications. Building on the 2023 report, this update incorporates data from 2020 and 2021, including greenhouse gas and nitrogen emissions, poverty indicators, and land-use change. By focusing on updated FAO and UN sources, the 2024 report provides a more unified basis for assessing costs.Despite methodological updates, the economic risks from agrifood systems remain consistent with the 2023 findings. Low-income countries bear the highest relative costs – over 30 percent of their GDP – while costs decrease with income. The report cautions that rising hidden costs from agrifood systems will impede economic growth unless addressed, as agrifood system impacts, such as nitrogen pollution and productivity losses from unhealthy diets, challenge global sustainability. Policymakers are encouraged to address these risks with tailored policies to protect growth, underscoring that reducing agrifood sector impacts differs fundamentally from the decarbonization pathway demanded of other sectors.

Background paper to the FAO flagship The State of Food and Agriculture 2024 – Value-driven transformation of agrifood systems

Cite this content as:

Lord, S. 2024. Hidden costs of agrifood systems – An update to the methodology for the State of Food and Agriculture 2024. Rome, FAO.

https://doi.org/10.4060/cd3007en

Language English

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Agrifood systems are essential for providing nourishment, sustaining livelihoods and shaping cultural identities. However, they also generate significant environmental, social and health hidden costs that are not reflected in market prices. These costs stem from unsustainable practices that contribute to climate change, natural resource degradation and the unaffordability of healthy diets. The 2023 and 2024 editions of The State of Food and Agriculture apply a true cost accounting (TCA) approach to estimate these costs, revealing that global hidden costs likely exceeded USD 10 trillion (PPP) in 2020. This report presents the 2024 TCA estimates for 12 Small Island Developing States (SIDS) – a diverse group of countries in terms of geography and income levels, facing unique vulnerabilities due to their size, remoteness and exposure to environmental shocks. The national-level estimates presented here offer a foundation for more in-depth and targeted assessments, supporting stakeholders in identifying priorities and guiding action towards more sustainable agrifood systems.
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Agrifood systems are invaluable to society. However, they also contribute to climate change and natural resource degradation while failing to provide healthy diets to all. Many of these impacts are not included in market prices and are thus hidden. True cost accounting (TCA) allows estimating the hidden costs and benefits of agrifood systems, providing decision-makers with the evidence needed for their transformation. A national-level TCA assessment for 154 countries reveals that global quantified hidden costs from agrifood systems are highly likely to exceed 10 trillion dollars, revealing the urgent need to factor these costs into decision-making. These new estimates are a first step in raising awareness and should be followed by more targeted TCA assessments.
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This background paper to The State of Food and Agriculture 2023 reviews the methods used, as well as the data required, to estimate the hidden environmental, social and health costs associated with agrifood systems. The studies analysed are based on the true cost accounting approach, which can facilitate improved decision-making by policymakers, businesses, farmers, investors and consumers. The reviewed studies demonstrate that hidden costs of agrifood systems are considerable, and that action is needed at global, national and local levels. To apply true cost accounting at the country level, the methods developed must be downscaled and the data limitations overcome. This review goes through each cost category – environmental, social and health – and proposes approaches to deal with them, with a focus on country-level estimates and analysis, especially in data-scarce countries. Where data are not available or time is limited, methods combining secondary data are suggested. In some cases, the suggestion is to collaborate with research centres. The paper further argues that, when addressing hidden costs in agrifood systems, trade-offs may arise, which may require the use of more complex tools, such as partial and general equilibrium models, to analyse their impacts on different areas. In general, the extent of the compromise will be minimized if there are at least as many policy instruments as there are objectives. For example, if a country seeks to restore fish stocks and address rural poverty, restricting catch alone could increase poverty in the artisanal fishing community. Adding income support, however, could allow both objectives to be met.