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Supporting policy with scientific evidence

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Publication | 2021

The True Cost and True Price of Food

Ensuring sustainable food systems requires vastly reducing its environmental and health costs while making healthy and sustainable food affordable to all. One of the central problems of current food systems is that many of the costs of harmful foods are externalized, i.e. are not reflected in market prices. At the same time, the benefits of healthful foods are not appreciated. Due to externalities, sustainable and healthy food is often less affordable to consumers and profitable for businesses than unsustainable and unhealthy food. Externalities and other market failures lead to unintended consequences for present and future generations, destroying nature and perpetuating social injustices such as underpay for workers, food insecurity, illness, premature death and other harms. We urgently need to address the fundamental causes of these problems.

This brief sets out the results of an analysis to determine the current cost of externalities in the food system and the potential impact of a shift in diets to more healthy and sustainable production and consumption patterns. The current externalities were estimated to be almost double (19.8 trillion USD) the current total global food consumption (9 trillion USD). These externalities accrue from seven trillion USD (range 4-11) in environmental costs, 11 trillion USD (range 3-39) in costs to human life and one trillion USD (range 0.2-1.7) in economic costs. This means that food is roughly a third cheaper than it would be if these externalities were included in market pricing.

More studies are needed to quantify the costs and benefits of food systems to support a global shift to more sustainable and healthy diets. However, the evidence presented in this brief points to the urgent need for a system reset to account for these ‘hidden costs in food systems and calls for bold actions to redefine food prices and the incentives for producing and consuming healthier and more sustainable diets.

The first step to correct for these ‘hidden costs’ is to redefine the value of food through True Cost Accounting (TCA) to address externalities and other market failures. TCA reveals the true value of food by making the benefits of affordable and healthy food visible and revealing the costs of damage to the environment and human health.

The second corrective step is true pricing: incorporating externalities in prices to align market incentives with social values. Appropriate safety nets to boost consumer purchasing power and the enforcement of rights and regulations should also be part of true pricing to ensure that affordable and healthy food is accessible to all.

Such actions will conserve the environment and simultaneously meet fundamental universal human rights and accelerate progress towards achieving development goals.