The State of Food and Agriculture 2023

Chapter 2 Uncovering the Hidden Costs of Agrifood Systems from National to Global Scale


Sustainability in agrifood systems is not simple to achieve. Changing the course of agrifood systems first requires a background understanding of the current state of agrifood systems at global, regional and national levels. Although it provides only a partial picture, this stocktaking exercise is a crucial starting point for addressing some of the most important challenges in our systems. This chapter attempts to advance this first phase, presenting preliminary national-level quantification of the environmental, social and health hidden costs of agrifood systems for 154 countries. Because of the preliminary nature of these results, considerable uncertainty persists with regard to estimates, so some categories of hidden costs – such as pesticide exposure, land degradation, AMR and the overexploitation of biological resources – have not been included, amid a lack of global databases reporting these dimensions at country level. The 2024 edition of The State of Food and Agriculture will attempt to improve this initial preliminary quantification and analysis based on country-specific information and input from in-country stakeholders and experts.

Yet, despite some hidden costs not being included in the analysis, the preliminary estimates of the global quantified hidden costs amount to 12.7 trillion 2020 PPP dollars, equivalent to almost 10 percent of global GDP. Of these, 73 percent were associated with unhealthy dietary patterns that led to productivity losses; 20 percent with environmental costs, mostly due to nitrogen and GHG emissions; and 4 percent with social hidden costs, driven by undernourishment and poverty in agrifood systems. The quantified hidden costs associated with unhealthy diets become increasingly important as the level of income increases. In contrast, addressing poverty and undernourishment remains a priority in low-income countries.

The finding that unhealthy dietary patterns are the main contributor to global hidden costs should not, however, divert attention from the environmental and social hidden costs of agrifood systems. Rather, it emphasizes the importance of repurposing current public support and food environments towards the production and consumption of healthy diets, with positive impacts on the environment. Past evidence has shown that the adoption of healthier and more sustainable dietary patterns can reduce costs related to climate change by up to 76 percent.19 Still, in low-income countries, the priority remains reducing poverty and undernourishment.

To decide on the most appropriate policies and investments, however, cost–benefit and scenario analyses are needed in addition to further knowledge on the abatement costs of the different strategies (see Chapter 3). For instance, diets often come down to personal choice and preference, and can be more difficult to regulate or shift; consequently, cost-effective climate change mitigation strategies may be more attractive.

This chapter further introduces three intensity indicators to measure the relative weight of quantified hidden costs across different dimensions and countries. These estimates and, in particular, the indicators can help identify entry points for prioritizing a more targeted assessment to guide policy actions and investments to reduce or eliminate hidden costs.

Overall, the results suggest that the quantified hidden costs associated with agrifood systems are substantial for all countries, even after accounting for uncertainty. They reveal the magnitude of transformation required and identify the potential economic risks associated with current practices, but do not consider the net gain or loss that countries might experience by transitioning to alternative agrifood systems. They also do not measure the cost of mitigating or preventing the different challenges, nor do they express whether it is feasible to do so. Rather, they indicate the relative contributions of various activities or pollutants and highlight areas needing further investigation in a targeted assessment and possible intervention by both public and private entities.

Consequently, these estimates can also be used to inform ongoing agrifood systems assessments and consultations that are outside the scope of TCA. Such initiatives consider interactions across sectors and capitals and can help spark national dialogue and determine relevant entry points for transformative action. However, they do not uncover the hidden costs and benefits that hinder the performance of systems. An example is FAO’s Food Systems Assessment project, in partnership with the European Union and the International Cooperation Centre of Agricultural Research for Development (CIRAD), which has advanced large-scale assessments and consultations on food systems in more than 50 countries as a first step towards transforming them.24 The evidence and knowledge proposed by the first phase of this two-phase approach – and gathered for this report – can be a useful complementary tool for projects such as the Food Systems Assessment, to better identify the key challenges faced by agrifood systems and to define the policies and investments needed.

The next step in this two-phase approach is to compare the costs related to transforming our current systems (termed “abatement costs”) with the reduced hidden costs realized from such a transformation. This is the crux of decision-making processes: a transformation to alternative agrifood systems will only be feasible (and desirable) if the cost of making that change is perceived to be less than the value of the reduced hidden costs realized from the transformation. The decision processes to inform transformational options to address hidden costs are at the centre of the next chapter that will lead to the fourth and final chapter, which examines the levers that can be activated to effect change.

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