Scenario analysis, including simulations of alternative futures, is a fundamental tool in informing policy actions. An increasing number of global scenarios using economic models are proposing paths forward to agrifood systems transformation.4, 6, 28 These scenarios can help navigate the complexity of the transformation required, which involves multiple and interacting policy levers and trade-offs. Nonetheless, scenarios include multiple assumptions and can only provide a high level understanding of potential pathways towards the desired outcomes. They need to be complemented with national-level assessments based on stakeholder consultations to identify effective levers for progress towards the desired outcomes. Nevertheless, scenario-building exercises are a useful policy tool.29
Scenarios for addressing hidden costs of agrifood systems
The Global Policy Report of the Food System Economics Commission (FSEC)4 uses an integrated modelling framework to compare the hidden costs of agrifood systems under current pathways with those under a transformation pathway, including the most comprehensive set of levers modelled to date (19 selected levers) in a single comprehensive framework.4, 30 The report finds that a global transformation pathway to address these quantified hidden costs is possible and would bring net benefits globally.
The impacts on environmental, social and health hidden costs show that the transformation pathway modelled has the potential to reduce global hidden costs by at least 5 trillion 2020 PPP dollars annually. The detailed results indicate that changes in dietary patterns drive 70 percent of this decrease across all dimensions – environmental, social and health impacts – again underlining the importance of clearly linking impacts to pathways where interventions need to happen (Box 3).
The annual cost of transforming agrifood systems globally is estimated to be between 200 billion and 500 billion dollars a year to 2050.31 Compared with the global hidden costs quantified at more than 10 trillion dollars in 2020, this translates into significant global net benefits.
The FSEC transformation pathway, however, is based on bold assumptions on the feasibility of implementing levers for agrifood systems transformation. Two key examples are the assumptions of a global redistribution system to reallocate financial resources between countries and a smooth dietary transition to the EAT-Lancet Commission’s diet everywhere.32, 33 As there is no global redistribution system, low-income countries will not be able to afford the envisioned transformation, as the cost of the social safety nets sorely needed in these countries is the highest of all transformation costs.4 Moreover, and notwithstanding the nutritional and environmental challenges associated with the EAT-Lancet diet, the smooth dietary transitions are assumed as exogenous in the FSEC analysis without estimating their costs given they are difficult to engineer due to current market, institutional and distributional failures.
A starting point for each country, therefore, is to prioritize existing commitments and implement those levers that are within reach in the confines of their fiscal and political spaces. This process can be informed using hidden costs and the agrifood systems typology.
Repurposing government support for food and agriculture
Given the pressure on public budgets and the multitude of national commitments, budget-neutral policy options to transform agrifood systems can, in principle, be considered “low-hanging fruit”. Total public resources allocated to agricultural support amounted to around USD 630 billion per year in 2013–2018, increasing to USD 817 billion per year in 2019–2021.34, 35 This makes the reform of public policies leading to this significant expenditure an important lever in the discourse on sustainable agrifood systems transformation.3, 4, 36, 37 Most of the discourse on repurposing concurs that while it may be effective in countries with a large amount of current agricultural support, it is only of limited use in countries with little or no support. Nevertheless, a synthesis of existing evidence on repurposing agricultural support to transform agrifood systems can highlight opportunities for and challenges to charting potential pathways for governments that may want to use this lever.
As shown in Figure 9, the fiscal space available for repurposing current agricultural support is very limited in most agrifood systems categories. In countries and territories with enough fiscal resources (falling within industrial and formalizing agrifood systems), repurposing agricultural support has the potential to reduce health and environmental hidden costs. However, the immediate reduction would be limited, as the behavioural and technological changes needed to decrease the dietary risks and environmental impacts take a long time and the nascent literature on what works and why is still building evidence to guide effective policy design.
Table A3 in Annex 3 summarizes a selection of prominent studies investigating the impacts of removing or repurposing agricultural support for various agrifood systems transformation objectives. A publication by FAO, the United Nations Development Programme (UNDP) and UNEP increased the visibility of this important lever in global agrifood systems transformation in the run-up to the United Nations Food Systems Summit.38 It documents the potential positive and negative impacts of agricultural support, as well as the trade-offs between environmental, social and health outcomes that a removal of all support would create globally and regionally. By establishing the inevitable need to redirect scarce public resources to nature-positive, low-emission and environmentally sustainable production and consumption, this report places this lever high on the discourse on agrifood systems transformation. Glauber and Laborde (2023)36 is the most detailed study exploring repurposing scenarios, including the redirection of fiscal subsidies and border support to consumers, producers or both. Although it does not assess hidden costs, it indicates that carefully targeted subsidies that improve the affordability of healthy diets, equity and climate outcomes would be expected to decrease health hidden costs significantly, as well as to change environmental and social hidden costs within a TCA approach. Heterogeneities across regions and agrifood systems categories are inevitable due to significant differences in fiscal, governance and technological capacity, which need to be considered when moving from global visions to national actions.
Springmann and Freund (2022)37 assess the impacts of repurposing agricultural subsidies towards producing healthier and more sustainable food groups in terms of GHGs and NCDs. The study finds that agricultural subsidy reform could lead to improvements in health, environment and economic welfare, though existing trade-offs need to be managed. Moreover, the scenario that best achieves this rests on the existence of a compensation system for countries without enough subsidies to ensure global inclusion. This study does not assess impacts on social indicators or combine all impact quantities leading to hidden costs to facilitate comparison.
While the aforementioned FSEC transformation pathway does not include the repurposing of agricultural support, a background paper for the report explores the potential for repurposing and reallocating support to agrifood systems globally.39 The study investigates impacts on production, the cost of a healthy diet, poverty, undernourishment, prices and GDP, though it does not consider health impacts or quantify the implications for hidden costs. Similarly to the other studies mentioned above, it emphasizes the importance of providing adequate financial resources to the Global South to enable innovation, technology transfer and adoption during the transition.
Only Lord (2022)40 calculates the impacts of removal scenarios on the hidden costs of agrifood systems.40 This study explores the impact on environmental and social hidden costs of removing all forms of agricultural support and concludes that this would lead to increased global hidden costs of about 460 billion 2020 PPP dollars. This study, however, does not measure the impact on health hidden costs due to a lack of data linking changes in food availability to food intake. This edition of The State of Food and Agriculture addresses this missing link in a case study, by connecting food availability in a country to dietary risks leading to NCDs that drive DALYs used to quantify health hidden costs (see next section). Future studies on global agrifood systems transformation would benefit from combining such a breakdown with a TCA approach to assess the impacts of various levers and address the remaining knowledge gaps.
Providing consumers with fiscal incentives to encourage dietary changes towards healthier and more sustainably produced foods is an important and effective lever,41–43 but these can be politically controversial when added as new measures increasing the fiscal burden.44–46 Another promising lever that would not increase the fiscal burden, therefore, is to reform the current system of taxation to complement the repurposing of agricultural support. A recent study on the impacts of reforming the existing value added tax (VAT) mechanisms in Europe – considering that VAT accounts for over one-fifth of public revenues in the European Union47 – finds that aligning VAT rates with health and environmental objectives could decrease food-related GHG emissions, reduce the dietary risks associated with NCDs and increase tax revenues, while leaving the cost of a healthy food basket mostly unchanged.48 The modelled health improvements (that is, lower mortality and disease burden attributable to dietary and weight-related risk factors) are linked to cutting VAT rates on fruits and vegetables, whereas most environmental and revenue benefits are driven by increased VAT rates on meat and dairy. Using taxes in a way that does not discriminate among who bears the costs can inevitably be regressive (that is, have a disproportionate impact on poorer consumers);49, 50 therefore, policy packages including such levers need to combine them with other health-related programmes to prevent disproportionate impacts on low-income households and children.51
The scenario analyses summarized above, by definition, include multiple assumptions about the way in which policies are made, implemented and adapted and how they lead to impacts. Even if a scenario is deemed to be win–win in such models, it may not be implemented because of multiple political economy constraints. Therefore, a deeper understanding of the reasons why policies cannot be implemented or may face resistance is needed to assess options for reform and their political feasibility.52 The trade-offs and synergies generated by various scenarios quantified using TCA need to be assessed with relevant political economy dynamics in mind.53 Such an approach would further underline the importance of international cooperation and transnational constituencies in implementing the repurposing scenarios and the requisite complementary initiatives for an inclusive global transformation.52
