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Hidden costs of food: 

GS Paper 2

Topics Covered:  Food security related issues. 

 

Context: 

As per a UN Report: 

  • The price of the food we consume is about a third the actual cost, which includes hidden cost to the environment and human health
  • These hidden costs or ‘externalities’ that do not reflect in the market price of harmful foods makes sustainable and healthy food less affordable. 
  • Also, the omission of external costs destroys the environment, heightens food insecurity, health risks and festers social evils such as underpayment of labour and inequality. 

 

What are the “true costs of food”? 

From the use of petroleum-based fertilizer and pesticides to the effects of soil degradation, water pollution, climate change, and the obesity epidemic — to name just a few — our current food system has a significant number of hidden costs to the natural environment and human health. These costs are in addition to normal production costs, and together they make up “the true cost of food.” 

 

What then is the real cost of food today? 

The current externalities are estimated to be almost double ($19.8 trillion) the current total global food consumption ($9 trillion). 

These externalities accrue from $7 trillion (range 4-11) in environmental costs, $11 trillion (range 3-39) in costs to human life and $1 trillion (range 0.2-1.7) in economic costs. 

 

Is there any tool to correct it? 

To correct this, the value of food should be redefined. 

This can be done using a tool- True Cost Accounting (TCA). 

  • A TCA assessment typically starts by identifying the goal and scope of the assessment, establishing the unit of analysis and the system boundaries. Then various externalities are assessed (qualitatively or quantitatively), valued and aggregated. 

 

UN suggested that the entire spectrum of people involved can utilise the tool in the following way: 

  1. Governments can integrate TCA into local, national or regional policy and budgeting. 
  2. Businesses can use these structured assessments to minimize negative impacts and enhance positive benefits across value chains. 
  3. Financial institutions use TCA for reporting, impact investment and risk assessment and obtain assurance on their published impact statement. 
  4. Farmers can use TCA as a means to account for the costs and benefits of their agricultural practices. 
  5. Consumers can use TCA to become aware of the environmental and social externalities embedded in the food they buy. 

Sources: Down to Earth.