The True Cost of the Food We Eat
Imagine if the price of a hamburger included the costs of cleaning up pollution from concentrated animal feeding operations (CAFOs) or medicating people with heart disease; the hamburger might be bumped off the dollar menu if all those external costs of the beef industry were considered.
True cost accounting is a method of better aligning externalized costs of production with end-product values. Many organizations such as the Sustainable Food Trust (SustainableFoodTrust.org) The Story of Stuff Project (StoryOfStuff.org), and the Lexicon of Sustainability (LexiconOfSustainability.com) are working to account for the true costs of food and agriculture, which include social, health and environmental consequences. Accounting for these external costs can lead to policy recommendations for fixing market failures, which occur when constraints prevent a market system from operating efficiently.
Worldwide, it is estimated that 75 billion tons of soil are lost every year at a cost of approximately $400 billion per year, or about $70 per person, according to the United Nations Food and Agriculture Organization (FAO). Crop loss from overuse of pesticides is estimated to cost $520 million just in the United States. According to the World Economic Forum, the cumulative costs of cardiovascular disease, chronic respiratory disease, cancer and diabetes in low- and middle-income countries are likely to surpass $7 trillion by 2025, an average of nearly $500 billion per year. These externalized health and environmental costs of agriculture are not reflected in the market prices for food products, but eventually paid for by sick consumers and taxpayers, representing a massive market failure.
Other healthcare costs are associated with agricultural inputs and occupational hazards. Endocrine-disrupting hormones, found in many pesticides and plastics, cause a disease burden of up to $359 billion per year, or 2 percent of Europe’s gross domestic product. According to the U.S. Centers for Disease Control and Prevention, about 167 agricultural workers suffer a lost work time injury every day in the United States, with 5 percent of these injuries resulting in permanent impairment. Public Health Reports estimates that agricultural occupational injuries cost an estimated $4.57 billion in 1992.
Food waste also adds to the externalized costs of agriculture. According to the FAO, $700 billion in natural resources, including $172 billion of wasted water, $42 billion of cleared forest and $429 billion of greenhouse gases are wasted every year when edible food is thrown away. The FAO estimates that the world wastes a third of the food produced annually.
These market failures can be corrected through the creation of more accurate economic models and policy recommendations. It’s possible to rein in external costs and reduce the harm to our health and environment without abandoning farmers that are already struggling to make ends meet. Diversified systems reduce the yield gap between organic and conventional systems and restore valuable ecosystem services, reducing farmers’ input costs and offsetting externalities. According to one study, the global net value of ecosystem services could exceed fertilizer and pesticide costs even if used on only 10 percent of the global arable land area.
Agriculture can become the solution to the problems of climate change, malnutrition and diet-related disease, rather than contributing to them. Agriculture is unique in that it utilizes natural capital—land, water and ecosystem services—at the front end, and also influences its future viability through its production practices. By investing in more sustainable production practices instead of borrowing from future natural capital, agriculture can actually improve environmental outcomes through carbon capture, soil building and sustainable water management. A robust vision of true cost accounting therefore aims not only to reduce negative externalities, but also to compensate farmers for social benefits and positive externalities that result from food production.
Danielle Nierenberg is president of Food Tank (FoodTank.com) and Emily Nink is a Food Tank research assistant.