Platform for African – European Partnership in Agricultural Research for Development

Friday, February 2, 2024

The Economics of the Food System Transformation

FSEC (2024) The Economics of the Food System Transformation Global Policy Report. The FoodSystem Economics Commission, 117 pages

  • The economic and planetary case for transforming our food systems is compelling. But negotiating change across a multitude of diverse stakeholders with unequal power and varying prospects from the transformation is an enormous challenge.
  • The report confronts this challenge head on, highlighting practical ways to dismantle barriers to change and develop achievable transformation strategies.
  • Evidence shows that embracing equity and inclusion is key to making a transformation politically viable and thus essential for success. The report summarizes the findings of a four-year investigation by the Food System Economics Commission (FSEC), an independent commission expressly created to assess options for comprehensive food system transformation. FSEC findings are based on rigorous economic modeling, in-depth literature reviews, and case studies. All background research is available at foodsystemeconomics.org
  • Transforming food systems could create multi-trillion dollars of economic benefits every year
  • In the report, the scientists provide the most comprehensive modelling of the impacts of two possible futures for the global food system to date: our `Current Trends’ pathway, and the `Food System Transformation’ pathway.

In its `Current Trends´ (CT) pathway the report outlines what will happen by 2050, even if policymakers make good on all current commitments:
  • food insecurity will still leave 640 million people (including 121 million children) underweight in some parts of the world, while obesity will increase by 70% globally, reaching 1.5 billion in 2050, or 15 percent of the expected global population.
  • Food systems will continue to drive a third of global greenhouse gas emissions, which will contribute to 2.7 degrees of warming by the end of the century compared to pre-industrial periods.
  • Per capita food waste would increase by 16 percent compared to today, reaching 76 kg of dry matter per capita in 2050.
  • Food production will become increasingly vulnerable to climate change, with the likelihood of extreme events dramatically increasing.
  • While Latin American countries may successfully fulfil their NDCs on deforestation, Sub-Saharan Africa and Southeast Asia are likely to continue losing their primary forests and associated biodiversity. Deforestation will erode a further 71 million hectares of natural forests between 2020 and 2050, an area equivalent to 1.3 times the size of France, with far-reaching implications for carbon emissions and biodiversity loss. (page 39)
  • Nitrogen surpluses will increase from 245 Mt N a year to about 300 Mt N in 2050. As more nitrogen continues to leach into waterways and natural areas, it will undermine public health and exacerbate biodiversity loss. (page 39)
  • The median estimate of global surface temperature under CT rises to 2.7°C by the end of the century, with a 30 percent likelihood of exceeding 3°C. Under Current Trends, global GHG emissions from agriculture, forestry, and other land use (AFOLU) will drop by 16 percent from 2020 to 2050. Implicit in this reduction is  that countries implement the mitigation measures necessary to meet their current NDCs within the UNFCCC framework. However, the scale of expected non-food related GHG emissions means this progress in reducing AFOLU emissions does not prevent an overall failure to address the climate crisis. (page 39)
FSEC also finds that the food system can instead be a significant contributor to economies, and drive solutions to health and climate challenges. In the `Food System Transformation` (FST) pathway, economists show that:
  • by 2050 better policies and practices could lead to undernutrition being eradicated, and cumulatively 174 million lives saved from premature death due to diet-related chronic disease.
  • Food systems could become net carbon sinks by 2040, helping to limit global warming to below 1.5 degrees by the end of the century, protecting an additional 1.4 billion hectares of land, almost halving nitrogen surplus from agriculture, and reversing biodiversity loss.
  • Furthermore, 400 million farm workers across the globe could enjoy a sufficient income.
  • Far-reaching changes in factors external to food systems, including a successful phase-out of fossil fuels, lower-than-expected population growth, and a thriving, equitable global economy, could limit peak warming to slightly above 1.7°C. But only by pursuing the FST as well does it become possible to limit peak global mean temperature to just above 1.5°C. (page 41)

Extracts of the report

Market concentration in the agri-food industry has increased across most segments and geographies due to mergers and acquisitions combined with the spread of modern food retailing – the “supermarket revolution”. While concentration does not necessarily enable a few large companies to manipulate prices at the expense of consumers, big market players are seen to use their financial power to exert significant influence on food systems and on policy decisions affecting them. For example, big players can push back against  government regulation and advocate self-regulation instead (page 23)

The distributional effects of trade on inclusion vary according to the impact of trade on sources 
of incomes, on the consumption and prices of traded and non-traded goods and on the assets owned by different groups of people. In general, however, the income opportunities offered by more trade integration can be difficult for small-er producers to grasp  (page 23)

Growth in trade also directly affects the environment through the demand for storage, packaging and transport that it stimulates (page 25)

Developing science-based pathways to reach defined operational goals and modeling to test them is a 
well-established means of exploring strategic options and revealing synergies and trade-offs across 
multiple goals.  FSEC’s main finding is that it is indeed biophysically and technologically feasible for the global food system to become inclusive, health-enhancing and environmentally sustainable. (page 32)

Science-based pathways aid in identifying and designing policy instruments that incentivize transformative changes. They also help to guide the investments from both public and private sectors needed to finance them (page 34)

FST also reduces global demand for cropland and pasture compared to CT, as land-intensive livestock products are replaced by plant-based proteins in healthy diets from less land-intensive legumes such as soybeans, groundnuts and other pulses. Production of legumes increases most strongly in Sub-Saharan Africa, China and India, while there are moderate reductions in Brazil and the US. This represents a significant shift from legumes for feed production to legumes for food production. The higher share of legumes in healthy diets diversifies crop production systems and reduces the need for nitrogen fertilizers. (page 43)

In Sub-Saharan Africa and India expenditures on food will increase. This is due to differences in the composition of their respective dietary shifts, as healthier diets require an increase in the intake of legumes, fruits, and nuts, and a decrease in the staple foods of those regions, which are relatively less costly. Rising food expenditures in these regions will have a negligible impact on their poverty levels as they are compensated for by other elements of the Food System Transformation  (page 45)

The transformation is affordable at a global level, but its costs for lower-income countries are beyond their current financing capacity. Lifting their financing constraints is critical to unlocking the global benefits of transforming  food systems. (page 54)

The total reduction in hidden costs between 2020 and 2050 under the FST breaks down as follows: (a) Reducing health-related hidden costs accounts for 55 percent of the total reduction. (b) Reducing hidden environmental costs accounts for 45 percent of the total reduction. (c)  The hidden costs of poverty are virtually unchanged, accounting for less than half a percentage point of the gross benefits of the FST. (page 57)

Within SSA, forest protection accounts for over a quarter of total transformation costs. (page 61)



BUNDLING 


Only 3 percent of public climate finance is dedicated to food systems, despite these systems contributing one third of global greenhouse gas emissions. This is astonishingly low compared to the financial amount allocated to greening the energy and transport sectors which is 22 times larger (GAFF 2022). A good starting point for mobilizing additional financing for food systems could be the ongoing discussions on the multilateral development banks’ agenda for reforming(page 64)

National strategies should include bundles of policy interventions as to ensure coherence, to maximize synergies including with transformations outside food systems, focus on areas of maximum impact, be based on coordinated governance and be supported by adequate implementation capacity. (...) Policy bundles can span incentives and regulation; innovation; and investment (THE 3 LEVERS TO TRANSFORM FOOD SYSTEMS) (page 66)

See: Lowder, S.K., Hunecke, C. & Ruggeri Laderchi, C. (2022a). Policy Bundles and Transformation of the Food System as well as Energy (and other) Sectors: a literature review.

 

INNOVATION


Food systems innovation is progressing at an unprecedented rate, with new technologies ranging from Artificial Intelligence (AI) to sustainable processing technology, from dietary additives for livestock to enhanced fertilizers. This trend bodes well for food system transformations. However current food  System research and innovation (R&I) needs strengthening in several ways to make sure its results support system transformations that are sustainable and inclusive. Food system R&I needs to extend beyond production, its current focus, to other areas such as food waste, logistics and distribution, food consumption and healthy diets. (page 71)

Progress in the following seven areas of food system R&I is particularly important to accelerate 
sustainable and inclusive food system transformations:
  1. Modernizing plant breeding in low- and middle-in-come countries (LMICs). 
  2. Developing more environmentally sustainable farming systems.
  3. Digitizing agriculture for small farmers.
  4. Integrating small producers into modern value chains
  5. Developing clean cold chains to reduce  post-harvest losses
  6. Supporting the shift to healthier and more sustainable diets.
  7. Smart scaling of critical innovations. (*The bundle of policies being used to combat micronutrient deficiencies offer a contemporary example of this approach)  (page 71-73)
          An increasing plurality of interest groups is seen in both national and international food policy forums. National governments, transnational NGOs, corporations, business associations, trade unions, and banking and investment institutions are all pursuing their particular interests with regard to global trade and food system governance. (* One example from the US is the "iron triangle of food aid" comprising NGOs, agribusinesses, and maritime transport businesses who all benefit from current food aid policies and regulations. These three groups of actors have resisted calls for food aid reform for more than 60 years) (page 85)

          The complex set of interests shaping food systems is mirrored by a complex web of institutions regulating them. The regulation of national food systems is generally carried out by a range of government departments including finance, environment, health, planning, industry, external affairs, and welfare as well as the more obvious agriculture department. (* For instance, in England, responsibility for policies affecting food systems is held by as many as 16 key government departments and public bodies) (page 86)

          Five elements in designing food system transformation strategies: 
          1. building coalitions of stakeholders; 
          2. establishing new governance arrangements that facilitate balanced stakeholder representation and policy coherence; 
          3. shaping narratives and providing information; 
          4. calibrating policies to gain acceptance from key stakeholders; 
          5. and holding governments and businesses to account for progress.  (page 86)

          PACKAGING

          Policy packaging—the systematic bundling of different policy measures—can help to mitigate the potential trade-off between political feasibility and problem-solving effectiveness. Policy packaging offers citizens better scope for assessing trade-offs in policy attributes and policymakers the opportunity to make unpopular reforms, including those needed to achieve healthy and sustainable food system transformation, more palatable to their constituents.

          "Citizens tend to prefer policy bundles that are more stringent on supply-side interventions, such as stricter organic animal farming standards for producers, and less so on the demand-side, such as taxes. (...) It would be extremely valuable to expand such research to low- and middle-income countries where there is evidence of rising obesity linked to growing incomes and increased consumption of ultra-processed foods and animal-sourced foods"

          SEQUENCING


          Transformative policies also need to be sequenced in line with growing support for them won by earlier measures: when the benefits of "softer" policies become visible and stakeholders have had time to adapt, the use of more stringent policy instruments becomes feasible over time. (* Take the shift to plant-based diets in the EU. Initial policies could establish a targeted EU transition fund for plant-based food. This could be followed by a more fundamental reform of the current CAP funding scheme and eventually the introduction of emission pricing schemes and stricter nitrogen regulation) (page 91)


          Resources specific on Africa

          The Food System Economics Commission (FSEC)

          This an independent academic commission, set up to equip political and economic decision-makers with tools and evidence to shift food and land-use systems. It brings together leading experts across the economics of climate change, health, nutrition, agriculture and natural resources, representing organisations including the Potsdam Institute for Climate Impact Research, the World Health Organisation, World Bank, London School of Economics, World Resources Institute Africa, and many more. The FSEC Global Policy Report builds on years of study (including the EAT Lancet report). It looks at food system transformation not only from the perspective of environmental sustainability, but also global health, nutrition, economic development, and social inclusion.

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