Dear all,
Annexed:
- Our general contribution for SOFA 2024
- Attachment with 5 studies on hidden costs in the Netherlands
Kind regards,
Joost de Jong, Jan Paul van Soest, Dutch Food Transition Coalition (TCV)
Jeroom Remmers, TAPP Coalition
Getting the prices right in food and agriculture
Contribution of the Dutch Food Transition Coalition (TCV) and TAPP Coalition, for the SOFA 2024 of the Food and Agriculture Organisation, with contributions of Wageningen University and Research (WUR).
Intro: As mentioned in the FAO study “Beyond the price tag” (‘Examing the hidden costs of agrifood systems to enhance their true value’), there are many hidden costs of the food systems in The Netherlands. Environmental costs are typically emissions and pressures that harm the climate and biodiversity and ecosystems, such as greenhouse gases, nitrogen compounds emissions and land use change. The health costs are mainly related to the unhealthy dietary patterns.
We, the Dutch Food Transition Coalition and True Animal Protein Price (TAPP) coalition, are committed to ‘getting the prices right’, i.e. internalizing external cost one way or another. In order to do so, we have commissioned and carried out a variety of studies in the past 4 years, to obtain a better insight in the external costs of food in the Netherlands and in the EU, and to lay a basis for developing the necessary policy interventions. Due to the high consumption and production of meat and dairy in The Netherlands and the EU, the protein transition is one of the main focal areas.
The first four scientific studies have a quantitative approach. The fifth study (TCV) is a qualitative study based on different studies and interviews, and offers a conceptual framework for implementing policies, depending on goals and on estimations of the impacts of different instruments.
It is a well-known economic fact that if prices do not reflect the full environmental, social, health and (animal) welfare effects, production and consumption patterns are suboptimal, leading to lower prosperity level than what would be feasible. For achieving a long-term sustainable food and agriculture system, it is therefore vital to correct pricing mechanisms. We have been raising this issue on three levels, and the true cost/true value accountancy approached can be applied on various levels:
- Macro-economic, in the form of social cost-benefit analyses
- Meso-level: applied to specific sectors, chains, and areas
- Micro-level of products, mostly known under the name of ‘true pricing’
Throughout these levels, adequate policy instruments need to be discussed and developed. Action on all levels is needed.
This approach, system levels and various policy interventions, offers a workable agenda and framework for further action, that can be applied in many (FAO) countries.
Hidden costs, unlocked values
The name ‘hidden costs’ refers to costs not visible for public and policy makers. That’s why it is necessary – just like in SOFA 2023 – that these costs in food systems are explicitly mentioned in policy papers. In many other sectors, like energy and transport, studies of hidden costs started already more than 30 years ago. In the Netherlands the last 10 years different kind of studies have been done to make these hidden costs in the food chain more explicit.
External costs of dairy and meat can be substantial, ranging between the € 0.34 for a litre of milk to over € 10 per kg of beef (https://cedelft.eu/publications/pay-as-you-eat-dairy-eggs-and-meat-internalising-external-costs-of-animal-food-products-in-france-germany-and-the-eu27/)
Food systems are now designed for 'plenty and cheap', which is made possible because the societal costs (nature and environment, unhealthiness, and animal welfare) are shifted to third parties, the taxpayer, nature, and the future.
Next to ‘hidden costs’, also ‘hidden values’ can be distinguished: food and agriculture can also contribute social value like landscape, water management, carbon storage, biodiversity restoration and the like. It is vital that society starts paying for producing these values, which also gives space to start pricing the hidden costs.
Instruments
The nature of the agricultural and food issues and the negative effects that the current system entails a call for a fundamentally different way of pricing and rewarding.
Revision and development of financial and fiscal incentives are thus an indispensable toolkit in the agriculture and food transition, as is also recognized in the recent FAO Roadmap to climate neutral agriculture, and in the EU Farm to Fork Strategy (Green Deal for Agri-Food). Financial and fiscal incentives offer the possibility of gradual, affordable, and proportional guidance so that a 'managed' transition can be designed.
The Dutch Food Transition Coalition (TCV) and the TAPP coalition are now focused on policies and instruments to reduce the hidden costs, and to abolish perverse subsidies. In particular, we focus on the effectiveness of financial instruments.
The so-called planetary boundary factors are promising foundations for pricing, particularly greenhouse gases, nutrients (nitrogen compounds, phosphate), water use and water level management, chemical substances (pesticides), and (change in) land use (intensity, destination).
For reducing greenhouse gasses in western countries, a reduction of the consumption of meat and dairy products is crucial. To stimulate the protein transition to more plant-based diets is an essential priority of our work. That’s why quite some studies demonstrate the impact of taxes on meat and dairy to reduce the consumption of meat and dairy.
Eating less red and processed meat is also interesting for improving public health of people (Health costs of 7.5 euros per kg of red meat overconsumption - True Animal Protein Price Coalition (tappcoalition.eu), inspired by the report ‘Health motivated taxes on meat’, showing optimal meat tax levels benefiting health and reducing health costs in 149 countries.
Depending on the context and conditions of a country, a selection of instruments has to be made. Public support for financial instruments is limited when prices of food will increase by these instruments. Complimentary policies will be necessary to get public support for financial instruments. Rewarding true value can be such a policy, but there are others too. Governments should make clear what will happen with the tax revenues. We call it “recycling of revenues”. For example, a levy with a rebate can accelerates a transition on two fronts: the inputs and impacts side on the one hand, and the conservation and protection side on the other (e.g. subsidizing farmers to reduce emissions and reducing taxes for healthy, sustainable food products or compensating low income groups). In this way, tax revenues on external costs (the ‘bads’) can be used to stimulate reducing impacts and restoration (the ‘goods’). This interplay provides perspective and ensures sustainable earning models for farmers, as well as for other links in the agriculture and food chains. Part of the tax revenues could also be recycled for climate funding for the new UN Loss and Damage Fund to compensate low income countries for the damage partly caused by overconsumption of meat in OECD countries.
To give an example from Dutch Policy development: during nearly one year the Agriculture Ministry negotiated with farm- and food organisations about an Agriculture Agreement. In the draft Agreement, 600 million euro per year climate- and nature payments to farmers were proposed for ‘hidden values like ecosystem services’. The proposal was to pay this from a consumer tax on meat products.
Final remarks
Every country has a specific context with different conditions. Studies and analysis of the most important food chains and the impact of these food chains in a country is necessary.
For preparing policies creating awareness on these hidden costs is essential, for instance with public information campaigns and supermarkets starting campaigns with the ‘real’ prices of food including all environmental costs, like the German supermarket Penny did one week with 10 food items in all stores (meat and dairy two times higher in price). Communication and dialogue on facts and figures support the creating of awareness. A clear political committment and leadership to start with policies on hidden costs is needed. Politicians in western countries do it already 15 years very successfully in the energy sector (CO2 taxes, ETS), why not too in the agri-food sector? The insight that huge figures for externalities actually imply a substantial prosperity loss for society as a whole can trigger urgency and action.
In our opinion policies focused om reducing external costs will stimulate a more efficient use of natural resources (nitrogen, fertilizer, land etc). And a careful use of natural resources is important for food security in the future.
Our studies (see Annex) are supporting policymakers and stakeholders in the food system to reduce the hidden costs. Also food companies realise the necessity to respect the planetary boundaries and - due to the CSR policy of Europa – are taking more steps to reduce the hidden costs of their suppliers.
Studies: (Are discussed in the annex).
- Value Case 2023. The societal impact of protein transition. Study by WUR (Wageningen University and Research), commissioned by TCV:
https://research.wur.nl/en/publications/maatschappelijke-impact-van-eiwittransitie - ‘Eat as you pay dairy, eggs and meat’, 2023. Study by CE Delft commissioned by TAPP Coalition. https://cedelft.eu/publications/pay-as-you-eat-dairy-eggs-and-meat-internalising-external-costs-of-animal-food-products-in-france-germany-and-the-eu27/
- ‘Sustainability Charge on meat’, 2020. Study by CE Delft, commissioned by TAPP Coalition. https://cedelft.eu/publications/a-sustainability-charge-on-meat/
- ‘Consumer health -True pricing method for agri-food products’, 2022, Study by WUR (Wageningen University and Research) and True Price, commissioned by TAPP. Health costs of 7.5 euros per kg of red meat overconsumption - True Animal Protein Price Coalition (tappcoalition.eu)
- “Rewarding and Pricing”. Rewarding and Pricing - Shifting Financial and Fiscal System Incentives from Farm to Fork TCV Study by Jan Paul van Soest and Tom Kools (Rapport-Belonen-en-Beprijzen-van-Boer-tot-Bord.pdf (transitiecoalitievoedsel.nl)
Joost de Jong, Jeroom Remmers, Jan Paul van Soest.
With support of Willy Baltussen of Wageningen University Research
Dutch Food Transition Coalition is a multi-stakeholder coalition of Dutch frontrunners in the field of agriculture, food, nature and health who strive to shape and speed up the transition. We are a coalition of approx. 200 peoples and parties: Our mission: A healthy life on a healthy planet.
TAPP Coalition (True Animal Protein Price Coalition) is a non-profit foundation, focused on fair food prices and taxes including external environmental and health cost to make the production and consumption of meat and dairy more sustainable. We are a coalition of 60 food companies and organisations working in the field of health, agriculture, animal welfare, environmental or youth, representing 1,5 million people and 3000 companies (EU, USA, Africa).
Mr. Joost de Jong