Agriculture is the foremost agenda for many governments around the world due to growing demand for diverse types of food from increasing and wealthier populations. Although global agriculture provides sufficient calories overall for today’s human population, more than 800 million nevertheless remain undernourished1. According to the United Nations Food and Agriculture Organisation, there is a need to double food production by 2050 to meet the demands of over 9 billion people2. The Green Revolution of the 1960s, through the use of intensive agriculture techniques, crop and livestock improvements and agrochemical use has resulted in many-fold increases in agricultural production. At the same time, increasing production through intensive agriculture has resulted in irreparable damages to biodiversity and the natural environment over the last five decades3. Another alarming and related consequence is that the global burden of diseases such as obesity, cardio-vascular diseases, diabetes, etc., is increasing globally4,5. Therefore, there is a need to take stock of the current situation and measure all the costs and benefits of agriculture and food systems so that they can be transformed to meet the growing food demand as well as protect planetary and human health through appropriate policy responses6.
Intensification supported by subsidies in agricultural inputs has been the dominant and indeed the only narrative to meet the growing need for food that has prevailed since the 1960s7. ‘Subsidy’ is a form of financial support for increasing output, while keeping prices low for consumers. In agriculture, these subsidies are provided by the public sector to the inputs industry so that farmers continue to produce food in large quantities and the market can keep food prices low. For example, rice is a staple food for half of the world’s population. Rice production is increased by adding large amounts of fertilsers and pesticides in addition to improved seeds, inputs which are subsidised by many governments. In the absence of these subsidies, prices of agro-inputs will escalate, and many resource-poor farmers will not be able to purchase the inputs required for production, hence negatively impacting agricultural output, livelihoods of farmers and also resulting in higher food prices to consumers. While agricultural subsidies are farmer and consumer friendly, worldwide research indicates that many farmers ended up adding more fertilsers and pesticide than the required amount due to their low and subsidised costs, which often results in pest resistance and leaching of fertilsers from excessive use (e.g., nutrients in surface run-off, nitrates in groundwater, nitrous oxide from rice paddies, which is 300 times more potent as a greenhouse gas than carbon-di-oxide, etc.).
As regards the private sector, large food corporations support industrial scale, mass production of food commodities such as soybean that is largely used in cattle production, which is then available for human consumption. In this case, research has demonstrated linkages with clearing of rainforest in South America especially in Brazil and Argentina for the production of soybean which is exported to China and the European Union for beef production8. This beef is then exported globally so that consumers can have access to year around availability of low-priced beef. It is therefore not surprising that the environmental footprint of such food production, processing, transportation and consumption is very large.
Subsidies ignore damage to natural resources, biodiversity, impact on human health and do not recognise any benefits of alternative production systems such as agro-ecological or organic production systems. Agroecology utilises ecological concepts and principles for sustainable and fair agriculture and food systems9. Such production systems generate many benefits to the environment (improved soil health, more pollinators, better wild habitats, less energy intensity, less or no agrochemical use) and to society (employ more local workers, provide fair wages, promote community participation, etc.). Such costs or benefits to the environment and to society at large are widely known as ‘externalities’ in an economic system. An externality is a positive or negative consequence of an economic activity to a third party that is not accounted for by the parties to that economic activity. In the case of agriculture and food systems, the “third party” is the planet and society at large.
Subsidised agriculture based on the technology and policies of the 1960’s continues to dominate current agricultural systems and are favoured by large scale producers in the name of a dominant narrative: we need to produce more food to feed human population. However, at what cost? Such focus has caused more harm not only to the planet but also to human health. The so called ‘cheap’ food has a very ‘high’ cost to society in terms of damages to the environment, biodiversity and to human health6, 10. These costs are neither accounted for in farm results or national accounts, nor corrected by policies on agriculture and food, nor broader economic policies. This often leads to perverse outcomes. Regions that adopted the ‘Green Revolution’ in 1960s successfully experienced growth in food production, however, these regions are now facing degradation of natural resources. For example, depletion of groundwater in Indo-Gangetic plains11 (food bowl of South Asia), loss of soil in Yangtze river plains in China12, and shrinking of the Aral sea13 (the largest freshwater lake) due to intensive cotton cultivation during the last five decades. Continuing business as usual undermines the ability of the world’s ecosystems to produce enough food (and fiber) for a growing population.
How to transform global agriculture and food systems?
Global agriculture has been unable to internalise externalities due to the lack of a common framework or approach and tools to assess them in a way that can be understood by all concerned stakeholders – farmers, business, governments and society at large6. This lack of tools and procedures is also a major barrier in understanding the full scale of costs and benefits associated with agriculture and food systems worldwide. Once these impacts are known, policies and programs can be developed to incentivise good practices and penalise detrimental practices and reduce the ecological footprint of agriculture and food systems.
In order to address this challenge, United Nations Environment’s initiative known as the Economics of Ecosystems and Biodiversity in Agriculture and Food (TEEBAgriFood), which is supported by the Global Alliance for the Future of Food, has developed a universal and comprehensive evaluation framework to measure, capture and disclose all significant positive and negative externalities6. Its main goal is to quantify all costs and benefits of agriculture and food systems using true cost accounting (TCA) in order to stimulate an appropriate policy response to fix the food equation14. TCA includes all major environmental and social costs and benefits of agriculture and food systems. TCA uses the damage function approach (damage costs) and the cost of control approach (avoidance, restoration, abatement and maintenance costs) to estimate the true cost of food production through the value chain6,10.
What is the TEEBAgriFood framework?
There are four key elements of the TEEBAgriFood evaluation framework – stocks, flows, outcomes and impacts. The framework describes stocks through the description of four types of capitals – produced, social, human and natural6. Stocks of these capitals are accumulated over time, whereas flows are the changes over a period of time. Flows can be described in the form of ecosystem services, agricultural inputs and output, and any residual flows such as pollution and greenhouse gas emissions. Outcomes are defined to reflect changes in stocks that impacts wellbeing. Four capitals included in this framework are described below.
Produced capital includes all manufactured, built and financial capital in the farming sector. For example, farm buildings, machines and equipment, physical infrastructure (roads, irrigation systems), processing plant, storage, warehouses, retail stores, knowledge and intellectual capital embedded in seed development etc. The produced capital can be measured by concepts and definitions of accounting standards at farm level, landscape level and corporate level (processing), by using definitions from the System of National Accounts.
Social capital in agricultural value chains includes farming networks, trust amongst group members, and societal norms that enable a farming community to act together more effectively to pursue shared objectives15. Social capital is essential to ensure that the other forms of capital are effective in generating incomes, and it is therefore very valuable. However, social capital of its own does not generate incomes. It can be measured by assessing structural (patterns of connections), relational (relationship and interactions) and cognitive (shared goals and values) dimensions of social capital16 and it can be valued by assessing the loss of income-generating capacity from other capitals as a result of reduced social capital.
Human capital comprises an individual’s health, knowledge, skills and motivation that are essential for productive work. In agriculture, it consists of farmers knowledge, proficiency in farm practices, use of software, health etc. It is based on the premise that individuals and society derive economic benefits from investments in people17. Human capital increases with improvements in these attributes, and is reduced by the loss of skills and experience and by damage to human health18.
Natural capital includes natural resources such as air, water, soil, biodiversity and ecosystems that provide various benefits to human beings in the form of ecosystem goods and services19. Natural capital can be measured by using the System of Environmental-Economic Accounting (SEEA)20.
Flows are the benefits and impacts during the use of various capitals in agriculture. All inputs and outputs in a production system through the value chain can be captured using farm accounts, business accounts as recorded in System of National Accounts (SNA).
Ecosystem services are defined as the benefits that are provided by agricultural landscapes to support farming and rural society21. In agriculture, ecosystem services include nutrient cycling, pollination, carbon sequestration, soil health maintenance, water regulation, conservation of habitat and biodiversity, recreation, cultural services etc. and amenity values. The framework also includes social justice and equity in the agriculture and food systems in terms of accounting for unequal power in communities.
Residual flows include waste, food losses, greenhouse gas emissions on farm, processing and consumption of the food. These will be measured by using SEEA Central Framework20.
How to apply the TEEBAgriFood framework?
TEEBAgriFood seeks to focus on the capacity of different systems, in the agriculture and food sector, to contribute to increases in stocks of produced, natural, human and social capital, and thus to human well-being. We highlight three examples: agricultural production systems (rice production), agricultural product (palm oil) and policy evaluation (pesticide tax in Thailand) that illustrate key components and potential applications of the framework22.
Rice production systems
Rice is central to the food security of half the world, therefore, a study23 that focused on rice production systems in the Philippines, Cambodia, Senegal, Costa Rica and California, US is being used here to demonstrate the application of TEEBAgriFood framework. An analysis of rice production systems in these countries found out that an alternative rice production system (e.g., agro-ecological) provides a range of ecosystem services (positive externalities; such as habitat for wildlife, natural pest control and cultural values) beyond food production. At the same time, conventional rice production generates negative externalities such as greenhouse gas emissions, air and water pollution and overuse of freshwater consumption. Due to the importance of rice as a staple food, many governments often have policies to support the consistent, low-cost supply of rice to consumers. Such policies involve subsidies for pesticides and fertilsers. The analysis in this study concluded that if all externalities were to be included in prices of pesticides and fertilsers then these subsidised inputs would become much more expensive. Here the question of interest for policy makers becomes: how to reduce trade-offs and enhance synergies, generating positive externalities and minimising negative ones?
Figure 1 shows various elements of the framework being investigated in this study23. The agricultural output in terms of rice production, income and purchased inputs were captured at the farm level in the agricultural production side of the value chain. Other provisioning services (for example, energy generation from rice husks) were monetised using direct market valuation. Regulating services (nutrient cycling, pest control, genetic diversity etc.) or supporting services (such as habitat provisioning) were also assessed where data was available. Cultural ecosystem services such as heritage, tourism, access to traditional rice varieties were also captured in the study. The study also describes but does not measure impacts on human health due to pesticide exposure, and impacts on ground water and air.
As shown by this analysis, subsidised pesticides and fertilsers lead to their intensive use, resulting in pest resistance and the need for even higher amounts of inputs. In addition, various impacts on natural resources, biodiversity and public health remain unaddressed as the existing policies are confined to production systems only and are motivated to support consistent supply of low-cost rice. Policy on prices of pesticides and fertilisers should be designed to reflect these negative externalities and encourage alternative management practices. It suggests that alternative rice production systems have potential to improve water and nutrient management, reduce use of agricultural inputs, and integrate fish in rice paddies when pesticides are not present. At macro level, the savings in inputs could permit greater support for farmer training and extension services to promote agro-ecological practices. In addition, this can also ensure consistent supply of low cost ecologically produced rice in sufficient amount to meet the needs of a growing population.
The Palm oil study24 quantifies and monetises key natural capital impacts of palm oil across the 11 leading producer countries, with a focus on Indonesia, the world’s largest palm oil producer. It quantified human capital impacts and also captures visible and invisible natural capital costs linked to the growing, milling and refining stages of palm oil production. Given increasing global demand for palm oil, the policy question that an application of the TEEBAgriFood evaluation framework can help address is how can markets be built to recognise and reward the value of natural, social and human capital, and the contribution of small holders in providing them?
The study states that palm oil production in the 11 countries has a natural capital (e.g., land degradation, loss of biodiversity, air and water pollution) cost of US$43 billion per year compared to the commodity’s annual value of US$50 billion. Producing one tonne of crude palm oil (CPO) has a natural capital cost of US$790 while one tonne of palm kernel oil costs US$897. The results also show that underpayment and occupational health impacts have a total human capital cost of US$592 per full-time employee, or US$34 per tonne of palm oil and US$53 per tonne of palm kernel oil.
This study covered some elements captured at the production and processing side of the framework as demonstrated by the Figure 2. It captured visible and invisible flows in terms of ecosystem services at the production side only using avoided cost and damage cost methods. It captured changes in stocks of produced, natural and human capital and also provided information on health impacts.
Pesticide tax in Thailand
Until the late 1990s policies in Thailand supported the use of pesticides, as in other lower income countries in East and Southeast Asia, in order to stimulate agricultural production. Subsidized farm credit programs and other causes led to the greater use of pesticides25. Over the period from 1987 to 2010 agricultural pesticide use in Thailand increased from 1 kg/ha to 6 kg/ha, on average, while pesticide productivity (gross output per unit of pesticide use) decreased from 400 USD/kg to 100 USD/kg. Besides the negative effect of pesticides on the environment, the health of farmers, farm workers and consumers were also exposed to risks.
The study provided a quantitative analysis of the external costs of pesticides, to help policy makers understand who was bearing these costs and where policy might intervene to reduce or eliminate these. A question of interest for policy makers is in determining where interventions will provide the most benefits? If clear negative externalities can be quantified, a pesticide tax may not be sufficient to change outcomes, therefore what other measures might accompany or replace tax measures?
This study used two approaches. In one approach, a set of base values for eight external costs (related to farm worker health, consumer health, and the environment) associated with the application of one kg of active pesticide ingredients was calculated, using the Pesticide Environmental Accounting (PEA) methodology. This analysis showed that by far the highest cost of pesticide externalities falls on farm workers and their health (83%) while health costs to consumers are estimated at 11%.
The second approach used data on government spending related to pesticide use, which was collected from government agencies26, to estimate the actual cost of pesticide use, looking at specific policy measures such government budgets for pest outbreaks, pesticide research and enforcement of food safety standards.
Between these two analyses, the priority revealed by government spending shows that greater importance is placed on food safety, while considerably less resources are allocated to the protection of farm worker health. The impacts of a pesticide tax were considered but research from various countries shows that the demand for agricultural pesticides is typically inelastic and that a tax would have a weak effect on demand, though it would generate considerable government revenues. The study estimated that an environmental tax would raise pesticide prices by 11-32%, yet would be insufficient to address the problem. Since the greatest costs are currently being incurred on the farm by pesticide appliers and pickers, it can be questioned if a pesticide tax will actually address these costs unless it is explicitly formulated to do so. To best target where interventions are needed, the study recommends the introduction of measures supporting non-chemical pest management methods, focusing on on-farm practices, such as Integrated Pest Management (IPM) methods, Farmer Field School (FFS), farmer training and education.
We applied the TEEBAgriFood framework to the variables used in the study, to demonstrate how policy makers might use such studies to make external costs visible, and thus help to define economic policies (e.g. taxes or incentives) for pesticide use (Figure 3). To be effective, policies and social institutions must address areas of greatest costs and benefits along the food value chain.
TEEBAgriFood’s framework is universal, inclusive and comprehensive as it includes all impacts and dependencies along the food value chain to holistically investigate agriculture and food systems6,27. The above examples provide preliminary evidence that a comprehensive application through the entire value chain can enhance potential development of sustainable agricultural and food systems. This information then can be used to inform policy for appropriate responses at local, national and global level. An initial exploration through existing examples provides an introduction to a process that will continue, as lessons are learned with each application of the framework. Through applying the framework and bringing the results into policy making arenas, it will be possible to identify and address the significant externalities that distort the current economic system. The three examples demonstrate the potential utility of the framework for policy makers to analyse alternative production systems, products and policies.
The current approach to assess agriculture is like the Galileo’s telescope which can see stars and planets from the Earth. But Hubble telescope can see better than a view from Earth using Galileo’s telescope. Similarly, the dominant approach and narrative that prevailed since 1960s is no longer relevant to address the current and future challenges of global agriculture. There is need to adopt a new and improved ‘wide-angle lens’ of TEEBAgriFood framework with TCA as an ‘eyepiece’ to see hidden costs and benefits of agriculture and food systems and stimulate policy response to improve planetary health and well-being of the society.
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