Quantifying the Hidden Costs: A Review of True Cost Accounting in Agrifood Systems

Abstract

Agrifood systems provide food along with providing employment opportunities to a large number of people around the globe. While the positive aspects are well known to all, many negative costs also arise out of agrifood systems which when given a monetary value are known as hidden costs. Antimicrobial resistance, air pollution, soil erosion, unhealthy diet composition, unaffordability of healthy diets, and water contamination are a few such negative costs. Though the food producers are responsible for these, they are not held accountable for the same as these costs are not reflected in the market prices of the food. Hidden costs are measured and valued using a methodology called True cost accounting (TCA). An assessment by FAO (2023) using TCA revealed that the total hidden costs of agrifood systems stood at 12.7 trillion dollars, which is around 10 per cent of the global gross domestic product (GDP) in 2020. Hendricks et al., (2023) also used TCA for calculating the hidden costs of agrifood systems and reported total hidden costs of 29 trillion dollars per year, while the cost of the total food at market prices is only 9 trillion dollars per year. Though adding up these hidden costs to the total price of the product will result in the rise of prices of food, a shift to sustainable production, in the long term, would make prices relatively lower and also will improve the productivity of the population by providing healthy food and conserving the environment. Therefore, it is imperative to integrate such assessments at regional levels so that the respective governments can use specific levers to internalise the costs and move towards sustainability.