GLOBAL POLICY REPORTThe Economicsof the Food System
Transformation

﻿

The Economics of the Food System Transformation

GLOBAL POLICY REPORTThe Food System
Economics Commission

The Food System Economics Commission is anindependent economic commission composed of:Ottmar Edenhofer (Co-chair, Potsdam Institute for
Climate Impact Research, PIK); Ravi Kanbur (Cochair, Cornell University); Vera Songwe (Co-chair,
Africa Growth Initiative at Brookings); Francesco
Branca (World Health Organization); Simon Dietz(London School of Economics); Shenggen Fan(China Agricultural University); Jessica Fanzo(Columbia Climate School); Jayati Ghosh (Universityof Massachusetts Amherst); Naoko Ishii (Universityof Tokyo); Rachel Kyte (Tufts University); Hermann
Lotze-Campen (Potsdam Institute for Climate
Impact Research, PIK); Wanjira Mathai, Susan
Chomba and James Wangu (World Resources
Institute Africa); Stella Nordhagen (Global Alliancefor Improved Nutrition); Rachel Nugent (RTI
International; University of Washington); Jo Swinnen(International Food Policy Research Institute and
CGIAR); Maximo Torero, David Laborde Debouquet
and Panagiotis Karfakis (Food and Agriculture
Organization of the United Nations); Juergen
Voegele and Geeta Sethi (World Bank); Paul Winters(Notre Dame University). Barbara Harriss-White’s(University of Oxford) invaluable contribution as aCommissioner until the middle of 2023 is gratefully
acknowledged.
The Food System Economics Commission wasconvened by Gunhild Stordalen (EAT), Jeremy
Oppenheim (Food and Land Use Coalition, FOLU)
and Johan Rockström (Potsdam Institute for Climate
Impact Research, PIK).
This report was authored by Caterina Ruggeri
Laderchi, Hermann Lotze-Campen, Fabrice
DeClerck, Benjamin Bodirsky, Quitterie Collignon,
Michael Crawford, Simon Dietz, Lukas Fesenfeld,

Claudia Hunecke, Debbora Leip, Steven Lord,
Sarah Lowder, Sebastian Nagenborg, Toby Pilditch,
Alexander Popp and Isabella Wedl. Jacob Leslie
produced the graphics and laid out the report.
Gina Campbell provided invaluable help by editing
the draft and Cassandra Rigg helped withthe copyediting.
Special thanks go to Iain Shepherd and to the rest of
the Secretariat: Madelaine Bereza, Alison Eddy, EirikNergård, Marius Weschke and Carolina Yang.
Our gratitude also goes to past members of theSecretariat: Franziska Gaupp and Joe Robertson
served as Directors of the Secretariat at different
times; and Yvonne G. Albin-Amiot, Juliana Gaertner,
Sanna O’Connor-Morberg, Ilona Otto, Andrea Oyuela
and Talia Smith.
Many people have contributed ideas, suggestions
and guidance at different times during the scoping
and the work of the Commission. We would like tothank in particular Channing Arndt, Lauren Baker,
Andrea Cattaneo, Koen Deconinck, Henry Dimbleby,
Marcelo Furtado, Joe Glauber, Corinna Hawkes,
Olav Kjørven, Tim Lang, David Nabarro, Michael
Obersteiner, Kelly Parsons, Janez Potocnik, Cristina
Rumbaitis del Rio, Katherine Stodulka, Keith Wiebe,
Jenn Yates and Simon Zadek.
The report builds on an extensive set of background
papers, commissioned or produced by the Food
System Ecomomics Commission Secretariat.
The contribution of the authors to the meetings of
the Commission is gratefully acknowledged. The fullset of papers is available at foodsystemeconomics.
org. References to individual background papers arealso hyperlinked in the text of the report.
2﻿

The Economics of the Food System Transformation

The Commission’s activities and this publication are
funded by the Wellcome Trust, IKEA Foundation,
Quadrature Climate Foundation, Norwegian Climate
and Forest Initiative (NICFI), and The Rockefeller
Foundation.
The opinions, findings, and conclusions or
recommendations expressed in this material do
not necessarily reflect the view of the donors or theconvening organizations.
How to cite this report:
Ruggeri Laderchi, C., Lotze-Campen, H., DeClerck,F., Bodirsky, B.L., Collignon, Q., Crawford, M.S.,
Dietz, S., Fesenfeld, L., Hunecke, C., Leip, D., Lord, S.,
Lowder, S., Nagenborg, S., Pilditch, T., Popp, A., Wedl,
I., Branca, F., Fan, S., Fanzo, J., Ghosh, J., HarrissWhite, B., Ishii, N., Kyte, R., Mathai, W., Chomba,
S., Nordhagen, S., Nugent, R., Swinnen, J., Torero,
M., Laborde Debouquet, D., Karfakis, P., Voegele,J., Sethi, G., Winters, P., Edenhofer, O., Kanbur, R.,& Songwe, V. (2024). The Economics of the Food
System Transformation. Food System Economics
Commission (FSEC), Global Policy Report.

3﻿The Economics of the Food System Transformation

Table of Contents

Executive Summary: The Economics of the Food System Transformation

6

Introduction: Transforming food systems
to tackle global climate, nature and health emergencies

16

The power of food systems

17

FSEC’s approach to understanding food systems and their transformation

18

Chapter 1: Shared Goals for Food Systems

21

Introduction22
Food systems around the globe are highly diverse and dynamic

22

Looking ahead: Opportunities and threats shaping the future of food systems

26

Five goals for the food systems of the future 

27

Chapter 2: Charting a Pathway towards Food Systems Fit for the Future

31

Introduction32
The value of identifying and modeling quantitative, science-based pathways

34

Modeling the FSEC pathways

35

The Food System Transformation Pathway

37

The Current Trends pathway underscores that a food system transformation is urgently needed
to avoid systemic failures

38

An inclusive, health-enhancing, and environmentally sustainable food system is possible

39

Chapter 2: Annex

48

Main regional aggregates 

48

Regional outcomes

50

4

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The Economics of the Food System Transformation

Chapter 3: The Net Benefits of the Food System Transformation

53

Introduction54
A bottom-up approach to assessing the net benefits of pursuing the FST pathway:
measuring the reduction in hidden costs

54

A top-down approach to assessing the net benefits of pursuing the FST pathway:
applied social welfare analysis

61

The financing gap of the transformation as a major barrier towards reaping
its benefits

62

Chapter 4: Designing Strategies to Make Change Happen:
Incentives and regulation, Innovation and Investments 

65

Introduction 

66

Designing food system transformation strategies

67

Incentives and regulations 

69

Innovation 

72

Investment74
Applying an inclusion lens to food system transformation 

Chapter 5: Designing Strategies to Make Change Happen:
Negotiating Interests, Institutions, and Ideas

7781

Introduction 

82Interests, institutions and ideas shape the political economy of food systems 

82

What is special about the political economy of food systems

85

Designing politically feasible food system transformation strategies

86

FSEC Background Papers

93

References by Chapter

97

5

Executive Summary
The Economics ofthe Food System
Transformation

Executive Summary

A transformation of food systems isurgently needed, possible, and offers
enormous economic benefits
Our food systems — the way we produce,
market, and consume food — are part of thepolitical, social, economic, ecological, and cultural
fabric of our communities. They have achieved
something of a miracle, keeping pace with decadesof population growth while decreasing some formsof malnutrition, reducing poverty and increasing life
expectancy. But progress has been uneven aroundthe world. And the recent evolution of food systems
has fuelled – and continues to inflame – some of thegreatest and gravest challenges facing humanity,
notably persistent hunger, undernutrition, theobesity epidemic, loss of biodiversity, environmental
damage and climate change. The economic valueof this human suffering and planetary harm iswell above 10 trillion USD1 a year, more than foodsystems contribute to global GDP. In short, our foodsystems are destroying more value than they create.2
Ignoring the consequences of today’s foodsystems locks the world onto a course that escalates
their negative effects disastrously. Yet in many policy
discussions, such as those around climate change,
food systems have long been ignored. Concerns forfood affordability and the livelihoods of hundredsof millions who depend on food systems, thepower of large-scale players, and divergent views
among stakeholders about what sustainable foodsystems look like have all contributed to make foodsystems something of an exception. Today there isan opportunity for policymakers to raise the levelof ambition. Transforming food systems worldwide
provides a uniquely powerful means of addressing
the global climate, nature and health emergencies
while offering a better life to hundreds of millions
of people.

1

The Economics of the Food System Transformation

This report identifies the elements of what atransformation from today’s food systems to an
inclusive, health-enhancing and environmentally
sustainable global food system entails. It shows thatsuch a transformation is not only biophysically andtechnically feasible; it offers immense economic
benefits to societies across the world. The net
benefits of achieving a food system transformation
are worth 5 to 10 trillion USD a year, equivalent tobetween 4 and 8 percent of global GDP in 2020.
Combined with transitions taking place outside therealm of food, notably to low-emission energy, afood system transformation can ensure that global
warming stays well below 1.5 degrees C at the end of
this century.3
The economic and planetary case fortransforming 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 headon, 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 afour-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 casestudies. All background research is available atfoodsystemeconomics.org.

Unless otherwise specified all figures are in USD Purchasing Power Parity (PPP) 2020.

2 It is not possible, either conceptually or analytically, to separate the production of non-food agricultural items from food items. In this report“food systems” is used as a short-hand for agri-food systems.
3 The food system transformation addresses both direct emissions of greenhouse gases (such as e.g. methane from ruminant entericfermentation and nitrous oxide from crop production) and indirect ones (through land-use change).

7

Executive Summary

The costs of current foodsystems are far larger than theircontribution to global prosperity
Food systems form a nexus linking some of
the greatest triumphs and challenges of our times.
Thanks to human ingenuity, determination andtechnical progress, they feed a world populationthat has doubled since the 1970s. And yet theunaccounted costs of the burdens they place on
people and the planet are currently estimated at
15 trillion USD a year, equivalent to 12 percent of
GDP in 2020. This finding is in line with other recent
estimates in the literature. These unaccounted
costs comprise:→ Health costs, which FSEC estimates to be at least
11 trillion USD. The economic costs of ill healthdue to food systems are measured through their
negative effects on labor productivity. Those are
driven by the prevalence of non-communicablediseases, including diabetes, hypertension, andcancer which can be attributed to food. A large
share of this burden is born by people living withobesity, currently estimated at 770 million people.
FSEC’s health costs also include a lower boundfigure for the productivity costs of undernutrition,
currently affecting 735 million people.
→ Environmental costs are estimated at 3 trillion
USD a year and reflect the negative impacts oftoday’s food systems on ecosystems and climate,including the impacts of current agriculturalland use and food production practices. These
practices are responsible for a third of global
greenhouse gas emissions, including emissions
arising from deforestation, and result in the net
loss of over 6 million hectares of natural forest
each year. Environmental costs also reflect thecosts of biodiversity loss and environmental
damage arising from nitrogen surplus, whichleaches into waterways and pollutes the air.

4

The Economics of the Food System Transformation→ Finally, food systems are a source of structural
poverty through the costs of food, but also
through the low incomes of many who workin food production. The incidence of poverty
tends to be higher in agriculture than in the othersegments of food systems.

The global food system is on anunsustainable trajectory andcurrent policy commitments are
not strong enough to divert it
Even if countries follow through on all thepolicy commitments made in their Nationally
Determined Contributions (NDCs), they will not
succeed in shifting the global food system from its
unsustainable trajectory. It will still be responsible
for about one third of future global emissions if
current trends in the overall economy prevail to2050. These emissions will contribute to an increasein global mean temperature of 2.7°C by the end of
the century,4 compared to pre-industrial periods.
But the negative impacts of the current trajectory go
well beyond climate.
The continuation of current trends to 2050, modeled
through the Current Trends pathway (CT), has
further striking features:→ Food insecurity and undernutrition continue toplague humanity, still leaving 640 million people,
including 121 million children, underweight in
2050, particularly in India, Southeast Asia, and
Sub-Saharan Africa.
→ The global adoption of diets high in fats, sugar,
salt and ultra-processed foods would increase
the number of obese people worldwide by 70
percent to an estimated 1.5 billion in 2050, or 15
percent of the expected global population. Notethat the direct medical costs of treating the healthconsequences of overweight and obesity havebeen estimated by others to rise from 600 billion
USD today to almost 3 trillion by 2030 already.

Under current trends warming at the end of the century also coincides with “peak warming”.
8

Executive Summary→ Per capita food waste increases by 16 percent
compared to today, reaching 76 kg of dry matterper capita in 2050.
→ Food production in many countries becomesincreasingly vulnerable to climate change andenvironmental degradation, with the likelihoodof extreme events dramatically increasing.
Rising food prices due to climate or other shocks
heighten poverty and hunger, stretching thebudgets of the poor and middle classes. This
leads to social tensions and the imposition of
measures to limit trade.
→ Deforestation will erode a further 71 million
hectares of natural forests between 2020 and
2050, an area equivalent to 1.3 times the size ofFrance. This has far-reaching implications forcarbon emissions and biodiversity loss.
→ Nitrogen surplus from agriculture and natural landalso increases from 245 Mt N to about 300 Mt N a
year, polluting water, destroying biodiversity andundermining public health.

Transforming food systems would
provide economic benefits equivalent
to at least 5 trillion USD a year
FSEC has assessed one specific science-basedtransformation pathway for food system whichbrings huge benefits for both people and planet.
This pathway is called the Food System
Transformation (FST). Estimates of those benefits,measured as reductions in the unaccounted costsof food systems outlined above, amount to at least5 trillion USD per year. When the full effects of a
global food system transformation on incomes arefactored in, estimates of its benefits rise to
10 trillion USD per year (Box ES.1). The FST offers
a future where:→ Undernutrition is eliminated by 2050, andcumulatively 174 million lives are saved frompremature death due to diet-related chronic
disease, compared to CT. This fall in diet-related
chronic disease accounts for

The Economics of the Food System Transformation

55 percent of the reduction in the food system’s
hidden costs associated with the FST (see figureES.1). When accounting for the impacts of changing
diets on both consumption and (indirectly) on landuse, changing diets accounts for 70 percent of thebenefits of transforming food systems.
→ Farmers in the global food system — around 400
million people — enjoy a sufficient income fromtheir work thanks to productivity growth andtargeted support policies.
→ An additional 1.4 billion hectares of land isprotected, while a further 200 million hectares areafforested and open to planet-friendly economic
uses such as the production of timber for housing.
→ A shift to environmentally sustainable production
in agriculture reverses biodiversity loss, reduces
demand for irrigation water and almost halves
nitrogen surplus from agriculture and natural land
(i.e. land that has not been altered or developed
for human purposes).
→ The food system becomes a net carbon sinkby 2040. As part of a larger sustainability
transformation which includes the energy sector,
this helps to ensure that global warming is limited
to well below the 1.5°C Paris Climate target by
the end of the century, with peak warming barely
exceeding 1.5°C.
→ Processes of structural transformation are
accelerated, meaning that agriculture becomesless labor-intensive than under CT. About 75
million more on-farm jobs are reallocated to othersegments of food systems or other sectors than
expected under CT.
This alternative future plays out differently in
different parts of the world. A shift to healthy
diets entails notably higher consumption of fruits,
vegetables and nuts in South and South-East Asiaand of legumes in China. Meanwhile, consumption ofanimal-sourced food decreases drastically in highand middle-income regions.
9Executive Summary

The Economics of the Food System Transformation

FIGURE ES.1

Reduction in hidden costs compared to Current Trends
Trillion USD PPP 2020

0

2020

2025

2030

2035

2040

2045

2050

Trillion USD/year

-1
-2
-3
-4
Poverty
The diﬀerence in poverty
hidden costs between
CT and FST is minimal androughly constantat 4 billion USD throughout
the period-5-6Greenhouse Gas Emissions
Nitrogen Pollution

Land Use Change

Dietary Intake

The Northern Hemisphere sees the largest increasein land conservation over CT, while one half of the
projected additional afforestation happens in Brazil.
And food waste is reduced most in some European
countries, the USA, and China.

At 200–500 billion USD a year,
estimated costs of global food systemtransformation are low compared toits economic benefits
Implementing the FST pathway worldwide
will need investments and transfers averaging 500
billion USD each year between now and 2050. Of thisamount, about 200 billion USD covers investments
in rural infrastructure (including roads, irrigation
expansion, access to energy), the protection andrestoration of forests, the reduction of food loss
and waste, support for the dietary shift andagricultural research and development. All thesecosts are additional to spending already expectedin these areas.
The remainder of the transformation costs
cover the safety net support needed to keep food

Povertyaffordable for the poorest, especially in the earlier
phases of the food system transformation. Under
the FST, agricultural commodity prices increase byroughly 30 percent by 2050, which may significantly
increase the prices consumers pay for food. Foodprice rises will be somewhat offset by rising incomes
and changing consumption patterns. However,
the risk of food becoming less affordable for thepoorest needs to be addressed head on withtransfer programs. The initial estimate of FSEC
is that this might require up to 300 billion USD ayear, based on spending patterns of the poor in
low income countries. This estimate needs to berefined depending on local circumstances, including
national programs’ ambition and how they are
scaled up over time, the specific income groups
expected to benefit, local household vulnerability to
price increases and the availability of resources andcapacity needed to operate transfer programs.
Given strained post-COVID budgets andrecent geo-political shocks, financing the costs oftransforming food systems will be a difficult hurdle
for low- and middle-income countries to overcome.
10

Executive Summary

It risks putting the benefits beyond their reach, eventhough these far outweigh the costs. Yet at a global
level, the costs of the food system transformation
are equivalent to only 0.2–0.4 percent of global
GDP, and clearly affordable compared to theglobal benefits. New resources, such as thosecurrently under discussion as part of the MultilateralDevelopment Banks reform agenda, could support
these efforts.

Five broad priorities can guide national
food system transformation strategies
Global food system change will in reality
take place at national and local levels. There isno universal recipe for what each transformation
should look like, but five broad priorities can guidenational and local strategies everywhere. Bundlingpolicies into coherent strategies to pursue thesepriorities maximizes the likelihood of impact:
Shifting consumption patterns towards
healthy diets. A global shift towards healthy dietsis the biggest source of benefits in the FSEC FST
pathway. Changing what people choose to eat is
not easy but policies that have been shown to work
include: regulating the marketing of unhealthy foods
to children; front-of-pack nutritional guidance;
targeting public food procurement on healthy
options; taxing sugar-sweetened beverages andunhealthy foods; and reformulating packaged
food. These policies can be applied at scale, butmore work is needed to find new ways to shiftconsumption patterns and improve access tohealthy food, as well as more research on which
policies work best and why.
Resetting incentives: Repurposing government
support for agriculture. Most agricultural support
from governments benefits larger producers andmuch is linked to harmful environmental, climate,and health effects. Reforming agricultural support
to make sure it incentivizes choices in line withthe goals of the food system transformation could
lower food systems’ hidden costs. For example,
repurposed subsidies could help to improveaccess to healthy diets and make them more

The Economics of the Food System Transformation

affordable. However, subsidy repurposing might
displace production to less efficient countries
thereby increasing environmental impacts. This
calls for investments to improve productivity andcontain environmental impacts, possibly throughinternational redistribution.
Resetting incentives: Targeting revenue
from new taxes to support the food systemtransformation. Transforming food systems into
net carbon sinks and reducing nitrogen pollution
are two important sources of benefits. Taxing
carbon and nitrogen pollution to help achieve theseoutcomes is in line with recommendations fromexpert bodies including the IPCC and OECD. But new
taxes must be designed to suit the local context.
Targeting resulting revenues towards direct andprogressive benefits for poorer households thatmight otherwise struggle to afford food can ensure
its outcomes are inclusive and help to win politicalsupport for a food system transformation.
Innovating to increase labor productivity andworkers’ livelihood opportunities, especiallyfor poorer workers in food systems.
An unprecedented number of new food systemtechnologies is being developed. Currently
this comes largely from the private sector.
National and international public institutions
can do a lot to speed up the development anddiffusion of innovations that meet the needs ofpoorer producers and remove barriers to theiradoption. Priority areas for public research andinnovation include: improving plant breeding inlow- and middle-income countries; supporting
environmentally sustainable, biodiversity-friendly,
and low-emission farming systems by, for instance,
tailoring public procurement and extension services;and developing digital technologies useful to small
farmers, such as information systems based onremote-sensing, in-field sensors and market
access apps.

11

Executive Summary

Scaling-up safety nets to keep food affordable
for the poorest. Developing and strengthening
safety nets is key to making food systemtransformations inclusive and politically feasible.
Experience with cash transfers during the COVID
pandemic has redefined what is possible, in termsof making efficient digital payments and targetingvulnerable populations. Countries should decideto start by targeting limited transfer resources onchildren, whose nutritional needs are critically linked
to their lifetime achievements, while mobilizing
more resources and putting in place morecomprehensive safety nets.

Failure to address head on the tensions
surrounding food system transformation
will hold back change
Transforming food systems brings huge benefits
but it also gives rise to unavoidable tensions among
potential winners and losers. Managing thesetensions calls for new ways of implementing policies.
Unless they are addressed, these tensions will stymie
change. Issues likely to require management include:

The Economics of the Food System Transformation

nature-based agricultural practices such asagroforestry can do the same. The shift towards
healthy diets is also likely to create new jobs: theILO expects some 15 million additional jobs fromthis source in Latin America alone. But for thesenew developments to absorb at scale labor shiftingfrom obsolete forms of food production they
will need well-targeted investment in productive
infrastructure, skills and more equitable access tofinance – notably for women farmers.
Policy siloes. Numerous government ministries
and departments influence food systems. They
often pursue disparate, overlapping, and sometimes
contradictory policy goals, and their decisions are
rarely informed by the views of other stakeholders.
While most governments now recognize the urgent
need to reform food systems, to ensure successthey need to convene more participatory forms offood system governance, develop clear, long-term
strategies with transparent accountability, andcoordinate their implementation of policies.

Fears of food price rises. Increasing hunger andworsening food insecurity caused by rising foodprices can lead to social unrest, especially whenpolitically powerful populations are affected.
For good reason, the price of food is consideredby governments and opposition parties as animportant barometer of their prospects for reelection or election. Concerns about the futureaffordability of food can paralyse food system
reforms, as well as resulting in disruptive policy
responses such as export bans. Putting in place
effective safety nets, as proposed by FSEC above, iscrucial to lifting this barrier to change.

Global inequalities. While the food systemtransformation is a clear win at the global level,
there are tensions surrounding the distributionof its benefits and costs. The required dietaryshift will reconfigure production patterns, likely
concentrating many of the costs in some producer
countries. Richer producer countries are equipped
to contain and mitigate adjustment costs but they
are clearly unaffordable for many low-income
countries. Food system reforms need to beprioritized for climate finance, in global public healthinterventions and agreements, and on the agendas
of multilateral development banks to be sure of
progress at the necessary scale and speed.

Fears of job losses. Transforming food systems
can accelerate the reallocation of jobs away fromfood production. Localized impacts can be severe
when transforming food systems affects the main
sources of livelihoods. Developing downstream
segments of the food system can help create jobs
for farm workers displaced by food system change,
particularly in low-income countries. Deploying

Entrenched vested interests. Food systems
are characterized by marked asymmetries in
power, information, and accountability. Powerfulcorporations often use their influence overpolicymaking to delay or dilute reforms perceived asa threat to shareholder value. FSEC highlights three
ways to assert the public interest in food system
reform based on successful examples of generating
12

Executive Summary

The Economics of the Food System Transformation

change. First, emphasize the intended publicbenefits, such as better child health and lives savedby healthier diets, to build constituencies for reform.
Second, form broad-based, multi-stakeholder
coalitions to challenge corporate power. Coalitions
were instrumental in persuading governments
across Latin America to raise taxes on sugary
beverages despite corporate lobbying against them.
Finally, when using new taxes to change incentives,link the tax revenue directly to interventions which
command broad support. For example, Bolivia
finances its healthy school meal programs from a
tax on hydrocarbons, converting natural capital into
human capital.
Daunting as the challenges of transforming foodsystems may be, there are reasons to be hopeful.
Over recent years transforming food systems has
risen in visibility as a policy priority. From citizen
movements to farmers to businesses, new groups
and coalitions are innovating to make food systems
more sustainable. New technologies and businessmodels are expanding the scope of what is possible.
The COP28 UAE declaration on Sustainable
Agriculture, Resilient Food Systems, and Climate
Action signed by over 150 countries signals a newambition to seize the opportunities offered bytransforming food systems.
Addressing squarely the concerns that shapepolicymakers’ vision of what is possible offers apathway to reap large benefits for people andplanet.

13

Executive Summary

The Economics of the Food System Transformation

BOX ES.1

Modeling the Food System Transformation
To understand the food system transformation in ascientifically rigorous way, FSEC explored food system
pathways generated using the modeling framework MAgPIE(Model of Agricultural Production and its Impact on theEnvironment, Dietrich et al. 2019). MAgPIE projects how
the agriculture and food sector may change over time
given a consistent set of socio-economic assumptions andbiogeophysical constraints. Its modeling capabilities areextended through coupling it with specialized models of
public health (Springmann et al. 2018), the energy system(Baumstark et al. 2021), and the climate system (Meinshausen
et al. 2020). FSEC uses the resulting pathways to produce
economic valuations of the gross and net economic benefitsof the food system transformations that they capture.
This report focuses on two such pathways. “Current Trends”(CT), represents a continuation of the trends that characterize
food systems today. The “Food System Transformation”(FST), characterizes a global effort to transform current
food systems into a global system that produces healthy,
nutritious food without sacrificing a livable environment,
meets the needs of those working in agriculture and lifts up
the world’s poor and hungry. A third pathway, elaborated in
Chapter 3, embeds the FST within a more general sustainabletransformation that is largely external to the food system.
This includes more optimistic assumptions for future GDP and
population growth as well as the ongoing energy transition.
The Current Trends (CT) Pathway
The Current Trends pathway projects a future extrapolated
from past trends and the present. Assuming no deep
structural changes in the world economy, global GDP expandsby over 100 percent by 2050, yet this prosperity is unevenly
distributed. Poverty rates decline, but entrenched structural
disparities ensure that a considerable portion of the global
population remains impoverished. Food production scales
to meet the needs of that global population, expected toreach 9.5 billion by 2050, but 640 million people remain
undernourished. At the same time, the increasing prevalenceof unhealthy diets in richer countries contributes to a surge inobesity, affecting nearly 1.5 billion people in 2050. Regarding
climate change mitigation, nations adhere to their current
Nationally Determined Contributions (NDCs), increasing
managed forestry by 230 million hectares to reach 560 million
hectares globally. Yet, inadequate international cooperation
hampers further progress toward the 1.5°C climate goal, andearlier powerful ambitions to meet the Paris climate targets
lose momentum. Agricultural expansion and overexploitationof natural resources further degrade natural ecosystems andthe biodiversity they foster.

The Food System Transformation (FST) Pathway
The Food System Transformation pathway projects analternative future, defined by worldwide commitment
to achieving an inclusive, health-enhancing, andenvironmentally sustainable food system. Over the next
thirty years, all countries gradually transition away from diets
dominated by empty calories and animal-sourced proteins,and instead increase their consumption of vegetables, fruits,nuts, legumes, and whole grains. Resolute action eliminates
hunger by 2050, sparing 640 million people the pain of going
to bed hungry, or not knowing what their children will eat thenext morning. Enormous swathes of natural ecosystems areprotected from development, and ambitious re-/afforestation
programs begin to expand managed forests by 2.5 million
hectares each year from today to 2050. These efforts, together
with technological progress reducing agricultural pollutants,
ensures the land-use sector becomes a net carbon sink by2040. Campaigns to fight poverty in the agricultural sector
are successful, ensuring living wages for the almost 400
million people who work in it. Simultaneously, the transition
away from expensive and wasteful diets, coupled withredistribution of carbon taxes, guarantees that food remains
affordable.
The gross and net economic benefits of thefood system transformation
FSEC uses two distinct but complementary methods to assess
the economics of transforming food systems: an aggregate
top-down approach and a detailed bottom-up approach. The
top-down approach (Dietz 2023) calculates the aggregatedimpacts of the FST in terms of health, environment, andincome, expressing changes in social welfare in monetary
terms. The bottom-up approach (Lord 2023) quantifies thehidden costs avoided by the FST, including those related tohealth, environment, and poverty. The bottom-up approach
estimates the value that present or future economies may
lose from poor health or environmental pollutants like
GHG emissions or nitrogen surplus. While both methods
are grounded in welfare economics, the top-down method
aims for a holistic measure of societal well-being, while thebottom-up approach focuses on tangible, itemized costs.
Together, they provide a comprehensive understanding of theeconomic impacts of food system transformation on a global
scale.
Sources: Baumstark et al. 2021; Bodirsky et al. 2023; Dietrich
et al. 2019; Dietz 2023; Lord 2023; Meinshausen et al. 2020;
Springmann et al. 201814

Executive Summary

The Economics of the Food System Transformation

TABLE ES.1

Packages of measures modelled by FSEC
Operational Goal

Diets
Consumption ofhealthy diets by all

Food system measures• Eradication of undernutrition• Stabilization of obesity• Convergence towards healthy diets• Halving food waste• Trade liberalization• Wage increases in agriculture• Capital substitution

Livelihoods
Strong livelihoods
throughout the
food system

Biosphere
Protection of intact
land and restorationof degraded land

Production
Environmentally
sustainable production
throughout the
food system

External
Sustainabletransformations
external to thefood system• Slower population
growth• Equitable humandevelopment• Sustainable energy
transition• Increase in bioplastics• More timber construction• Reducing emissions fromdeforestation and forest degradation(REDD+)• Land conservation• Peatland rewetting• Water conservation• Biodiversity oﬀset• Nitrogen eﬀiciency• Longer crop rotations• More landscape habitats• Emission mitigation from rice cultivation• Livestock management• Manure management• Soil carbon management

15

Introduction
Transforming food systems
to tackle global climate, natureand health emergencies

Introduction

The Economics of the Food System Transformation

Introduction→ Transforming food systems worldwide provides a uniquely powerful means ofaddressing the global climate, nature and health polycrisis while offering abetter life to hundreds of millions of people.
→ The approach of the Food System Economics Commission to the analysis of theeconomics of the food system transformation is characterized by five elements:
an emphasis on inclusion, putting people at the centre of the transformation;
the integration of insights from a variety of economic approaches; the emphasison generating and sustaining systemic change; the recognition that transforming
systems takes time and progress will be uneven; and an emphasis on theinterdependencies between food systems and other systems.

The power of food systems
Our food systems — the way we produce, market,
and consume food — are woven into the political,
social, economic, ecological, and cultural fabric of ourcommunities. Seen as one global food system, they
have performed something of a miracle over recent
decades, managing to keep pace with global population growth while decreasing some forms of malnutrition, reducing poverty and increasing life expectancy(Box I.1). But the rapid evolution of food systems has
also fuelled and continues to inflame some of ourgreatest and gravest challenges, from persistent hunger, undernutrition and obesity to declining biodiversity, environmental damage and climate change.
Ignoring the consequences of today’s foodsystems locks the world onto a course that escalates
their negative effects disastrously. Yet in many policy
discussions, such as in discussions around climatechange, food systems have long been ignored –concerns for food affordability and the livelihoods ofhundreds of millions who depend on food systems,
the power of large-scale players, divergent views
among stakeholders about what sustainable foodsystems look like have all contributed to make foodsystems something of an exception. Current policy
commitments fall short of preventing agriculture
from being the source of about one third of global
emissions and at the same time a victim of climatechange. Efforts to rein in consumption of the foods

most harmful for our health are defeated by concerns about food affordability. Incentives to promote
more sustainable ways of producing food contend
with the challenge of addressing stranded assets
at the farm level while offering strong and stable
livelihoods. Yet this is an opportunity for policymakers to raise the level of ambition. Transforming foodsystems worldwide provides a uniquely powerfulmeans of addressing the global climate, nature andhealth emergencies while offering a better life tohundreds of millions of people.
What would making our food systems inclusive,
health-enhancing and environmentally sustainableentail? This report draws on extensive research undertaken by the Food System Economics Commission (FSEC) from 2020 to 2023 to answer this question and three more: is such a global transformation
economically viable? What policy levers can make it
happen? And what obstacles could block its way?
Chapter 1 examines today’s food systems andthe opportunities and threats they pose, before setting out five defining characteristics of an inclusive,
health-enhancing and environmentally sustainable
food system. These characteristics form the goals ofpotential food system transformation pathways thatFSEC has explored using an Integrated Assessment
Modelling (IAM) approach, explained in Chapter 2.
Overall, the modeling shows that a transformationof the global food system is both possible by 2050
17

Introduction

The Economics of the Food System Transformation

BOX I.1

Defining food systems
Agri-food systems are defined as “encompassing
the entire range of actors and their interlinked
value-adding activities involved in the
production, aggregation, processing, distribution,
consumption and disposal of food products thatoriginate from agriculture, forestry or fisheries,
and parts of the broader economic, societal
and natural environments in which they areembedded” (FAO 2018).
FSEC’s focus is on the global food system madeup of infinite interconnected national and local

and economically viable. Indeed, food systemtransformation on a global scale leads to enormous
economic benefits that far outweigh its costs, as
Chapter 3 shows.
Achieving those global gains depends first andforemost on action to change food systems at thenational and local levels. There is no universal recipeof policies for transforming food systems, but transformation strategies everywhere are likely to share
the priorities detailed in Chapter 4, namely: shiftconsumption patterns towards healthy diets; reset
incentives to encourage essential changes, especially by repurposing existing government support for
agriculture and by taxing carbon and nitrogen pollution; invest to increase productivity in food systems
through innovation and improve the livelihoods they
offer, particularly for poorer workers; and scale-up
safety nets to keep food affordable for the poorest.
Food systems are already changing across theworld, as Spotlights on Change throughout the reportdemonstrate. Citizen movements, farmers, businesses,
and others are all innovating to improve food system
sustainability (see Spotlight on Change 1). But these
uncoordinated improvements are scaling too slowly toachieve a global transformation in time. Much faster,large-scale change needs to be negotiated among themultitude of diverse stakeholders in food systems who
have unequal power and very different interests in the
major changes ahead. Chapter 5 identifies potential
barriers to change and highlights practical ways todismantle them, to help food system stakeholders

elements, which in this report are referred to as
food systems (plural). It is analytically difficult,often impossible, to separate food and non-food
related activities in food systems, as often a single
product, for instance maize, has both food andnon-food uses. For this report, therefore, FSEC has
mostly drawn on analysis of agri-food systems. For
simplicity they are referred to throughout as “foodsystems” except where a special emphasis on the
non-food components is needed.
Source: FAO 2018

negotiate system transformations that are politicallyachievable.

FSEC’s approach to understanding foodsystems and their transformation
Several recent reports have explored different
aspects of the food system transformation (Willett
et al. 2019; FOLU 2019; Mbow et al. 2019; FAO et al.
2022). Building on those insights and others, FSEC’s
analytical focus is defined by five elements:→ First, the emphasis on inclusion. This means thereport puts people at the centre of food systemtransformation. For FSEC, protecting and enhancing the livelihoods of those who depend on foodsystems and ensuring that healthy, diverse andsafe diets are accessible and affordable to all areessential aims of any transformation strategy.
They entail addressing inequalities across genderand race, and those experienced by particular socioeconomic groups (see Spotlight on Change 2).
This emphasis on inclusion requires understanding how different groups might be affected byfood transformation strategies and to incorporate distributional impacts in strategy design.
Understanding of distributional impacts includes
not only direct income and price effects but alsobroader effects, such as the shifting profile ofopportunities and jobs that a transformation
will bring.

18

Introduction→ Second, the integration of insights from avariety of economic approaches. The research
informing the report integrates long-term global
pathway analysis and modeling with political
economy analysis to identify relevant policy tools
and insights into how feasible transformation
strategies can be shaped (Gaupp et al. 2021).
→ Third, the emphasis on generating and sustaining system change. This emphasis explains

The Economics of the Food System Transformation

why the report covers not only changes in the
production and consumption of food, but also
the need for new institutions and new ideas toshape preferences and shift interests, fostering
sustained systemic support for new practices andbehaviours. Taking this systemic approach to thedesign of transformation strategies means
considering all the relevant interactions and feedback loops between different elements of foodsystems as well as the synergies and trade-offs

SPOTLIGHT ON CHANGE 1

Different actors, similar goals
Transforming deserts into fertile farmland
Part of the rich dynamism of food systems is thatchange can be initiated at all levels, from theglobal to the very local. And while government
action and funding can often play a central role,
there is much that can be achieved by individual
actors and communities. The two very different
examples of land restoration interventions in the
Loess Plateau in western China and in Tigray, innorthern Ethiopia, help illustrate the variety ofways that transformative change can happen infood systems.
The once rich soils of the Loess Plateau inwestern China, a region about the size ofFrance, used to feed one quarter of the Chinese
population. Intense pressure on the land eroded
the soil leaving the population in poverty by
the 20th century. Funds from the World Bankand the Chinese government restored 4 million
hectares of land on the Loess Plateau in the
2000s. Local farmers’ incomes have more thandoubled, sediment erosion has been reducedby 100 million tons annually, the risk of flooding
has been reduced and grain production has
increased dramatically. The changes werebrought about by designating ecological andeconomic areas of land, terracing, sedimenttraps, dams, and other methods of capturing
rainwater.

In contrast with this largely central government
project, large-scale restoration of arid areas inEthiopia started as a bottom-up initiative led
by local farmers: The inherently barren Tigray
region in Northern Ethiopia is frequently hit bysevere and ever more frequent droughts. These
contributed to several hundred thousand people
starving to death in the 1980s. As a result,local smallholders and communities came up
with innovate approaches and techniques for
capturing water. As well as the building of wells,
they tended upper mountain slopes to capture
water and prevent soil erosion. Farmers in theregion created a collective knowledge repository
with more than 50 methods to prevent soil
erosion and capture water. The World Food
Programme provides technical assistance,
while the Ethiopian government has granted
microloans to smallholders, and provides
subsidized artificial fertilizers and improved
plant seeds. Most farmers have paid off theirloans expeditiously thanks to significantly
increased and diversified yields, including awide range of cereals, vegetables, and fruits. The
continued expansion of fertile lands in Ethiopia
is endangered by the terrible domestic conflict,
as well as disputes with neighbouring Sudan andforeign land-grabbers over fertile soils, which
are threatening to reverse progress.
Sources: Buckingham 2016; Hagazi et al. 202019

Introduction

The Economics of the Food System Transformation

SPOTLIGHT ON CHANGE 2

Tackling the constraints that limit women’s access to land
Regularizing land tenure in Rwanda
Gaining security of tenure generally makes
landholders more willing to invest in improving
the productivity of their land and its natural
capital. It may also empower women, as
Rwanda’s experience demonstrates.
Historically, competition for land in Rwanda
has fuelled pervasive land disputes, “landgrabbing” and illegal land sales, in turnexacerbating inequality, landlessness andsocial tensions. To reduce such land-related
conflicts, Rwanda has taken far-reaching legal
measures aimed at clarifying land rights andending discrimination that impedes womenfrom becoming landowners. Between 2007
and 2013, Rwanda tested and rolled out aland tenure regularization (LTR) program
which identified and registered more than
10.3 million land parcels (DAI 2023). The
program included sensitizing stakeholders,
demarcating the boundaries of land parcels
with both landowners and neighbours present,
documenting the parcels on an index map

between different food system objectives. (FAO2018).
→ Fourth, the recognition that transforming
systems takes time and progress will be uneven. Changes to a food system’s supply side areespecially likely to be uneven where altering established production patterns depends on large,“lumpy” investments. External shocks can alsointerrupt the pace of change. And some effects ofa transformation may themselves produce unintended volatility.
→ Finally, our focus on the interdependencies
between food systems and other systems.
Transforming food systems will not be enoughby itself to keep the world within 1.5 degrees C of

and registering everyone with a claim to eachparcel, including women and minors. The tenuremaps and registers were digitized and madepublicly available.
A scientific evaluation of the effects of thepilot program (2007/08) found a subsequent
increase in secure land tenure among married
women, who are more likely to be regarded
as joint landowners than before. Women
were more likely to inherit land too. Although
Rwandan inheritance law requires genderequality, informal inheritance of land by men
often bypassed women’s rights. By requiring
landowners to specify their planned inheritors,
the LTR virtually eliminated gender bias ininheritance. In addition, households almost
doubled their investment in soil conservationand female-headed households almost
tripled their investment (Ali et al. 2014). Sincecompletion of the program, 92 percent of land
certificates include the name of a woman(DAI, 2023).
Sources: Ali et al. 2014; DAI 2023

global warming, significantly reduce obesity andthe incidence of diet-related, non-communicable diseases, and strengthen the livelihoods ofpeople working in food systems. FSEC’s analysis
seeks therefore to distinguish progress that canbe achieved by changes within food systems andadvances that depend on accompanying broader
socio-economic developments.
The diversity of the world’s food systems makes it
hard to pin down specific recipes for transforming
them. But the dynamism, adaptability, and innovative abilities of all the actors that shape foodsystems grounds the hope that transformations toan inclusive, health-enhancing and environmentally
sustainable food system will be achieved by 2050.

20

Chapter 1
Shared Goals for
Food Systems
21

Chapter 1

The Economics of the Food System Transformation

Chapter 1→ Food systems are incredibly diverse and transforming them towards more
inclusive, health-enhancing and environmentally sustainable outcomes will
require solutions tailored to their different contexts.
→ Despite local specificities, the future of food systems is likely to be shaped byheightened concerns for resilience to climate and conflict shocks, an ongoingshift away from traditional diets, high levels of innovation along the whole foodvalue chain, and continued reallocation of labor out of agriculture.
→ Transforming food systems towards inclusive, health-enhancing andenvironmentally sustainable outcomes can be translated as the pursuit of fiveoperational goals: (1) consumption of healthy diets by all; (2) strong livelihoods
throughout the food system; (3) protection of intact lands and restorationof degraded lands; (4) environmentally sustainable food production and (5)resilient food systems that maintain food and nutrition security in the shortand the long run.

Introduction
This chapter looks at the challenges of transforming food systems given their diversity and the varietyof trends that shape them. It describes the major
trends affecting food systems today and the opportunities and threats ahead. It then identifies five defining
characteristics of inclusive, health-enhancing and environmentally sustainable food systems. FSEC’s modeling of transformation pathways, detailed in Chapter
2, adopts these five characteristics as operational
goals and considers courses of actions or pathways toreach them. In practical terms, these five operational
goals can also guide the actual transformation of
any food system, whatever its scale and geographic
location, into one that is inclusive, health-enhancing
and environmentally sustainable.

Food systems around the globe
are highly diverse and dynamic
A first step towards transforming food systems
is to recognize their differences, similarities and interconnections, and the variety of country-level andglobal trends shaping their future.

Country-level trends
Food systems are highly diverse. Ambikapathi etal. (2022) group them in five categories ranging fromtraditional systems using ancient practices to highly
automated, industrial systems. This categorisation
helps to identify several trends that have shaped
food systems in all countries, to varying degrees, as
they have experienced both the modernization ofagriculture and its declining contribution to national
economies. These trends include:→ Increasing affordability of healthy diets, driven
by the increasing supply and falling prices of anumber of healthy foods. However, healthy dietsremain unaffordable for 3.1 billion people (FAO et
al. 2022), and obesity and other non-communicable diseases associated with unhealthy diets havebeen rising worldwide over the past few decades(Willett et al. 2019; Branca et al. 2019).
→ A large shift away from distinctively local diets highin traditional, minimally-processed staples andcereals towards more globally homogenized dietshigher in sugar, salt and fat. This trend has been
22

Chapter 1

driven by urbanization and rising incomes as wellas the growing role of multinational corporations inshaping food systems (Vaidyanathan 2021).
→ A growing burden on the environment arisingfrom over-consumption of certain foods andexcessive food loss and waste. In particular, theover-consumption of ruminant meat in industrialized food systems is expanding their carbon
footprint.
→ The movement of labor out of agriculture as urban and rural activities and employment in manufacturing and services have expanded. Thesedevelopments have transformed the structureof most economies. Corollaries of this structuraltransformation are an ageing farmer populationand increasing land consolidation (Giller et al.
2021).
While agricultural productivity growth related tothese trends has helped to reduce poverty andincrease food security in many countries, some in
Sub-Saharan Africa (SSA) and South Asia have been
exceptions (IFAD 2016).
Global trends
In addition to these country-level trends, at least
three major global trends shaping food systems
have intensified since the turn of the millennium:
Market concentration in the agri-food industry;
trade and interdependence; and the frequencyof shocks producing food crises across the globe.
These trends are having varying effects on inclusion,
food security, nutrition and the environment.
GROWING MARKET CONCENTRATION
IN THE AGRI-FOOD INDUSTRY

Market concentration in the agri-food industry
has increased across most segments and geographies due to mergers and acquisitions combinedwith the spread of modern food retailing – the“supermarket revolution” (Reardon et al. 2010). While
concentration does not necessarily enable a few
large companies to manipulate prices at the expenseof consumers, big market players are seen to use
their financial power to exert significant influenceon food systems and on policy decisions affecting

The Economics of the Food System Transformation

them (Hernández et al. 2023; see also Chapter 5).
For example, big players can push back against
government regulation and advocate self-regulation
instead (Béné 2022). As a result, agri-food industry
regulators have increasing difficulty in setting andenforcing industry standards to protect consumers,
workers and the environment. In other sectors, suchas tobacco, the lack of effective regulatory standards has been associated with failure to contain
excessive influence from big players (Sharma et al.
2010). This weakness in the regulation of the tobacco
industry was addressed successfully by the WHO
Framework Convention on Tobacco Control (FCTC)(Puska & Daube 2019).
GROWING INTERNATIONAL TRADE
AND INTERDEPENDENCE

Although on average only 17 percent of all foodby weight is currently internationally traded, thevalue of trade in food and agricultural commodities
has grown eight-fold over the past five decades,a period in which agricultural production tripled(Global Panel 2020). Staple grains, mostly for animal
feed, dominate this trade although growth in otherfood categories, including fruits, vegetables, meatand eggs, is enabling the diversification of dietsworldwide.
There is much debate on the implications of thegrowing interdependence of food systems throughtrade over the past few decades, since trade has
multiple and often contrasting effects:→ The distributional effects of trade on inclusion
vary according to the impact of trade on sourcesof incomes, on the consumption and prices oftraded and non-traded goods and on the assets
owned by different groups of people. In general,
however, the income opportunities offered bymore trade integration can be difficult for smaller producers to grasp (Onono-Okelo & Omondi2023). Women in particular face disproportionate
barriers to accessing the resources they need
to benefit from these opportunities (Njuki et al.
2023).
→ The effects of trade on food security may be
23

Chapter 1

countervailing to some extent. Trade helps tosmooth volatility in domestic consumption ofheavily traded staples (Bradford et al. 2022). However, interdependence between food systems
can amplify the impact of local or regional supply
shocks, such as those caused by Russia’s invasion of Ukraine or export restrictions in producer
countries to protect domestic consumption.
→ From a nutritional point of view, “food trade plays
an important role in the global distribution ofnutrients” (Global Panel 2020). However, its impact has been mixed depending on what type offood is traded and in which region. For example,
fruit imports have risen globally since the mid1990s, but fruit imports per capita have stalled in
Sub-Saharan Africa and South Asia. At the sametime, nutritionally less helpful sugar imports haverisen in high income countries and also in some
low and lower-middle income countries. The

The Economics of the Food System Transformation

establishment by multinationals of new production facilities in Latin America to take advantage
of growing trade in ultra-processed food has
been linked to the growth in local consumption of
those foods (Global Panel 2020).
→ The environmental aspects of trade are muchdebated and may also be countervailing to someextent. In principle, trade can be crucial for adaptation to climate change. Producers can adapt
to regional biophysical and climatic conditions
by specializing in export products suited to theirlocal conditions, avoiding the negative impacts
on biodiversity and the environment of trying tomeet all their needs locally (WRI 2022). However,
empirical estimates of success are mixed. The evidence suggests that trade overall leads to more
efficient water use (Dalin & Rodríguez-Iturbe 2016)
but its effects on greenhouse gas emissions andpollution are less clear. Trade may also indirectly

SPOTLIGHT ON CHANGE 3

The potential of urban agriculture to feed cities
Urban agriculture can nourish up to one billion
city dwellers while supporting progress towards
several other sustainable development goals.
These range from strengthening livelihoods,
extending environmentally sustainableproduction and creating new local food supply
chains to enhancing ecosystem services suchas climate change adaptation and countering
the urban heat island effect. Urban agriculture
can also play a major role in strengthening theresilience of cities and communities.
In low-income countries urban agriculture
already provides significant shares of householdincome in urban areas, notably in Nigeria (71percent), Madagascar (63 percent), and Ethiopia(40 percent) (Poulsen et al. 2015). Urban
agriculture has the advantage of offering women
additional income earning opportunities. In
higher income countries too, there is growing

awareness of the potential for urban agriculture.
The city of Berlin estimates that urban
agricultures could supply up to 80 percent of
the city’s fresh vegetable demand. In China,
cities could meet 30 percent of their vegetabledemand from indoor and rooftop urban
agriculture on average, with its potential ranging
from supplying 10 to more than 200 percent of
individual cities’ total vegetable needs.
The success of urban farming depends ona range of factors. Available space, local
population density, vegetable yields andresource management all make a difference.
To encourage successful urban agriculture
over the long term, cities need to offer bothincentives and the right supporting physicaland organizational infrastructure, includingcommercial frameworks.
Sources: Pradhan et al. 2023; Poulsen et al. 2015

24

Chapter 1

amplify pressure to convert natural habitats toagricultural uses by enabling output from newly
cultivated areas to meet international demand(Global Panel 2020). Growth in trade also directly
affects the environment through the demand forstorage, packaging and transport that it stimulates (Nemecek et al. 2016).
GROWING FREQUENCY OF SHOCKS LEADING TO FOOD
CRISES ON A GLOBAL SCALE

Extreme weather events and geopolitical andeconomic shocks have been the main triggers ofincreasingly frequent food crises (Cottrell et al. 2019).
Financial markets often amplify any resulting volatility in food prices (Headey et al. 2010). Repeated foodcrises over the past two decades have highlighted

The Economics of the Food System Transformation

the fragility of today’s highly interdependent, concentrated global food systems (FAO 2022).
Paradoxically, this fragility arises from thepursuit of efficiency. Short-term optimization of
resources has tended to concentrate a large proportion of global production of many traded food commodities in locations with the most favorable cost/
output ratios. This makes global supply of thosecommodities much more vulnerable to shocks inthose locations than would be the case if there wereless specialization and more redundancy in foodsystems, that is, if traded commodities were grownin more locations more widely dispersed aroundthe globe (Janetos et al. 2017). Pilditch et al (2023)
discuss the trade-off between optimizing for too
narrow a set of variables and diminishing resilience

SPOTLIGHT ON CHANGE 4

Developing new production opportunities downstream
Processing cashew by-products in Benin
Benin relies on exports of shelled, raw cashew
nuts, which grow on cashew apples. At present,
the cashew apples and nutshells are generally
discarded as waste. However, cashew apples
are rich in nutrients and especially beneficial for
diabetes patients. They can be processed into
various products such as cashew apple juice.
And both cashew apples and nutshells can be reused to produce bioenergy.
Cashew apple processing at scale has not yet
developed in Benin partly because the apples
are highly perishable and must be processed
the day they are picked. The lack of available
technical know-how and equipment plus
unstable electricity supplies pose further
challenges to processors, as does the currently
low domestic demand for cashew apple juice
due to low awareness of its availability, taste andhealth benefits among consumers.
Scenario analysis shows that overcoming thesechallenges to develop a cashew processing
sector would bring a host of benefits to Benin:

the economic benefits of additional growth;higher income for cashew farmers; alternative
employment for agricultural workers including
new jobs in processing, transport, marketing,and sales; the social benefits of increasing
incomes for women, who form a large part of the
cashew harvesting and processing workforce;the population health benefits of substituting
cashew juice for sugar-sweetened beverages;
and the environmental benefits of processing
waste into healthy food and green energy.
Targeted policies that would speed developmentof Benin’s cashew processing sector include
promoting cashew apple juice to consumers,
improving rural infrastructure, and providing
support for a processing value chain. Helping
farmers to execute the first stage in that chain
on-farm would solve the perishability problem
and reduce transport volumes. Converting
cashew apples and nutshells into bioenergy
would give processing factories both a newsource of electricity and additional income.
Source: Kinkpe & Grethe 2023

25

Chapter 1

as a common feature of complex systems.
Structural inequalities common in food systems
underlie uneven distributions of losses when a foodcrisis strikes. Women and other marginalized groups
are particularly vulnerable. Women tend to be lessable to guard against the risks of shocks or recoverfrom their effects because of social norms including
restrictions on their mobility and access to information and other resources (Njuki et al. 2023). Moreover, the governing bodies of today’s food systems
have limited mechanisms for coordinating crisis
management. As a result, food price spikes following
supply shocks increase hunger, poverty and inequality, especially in the poorest countries (Ocampo etal. 2022).

Looking ahead: opportunities and threats
shaping the future of food systems
The food system trends summarized above
shape several future opportunities and threats:→ Food system resilience will remain a central
concern because climate and conflict shocks
pose real risks to food systems at all levels, fromlocal to global. Population growth will also add topressures on food systems: the global population
is expected to reach about 9.5 billion by the middle of this century. According to the latest IPCC
report, “Climate-related extremes have affected
the productivity of all agricultural and fisherysectors, with negative consequences for foodsecurity and livelihoods […]. Climate change will
make some current food production areas unsuitable […]. Climate change will increase the numberof people at risk of hunger in mid-century, concentrated in Sub-Saharan Africa, South Asia andCentral America” (Bezner Kerr et al. 2022, p.717).
Furthermore, lower nutrient levels are expected insome crops due to warming and increases in CO₂
concentrations (Ziska 2022; Smith et al. 2018; Ebi
et al. 2021).
→ Food consumption patterns will probably
continue to shift away from traditional norms,
driven by complex responses to factors such asurbanization, income growth, the loss of culinary
knowledge and traditions (HLPE 2017), and themarketing of non-traditional foods and bever-

The Economics of the Food System Transformation

ages (Kearney 2010). Some aspects of this shift
will give currently undernourished populations
access to healthier diets. Others are likely to fuelthe growing consumption of ultra-processed
food, resulting in more instances of diet-related
non-communicable disease and their associatedeconomic threats, such as rising healthcare costs.
In addition, sustained global increases in the
supply of animal-sourced products are likely to increase pressures on the environment unless there
are significant innovations in production methods
and improvements in their productivity.
→ Innovation will continue apace, possibly leading to entire new models of production. Supply
chains are already being redesigned. For example,
labor shortages are promoting the use of robots
in highly labor-intensive sectors such as fruit andvegetable production. Plant breeding and precision farming will remain important for adapting
production systems to more volatile conditions
and assuring product quality. Other developments include more locally-produced food andcircular production models, more food grownin cities (see Spotlight on Change 3), and morediversification of suppliers (Hertel et al. 2023). Artificial intelligence applications are likely to transform many parts of the economy and will affectfood systems. Synthetic foodstuffs may become
increasingly important as they can be sourced
locally, making supply chains more resilient.
They could also replace animal-sourced proteins,
although their effects on inclusion, health and theenvironment when deployed at scale are as yet
unknown and untested.
→ The modernization and structural transformation of agriculture will continue to reshapeopportunities and livelihoods. Both trends may
offer many people now working in agriculture thechance to diversify and strengthen their sourcesof income or to get new jobs, either in other partsof food systems or elsewhere in the economy.
New investments, for example in rural infrastructure, may be needed to create new opportunities(See Spotlight on Change 4). However, while themovement of workers out of agriculture clearly
helped to reduce poverty during the second half
26

Chapter 1of the 20th century, there is current evidence
that some people leaving agriculture in countries
experiencing a late structural transformation are
moving into low productivity services rather thanmore productive manufacturing jobs (Ambikapathi et al. 2022; Gollin et al. 2016).
Assessments of how these opportunities andthreats will play out vary wildly. For example, some
expect further urbanization and land consolidation to foster the more productive, intensive use ofland for food production, which they see as key toprotecting uncultivated land from the encroachment of agriculture if matched with policies andsupport to halt land expansion (Folberth et al. 2020).
Others emphasize the potential of new and moregeographically diffuse, smaller-scale production
models focused, for example, on urban or peri-urban agriculture (Pradhan et al. 2023) or alternative
proteins (Humpenoeder et al. 2022) to offset future
threats to food supply and nature. The homogeneityof these trends across geographies is also in question. Some see a global increase in the consumptionof animal-sourced food as inevitable as incomesrise around the globe despite evidence that sucha trend would be detrimental to both human andenvironmental health. The global increase in meat
consumption is incompatible with both the 1.5°C
climate target and the land targets agreed upon in
the 2023 Kunming-Montreal Convention on Biodiversity. Others point to signs of a shift away from eating
meat products in high-income countries (Willoughby& Muzi 2023).
The food systems of the future are likely to be
characterized by all these contrasting forces, thoughdifferently in different parts of the world. Global
trade, for example, will continue to mitigate theimpact of local shocks, while new, more diffuse foodproduction models may create some of the redundancy in food systems needed to lessen the impact
of global shocks.

Five goals for the foodsystems of the future
Given the diversity of food systems today andthe complexity of the trends shaping them de-

The Economics of the Food System Transformation

scribed above, are there any characteristics common to inclusive, health-enhancing and environmentally sustainable food systems?
FSEC has identified five of such defining characteristics. Those can be taken as operational goals
that can be quantified to guide specific transformative actions. The operational goals include: (1)consumption of healthy diets by all; (2) strong foodsystem livelihoods; (3) protection of intact lands andrestoration of degraded lands; (4) environmentally
sustainable food production and (5) resilient foodsystems that maintain food and nutrition security inthe short and the long run (Figure 1.1). While the fivegoals can be adopted in every context, the actions
needed to reach these goals are context-specificand will differ by location.
Consumption of healthy diets by all. This goaladdresses all forms of malnutrition, including overweight and obesity. It encompasses both food security for all, to address the current undernourishmentof almost 1 in 10 people on the planet, and affordable diets for all, to address the lack of affordable
healthy food currently experienced by more than 3.1
billion people worldwide (FAO et al. 2022).
General alignment on what a healthy dietcomprises is needed for this goal to guide coherent
action at the global level. The healthy diet’s composition needs to be sufficiently flexible to accommodate local variations in food culture, ecologicalcontext and each individual’s age and gender.
Scientific debate about the recommended ranges ofhealthy consumption levels for some foods continues. However, there is broad scientific consensus
on the need for diets to be diverse, including foods
across major food groups, and to allow significant
flexibility of choice of foods from those groups within overall healthy levels of consumption (Neufeld etal. 2023). The EAT-Lancet Planetary Health reference
diet (Willett et al. 2019; Springmann et al. 2018), FAO
and WHO recommendations for Sustainable Healthy
Diets (FAO & WHO 2019), and National Food-Based
Dietary Guidelines (FAO 2023) all provide dietary recommendations that are aligned at this general level.
Although there are some variations in their general
dietary recommendations, they differ from each27

Chapter 1

The Economics of the Food System Transformation

FIGURE 1.1

Five operational goals for transforming
food systems
Diets
Consumption ofhealthy diets by all

Livelihoods
Strong livelihoods
throughout the
food system
Biosphere
Protection of intact
land and restorationof degraded land
Production
Environmentally
sustainable production
throughout the food system
Resilience
Resilient food systems
maintain food andnutrition security inthe short and long runother much less than actual consumption patterns
differ from what they recommend. In other words,
there is strong consensus on the recommended
direction of change in diets. Following this direction
while retaining regional differences in diet would on
average require:→ a nearly universal increase in the consumption ofwhole grains, fruits, vegetables and nuts;→ less consumption of ultra-processed foods; and→ regional changes in the consumption ofanimal-sourced food, with consumption significantly reducing in high-income countries andrising in low-income countries to ensure the adequate consumption of essential nutrients (Afshin
et al. 2019) in all regions.

There are no constraints on the diversity of foods
that can be consumed in a healthy diet beyond therequirements that it provides a healthy balance offoods from the major food groups and safeguards
cultural differences and values.
Strong livelihoods throughout the whole foodsystem, meaning higher incomes and better jobs forfood system workers. An estimated 1.2 billion people work in agri-food systems and 3.8 billion live infamilies whose livelihoods depend on food systems(Davis et al. 2023). Those livelihoods are supported by a variety of jobs, from daily manual labor on
farms to managerial employment in large supermarket chains. Often, food system livelihoods involve
work in multiple roles within food systems, or acrossfood and non-food related activities. Importantly,
many food system livelihoods entail working to varying degrees in the informal sector. This complicates
the task of understanding, monitoring and managing food systems, as informal work is often unrecorded. The need to identify local solutions to foodsystems challenges, and particularly the challenge ofstrengthening of livelihoods, largely stems from thedifferences in the extent and nature of informality
across food systems (see Box 1.1 on informality andthe challenges of strengthening informal workers’
livelihoods).
The persistent concentration of extreme poverty in agriculture is an indirect indication that many
farming systems limit the productive potential andwell-being of people whose livelihoods dependon them. Such systems restrict workers’ accessto resources including security of tenure, capital,
and inputs that they need to improve productivity.
In addition, activities in many local food systems
are assigned to particular groups, often by genderor caste. This can further limit the opportunities
available to the poorest, most vulnerable groups toimprove their livelihoods. Many food systems alsooffer little social protection for workers. Examplesof oppressive work conditions and modern slavery
from food systems all over the world are well documented (McGregor et al. 2018).

28

Chapter 1

Protection of intact land and restoration of
degraded land. Ensuring the ecological sustainability of food systems requires halting or limiting the
expansion of agriculture into remaining intact ecosystems and wilderness areas. These lands currently
occupy approximately 50 percent of the globe’s
land surface, but much of this area is taken up by
desert and boreal/tundra ecosystems unsuitable for
agriculture. In each ecoregion1, intact lands need to
be protected from encroachment to halt the loss of
biodiversity and of unique "ecological communities"- i.e., groups of native species that are interacting
in the same unique habitat – and help maintainnature’s contributions to people, including the regulation of climate and water cycles (Rockström et al.
2023; Richardson et al. 2023). Restoration of degraded lands can help these essential environmental services recover and flourish. Retention of upwards of
75 percent of forest lands is required to retain theircontribution to climate mitigation targets (Richardson et al. 2023).
Environmentally sustainable production
throughout the food system. Food systems
contribute significantly to total GHG emissions,biodiversity loss and environmental pollution. They
account for about a third of global GHG emissions,with conversion of land to agriculture and agricultural production itself responsible for much of thatamount, notably in the form of methane emissions
from ruminant livestock and rice production. Emission intensities also vary significantly within productcategories, depending on production practices
and contexts. For example, environmental impactsof maize, wheat, and rice production from the 10
percent most emission-intensive forms of production are more than three times as large as thosefrom the 10 percent least emission-intensive forms(Deconinck & Toyama 2022). Emissions from areasof food systems other than agricultural production
remain under-researched, although new approaches
to monitoring and reporting emissions from supply

The Economics of the Food System Transformation

chains are helping to make them more transparent(Deconinck & Hobeika 2022).
Sustainable intensification of production is necessary in order to spare remaining intact land for its
contributions to climate and environmental stability(Folberth et al. 2020). Sustainable and ecologicalintensification aim to close yield gaps where they
persist, while recognizing and amplifying the ecological performance of production systems, including
retaining sufficient embedded habitats within agriculture to secure pollination, pest regulation, and otherecosystem services necessary in agricultural lands– at least 20 percent habitat per square kilometre has
been proposed as a minimum value necessary tomaintain such services (Willett et al. 2019; Rockström
et al. 2023; Garibaldi et al. 2020). A diversity of practices qualifies as sustainable intensification including
conservation agriculture, agroforestry, precision
agriculture, organic agriculture to name but a few(FOLU 2023). There are concerns that some of thesepractices reduce yields with active debates on how
to sustainably manage production landscapes with
topics including regenerative agriculture, sustainable
intensification, and ecological intensification. To aid
navigation of this debate, the FAO has adopted 10
principles of agroecology that emphasize inclusionand diversity (FAO 2018).
Resilient food systems that maintain food andnutrition security in the short and long run.
Resilience is closely entwined with the other four
operational goals. Consuming healthy diets, providing higher incomes and better jobs, protecting andrestoring land, and producing food in an environmentally sustainable fashion all help to give food systems
the capacity to cope with sudden shocks. Their resulting resilience is particularly important for protecting
the most vulnerable. Strengthening food systems’ability to withstand shocks through measures thatcreate more redundancy in food systems and reducethe impact of shocks is therefore an essential component of a food system transformation strategy, partic-

1 A large area of land or water containing a characteristic set of natural communities that share a large majority of their species, ecologicaldynamics and environmental conditions (Fath 2018)29

Chapter 1

ularly as climate change increases the risk of shock.
To illustrate, environmental shocks threaten
food security, especially for the poorest, by restricting supply and causing price spikes. They can also
derail efforts to make food systems sustainable overthe long term by pushing policymakers into crisis
management. The urgent need to address shortterm food supplies, particularly for lower-income
groups, may divert their attention from longer-termtransformation goals. During food crises, for in-

The Economics of the Food System Transformation

stance, policymakers often relax environmental
regulations as a means of quickly increasing foodproduction, which undermines long-term goals.
(Laaninen 2022; Cerier 2023). In contrast, protecting
valuable ecosystems, and restoring the productivityof degraded lands delivers myriad environmental
services that both lessen the likelihood of environmental shocks and help to ensure food security overtime.

BOX 1.1

Informality and the challenges of strengthening informal workers’ livelihoods
The livelihoods of many people working in foodsystems are at least partly informal, meaning
they are beyond the reach of formal regulations.
Globally, agriculture is the sector with thehighest level of informal employment. Today
98 percent of agricultural workers in Africa areemployed informally, as are 99 percent in SouthAsia, and India is the country with the largest
number of informal food system workers by far(ILO 2018). In Sub-Saharan Africa, food traders
are mostly unregistered, and 70 percent of theurban population in 11 African cities get all theirfood from such informal street vendors or otherinformal retailers (Resnick 2017).
Informality is generally prevalent where many
enterprises lie outside the scope of regulations.
For example, in India the employment thresholdthat triggers regulatory scrutiny of an enterpriseis five workers and an estimated 95 percent of all
firms in the economy have fewer than five (MOSPI2016). Alternatively, workers may be contracted
by formal organizations in arrangements notgoverned by labor laws. And where informal entities

and workers do come under the scope of policies,
these may have limited impact for various reasons.
For instance, policies to regulate the terms ofpervasive informal financing might be circumvented
by creditors requiring repayment from indebted
producers outside regulated sites. Or informal
workers may be eligible for state income transfers
but cannot receive them because they are notregistered with the state welfare system.
The boundaries between formal and informal
work are often blurred. The combination ofcorruption, working arrangements that are
exploitative without being illegal, poor compliancewith policies and weak policy enforcement all
make it especially difficult for regulators to
influence activity in the informal sector. Moreover,high levels of informality can amplify policies’unintended effects. For instance, when street foodvendors are closed down for breaking food safety
regulations, this not only damages their livelihoods
but also removes a supply of food from their poor
customers.
Sources: Resnick 2017; ILO 2018; MOSPI 2016.

30

Chapter 2
Charting a Pathway
towards Food Systems
Fit for the Future
31

Chapter 2

Chapter 2→ It is biophysically and technologically feasible to transform the current global
food system into one that is inclusive, health-enhancing and environmentally
sustainable. The Food System Economics Commission has explored thistransformation by contrasting two science-based, quantitative pathways
up to 2050: Current Trends (CT) and the Food System Transformation (FST).
→ All measures aimed at transforming food systems need to be implemented ina deliberately integrated fashion to leverage synergies and manage trade-offs
between different food system goals.
→ The FST pathway achieves health targets by eradicating food insecurity,
improving diet-related health outcomes, and achieving a strong reduction in
nutrition-related mortality.
→ In the FST pathway, greenhouse gas emission reductions keep global warming
below 2°C by 2050, biodiversity loss is reversed, and nitrogen surpluses are
reduced by half.
→ This pathway enhances processes of structural transformation and reallocationof labor outside of agriculture.
→ Broader societal goals, such as stabilizing climate and eradicating poverty,
require complementary actions outside of food systems, particularly in theenergy system.
Introduction
Chapter 1 showed how the world’s food systems are together on an unsustainable pathway. Itthen set out five goals for the food systems of the
future. Achieving those goals worldwide would in
effect produce a global food system that is inclusive,
health-enhancing and environmentally sustainable.
But is it biophysically and technologically possible
for food system reforms across the globe to pursue
and achieve these multiple goals at the same time?
To answer this question, FSEC has developed ascience-based Food System Transformation (FST)
pathway targeting the five operational goals set out
in Chapter 1. Using integrated modeling, FSEC has
tested the feasibility of pursuing this FST pathway toachieve the goals at the global level by 2050. Developing science-based pathways to reach defined

operational goals and modeling to test them is awell-established means of exploring strategic options and revealing synergies and trade-offs acrossmultiple 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. The FST pathway
modeling quantifies gradual progress towards theoperational goals set out in Chapter 1 by 2050, as
societies respond to packages of measures aimed
at changing dietary patterns, improving rural
livelihoods, conserving ecosystems and improving
agricultural management.
Throughout this chapter, the outcomes of the
FST pathway are contrasted with those emanatingfrom following Current Trends (CT). A crucial insight32

Chapter 2

The Economics of the Food System Transformation

FIGURE 2.1

Detailed description of packages of measuresmodelled by FSEC in the FST and External pathways
Operational Goal

Food system measures
Eradication of undernutrition
Caloric intake is increased to eliminate undernutrition by 2050.

Stabilization of obesity

Diets
Consumption ofhealthy diets by all

Excess caloric intake is reduced to stabilize the rate of obesity at
50 percent of Current Trends.

Convergence towards healthy diets
Countries are in line with minimum levels of legumes, nuts and seeds,
fruits and vegetables, and fish, and maximum levels of staples, sugar,
and animal-sourced foods.

Halving food waste
Household and retail food waste is reduced to a maximum of
20 percent of per-capita caloric intake.

Trade liberalization
Trade barriers are reduced for crops, livestock, and secondary products.

Wage increases in agriculture

Livelihoods
Strong livelihoods
throughout the
food system

A minimum wage in primary production increases incomes in low-income
countries, but also higher production costs and some labor substitution
by capital.

Capital substitution
Capital is substituted by labor in countries with high capital intensity,
leading to increased employment and production costs.

Reducing emissions from deforestationand forest degradation (REDD+)

Biosphere
Protection of intact
land and restorationof degraded land

A GHG price on AFOLU emissions curtails deforestation and degradation,
promoting the regrowth of natural vegetation on non-agricultural land.

External
Sustainabletransformations
external to thefood system
Slower population growth
Population growth slows more
quickly than expected, particularly
in low-income countries.

Equitable human development
Societal development is more equitable,with stronger institutions, education,and social justice.

Sustainable energy transition
Sustainable development strongly
curtails GHG emissions in the energy
and transport sectors.

Increase in bioplastics

30 percent of the projected total plastic
demand is replaced by bioplastics.

More timber construction

Wood is used as construction material
for 50 percent of future urban buildings.

Land conservation
Protected areas expand from 15 to 30 percent of global land, including
threatened biodiversity hotspots and intact – though currently unprotected –forests.

Peatland rewetting
A GHG price on AFOLU emissions disincentivizes draining intact peatlands
and encourages the rewetting of drained ones.

Water conservation
Local minimum environmental water flow requirements cannot be overdrawn.

Biodiversity oﬀset
The Biodiversity Intactness Index (BII) does not decline post-2020. Local
biodiversity loss must be oﬀset by increases in the same biome and region.

Nitrogen eﬀiciency
Nitrogen uptake eﬀiciency is increased through technical measures
including optimized manure application, nitrification inhibitors,
designated fertilizer-free zones, etc.

Production
Environmentally
sustainable production
throughout the
food system

Longer crop rotations
Payments incentivize longer crop rotations to oﬀset the external costs
associated with less diverse farming practices.

More landscape habitats
20 percent of land in agricultural landscapes is reserved for semi-natural
habitats to support biodiversity and ecosystem services.

Emission mitigation from rice cultivation
Reduced emissions through direct seeding, improved residue management,
flooding and drainage, and improved fertilization.

Livestock management
Livestock intensification, especially in low-income countries, enhancesfeed-to-product conversion eﬀiciency.

Manure management
About 50 percent of confined manure is anaerobically digested with a
90 percent recycling rate; reducing storage losses and emissions compared
to conventional methods.

Soil carbon management
A GHG price on AFOLU emissions discourages the degradation ofsoil carbon (e.g. through land conversion) and encourages sequestration.

33

Chapter 2

gained from this modeling is that measures aimed attransforming food systems need to be implemented in a deliberately integrated fashion to leveragesynergies and manage trade-offs between different food system goals. For instance, shifting dietstowards more plant-based consumption patterns
is essential to moderate the emerging food pricepressures generated by protecting ecosystems andshifting to environmentally sustainable production
throughout food systems. Spotlight on Change 5
provides an example of how synergies between foodsystem goals can advance systemic transformation.
The chapter also considers a third pathway thatcombines actions taken on the FST pathway andadditional changes external to the food system, forexample, creating low-emission energy systems. Thisis called the Food System and External Transformations pathway (FXT). The packages of food systemmeasures assumed to be implemented in the FST and

The Economics of the Food System Transformation

FXT pathways and their connection to the five goals
are shown in Figure 2.1 (see also Chapter 2 Annex).
Comparing the FST and FXT outcomes brings tolight a critical finding from this modeling exercise:achieving the FST without pervasive sustainable
progress beyond food systems will not be enoughto secure society’s broader goals, particularly forstabilizing the climate and reducing poverty.

The value of identifying and modelingquantitative, science-based pathways
The United Nations Food Systems Summit in
2021 highlighted the need for comprehensive andsustainable pathways, rooted in scientific evidence,research, and principles, to guide a sustainabletransformation of food systems (UNFSS 2021).
Science-based pathways aid in identifying and designing policy instruments that incentivize transformative changes. They also help to guide the invest-

SPOTLIGHT ON CHANGE 5

How synergies between food system goals can propel transformation
The rewilding of California’s rice production
The Central Valley of California, once home togrizzly bears, is now one of the most productive
agricultural regions in the world and a major
contributor to the state’s total agriculture,valued at 48 billion USD. In the middle ofthe valley, the San Joaquin, American, andSacramento Rivers form the Sacramento Delta,
which is California’s rice growing region. Until
the early 1990s, farmers burned rice straw toclear their fields for spring planting. But thenegative effects on air quality and humanrespiratory health in the Sacramento region led
to a ban on burning rice straw in 1991.
Instead of burning, farmers switched to winterflooding, which slowly decomposes the ricestraw. Migratory waterfowl began to choose
the flooded fields as their winter habitat, andaccelerated decomposition of the rice straw
in the process. Banning rice straw burning for

health reasons doubled California’s wetland
habitat and turned the state’s rice farmers into
its most successful restoration agents without
reducing the rice-growing area or compromisingyields: at 10 tons per hectare, these remainamong the highest in the world. The economic
value of this habitat has been assessed at 1.5
billion USD, plus the additional economic valueof duck hunting. The same land also serves as
the first line of defence against flooding for thecity of Sacramento, valued at 121 million USD(40-400 USD per hectare). Much of the area liesin the Yolo Bypass, which is jointly managedby farmers, the Army Corp of Engineers, andthe California Department of Fish and Game.
Together these groups coordinate land andwater management in the delta to reap
multiple benefits: Human health, wildlife
conservation, rice production, recreation,and flood protection.
Source: Bogdanski et al. 201734

Chapter 2

ments from both public and private sectors needed
to finance them (Hainzelin et al. 2023; Béné et al.
2019; FOLU 2019; Hendriks et al. 2023; von Braunet al. 2023).
Integrated assessment models, of the kind thatFSEC has used here, are valuable tools for generating these science-based pathways because they
can present plausible futures based on consistentassumptions about key drivers of change and theirinteractions (van Vuuren et al. 2012; Hainzelin et al.
2023; Bai et al. 2016). These models allow for thesimulation of long-term, large-scale food systemtransformations by integrating key processes thatdrive the economics of land use alongside the biogeophysical dynamics that constrain it. These models additionally incorporate broader societal shifts

The Economics of the Food System Transformationin population and GDP, and thus facilitate synthetic
investigation of the consequences of long-term
structural changes in the food system. This kind of
integrative modeling enables, for example, rigorous
estimation of synergies and trade-offs in pursuing
different objectives of the food system transformation at national level, as illustrated by the country
level analysis FSEC conducted for India (see Box 2.1).

Modeling the FSEC pathways
The FSEC science-based pathways are designed
and modelled to estimate a set of outcome variables
wider than any previous food system pathways.
These outcomes reflect not only the economics ofthe foods people eat, but also food consumption’s
consequences on the environment (GHG emissions,

BOX 2.1

Synergies and trade-offs on the pathway to a sustainable food system in India
India’s food system faces several interconnectedchallenges: Undernutrition and diet-relateddiseases persist; conventional agricultural
practices deplete groundwater, cause high GHG
emissions and pollute the environment; and many
farmers are indebted. FSEC’s modeling showsthat by following a pathway to a sustainable foodsystem, India could improve nutrition, reduce
environmental damage and enhance livelihoods.
Moreover, there are synergies between these
multiple goals. But there are also trade-offs, whichmust be negotiated and navigated, calling for
careful policy design.
On the one hand, including more fruits, legumes,
and nuts in Indian diets would significantly
improve public health by reducing bothunderweight and obesity. It would also diversify
crops grown in the country, reduce GHG emissions
from farming and boost agricultural employment.
On the other hand, growing more fruits, vegetables
and nuts would require more irrigation, whilewater is already scarce in many regions. Similarly,
liberalizing trade and raising wages to improve
food system livelihoods will not only raise farmers’
incomes but bring multiple environmental benefits
as well. However, these measures will add toalready significant pressures to reallocate jobs
from agriculture, which will need to be absorbedby new jobs in other food system segments orother sectors. Measures to conserve and restore
land likewise offer multiple benefits by improving
biodiversity and lowering GHG emissions.
Adopting more sustainable agricultural practices
will do much to protect the environment and bring
India’s GHG emissions down further. However,along with action to make diets more nutritious
and improve livelihoods, as noted above, thesemeasures will raise food prices and the costs ofagricultural production. Food may become lessaffordable, and poverty may increase without
countervailing policies, such as social protection
and compensation measures.
This example helps underscore the trade-offs andsynergies that transforming food systems entail
in practice. As discussed in Chapter 4 and Chapter
5 emerging national food system strategies
that are focused on incentives and regulation,
innovation, and investment and fine-tuned toaddress the political economy constraints can help
policymakers navigate these challenges.
Source: Das et al. 2023

35

Chapter 2

The Economics of the Food System Transformation

nutrient surpluses, biodiversity), people’s health(premature mortality, obesity and undernourishment), and their livelihoods (agricultural wages,
poverty). FSEC has been able to assess this wide
range of variables by constructing a comprehensive
framework that integrates a variety of specialized
models describing land systems, macroeconomies,
human health and poverty, and the climate systemand their mutual interactions (see Figure 2.2). These
constituent models are each well-established, withrobust records of scientific publication, and arethemselves often included in the ongoing modelingexercises contributing to the IPCC reports. However, FSEC’s pathways are the first of their kind tocombine these state-of-the-art models into a single

comprehensive framework.
The findings in the following section draw
on comparison of FSEC’s pathway modeling showing
potential global food system development towards
2050.
One pathway reflects the continuation of current
trends (CT) and a second represents a comprehensive food system transformation (FST) pathway(see Bodirsky et al. 2023, for more details). A third
pathway extends the FST to account for potential
sustainable transformations occurring external to
the food system (FXT). This includes, for example,
the decarbonization of energy systems.
The results are summarized in terms of 16
outcome indicators, each connected to one of the

FIGURE 2.2

Modeling Framework

Population andIncome ProjectionsPop
I n c ulat
om ione

Population
IncomeGini Index
Population
IncomePopulation
IncomePop
I n c ulat
om ione

Poverty
Model
Macroeconomy
and Energy
System Modelses
ga r su s e s e c toohen herG re m ot
f ro

Bio

en

Fo
o
Tra d exnsf p enerdp a itur
ym e
en
ts

e rg

yd

m
f ro ngeses haga use c
e
s
d
u
an
ho
en nd lGre se adulan

ClimateModel

Temperature
Precipitation
Radiation
CO₂

em

an

Vegetation
Model

IntakeFood composition
Bodymass index

Food
Demand
Model

d
an n
em tiod d p o sioF o co mtDiedCrop and grass yields
Carbon densities
Water availability

Dietary
HealthModel

Land
SystemModel
Connections
Models36

Chapter 2

five FSEC operational goals (Figure 2.1). Healthindicators include underweight, premature mortality and obesity. Environmental indicators include
a biodiversity intactness index, Shannon index,
nitrogen surplus, environmental water flow violations, AFOLU GHG emissions, and global surface
warming. Inclusion and economy indicators consistof expenditure on agricultural products, number ofpeople in poverty, agricultural employment, agricultural wages, bio-economy supply, and agricultural production costs.
FSEC has explored what happens if the FST
pathway is realized within the larger socio-economic
context modelled in the Shared Socio-economic
Pathway 2 (SSP2) or “Middle of the Road” (O’Neill et
al. 2014). SSPs are a set of standardized assumptions
used by climate researchers to account for potential
future change in key variables such as population
and GDP growth. By integrating prevalent socio-economic trends, the analysis isolates the effects of thefood system transformation from these confounding variables, which shape the wider outcomes but
fall beyond the realm of the transformation itself.
Importantly, as modelled here, SSP2 assumes thatcountries successfully implement their current policy
commitments (Nationally Determined Contributions,
NDCs) to reduce greenhouse gas emissions.
To model the FXT pathway, FSEC incorporated
into the FST pathway several more general sustainable transformations external to the food system, as
well as more optimistic assumptions of population
and GDP change aligned with the trends of Shared
Socio-economic Pathway 1 (SSP1) or “Taking theGreen Road” (O’Neill et al. 2014). The FXT pathway
also considers the effects of a renewable energy
transformation and an increase in timber demandfor construction (Figure 2.1).
This analysis focuses on the broadly-scoped
measures taken to achieve food system goals, as detailed in the following section. It does not model theunderlying policies necessary to incentivize and ensure implementation of the measures. To illustrate,
the FST modeling assumes that the changes needed
to ensure healthy diets are introduced in different
parts of the world without prescribing how theycome about. Details about different policy levers

The Economics of the Food System Transformationand their effectiveness are discussed in Chapter 4.
Disaggregating global modeling outcomes demonstrates that the FST pathway often generates diverse
outcomes in different regions particularly concerning the affordability of food. Notable differences inregional outcomes are highlighted throughout thischapter. Chapter 4 explores potential responses forpolicymakers. Further decomposition and detailsof regional outcomes of the pathway modeling is in
Chapter 2 Annex.

The Food System Transformation Pathway
The FST pathway (Figure 2.1) provides a comprehensive understanding of how changes to different
aspects of the global food system, ranging fromproduction to consumption, interact to achieve
outcomes that are inclusive, health-enhancing, andenvironmentally sustainable. Comparison with theCT pathway underscores the urgency of achieving
FST ambition.
The FST is designed to:→ Immediately reduce greenhouse gas emissions
and ensure the land system becomes a net
carbon sink by 2040;→ Eradicate undernutrition by 2050 and halveobesity compared to CT (that is equivalent tostabilizing obesity at current levels);→ Reverse the decline of biodiversity, and protect
and expand forests;→ Increase the wages of agricultural workers andcontain poverty.
The FST has been designed to ensure a rapid fall in
GHG emissions, as accumulating emissions increase
the challenge of future mitigation. It also reflects theneed for rapid action to stem the irreversible loss of
biodiversity and address hunger and malnutrition.
The modelled shift towards healthy diets, while also
ambitious in pace, is relatively slower than the otherelements of the transformation.
Translating these shifts in the model to achieve
the five operational goals set out in Chapter 1 has required implementing 19 selected measures, (Figure2.1). They have been identified based on the findingsof existing literature and previous assessments of37

Chapter 2

sustainable development pathways (Soergel et al.
2021). The measures include eradicating undernutrition, halving food waste, stemming the loss of
biodiversity, improving nitrogen-use efficiency, andreversing deforestation among others. The measures are grouped in packages aligned with the FSEC
operational goals, to enable the modeling to identify
interlinkages between them. To operationalize theshift to healthy diets, the FST reflects all countries
gradually adopting by 2050 a healthy reference
diet as defined by the EAT-Lancet Commission(Willett et al. 2019, Springmann et al. 2018). This dietincludes healthy minimum food intake levels forfruits, vegetables, soybeans and other legumes, andnuts. It also includes healthy maximum food intake
levels for sugar and vegetable oils, as well as redmeat, poultry, eggs, and milk products (Bodirsky et
al. 2023). Within these limits, as detailed in Figure
2.1, country-specific dietary patterns can be quite
diverse. Together, these measures constitute the full
FST pathway (Figure 2.1). In addition to the complete
FST, the impacts of all 19 measures have been modelled individually and in combination1 to explore
their interactions and interdependencies.
Readers should note that while food system
resilience is best measured by its ability to adapt toshort-term disruptions, integrated assessment models are designed to analyse long-term dynamics andtrends. This makes them unsuitable for assessing
resilience to short-term shocks and extreme events.
For that reason, no food system measures in the FST
are explicitly linked to achieving the operational goalof resilience; however, as discussed in Chapter 1,
reorienting food systems to achieve the other operational goals will also strengthen their resilience.

The Economics of the Food System Transformation

The Current Trends pathway
underscores that a food systemtransformation is urgently needed
to avoid systemic failures
The transformative impact of the FST is fully
brought out by comparisons with the Current Trend
pathway. Current Trends shows that without effective
food system measures the world will undergo a deepening ecological and health crisis. While the relatively
optimistic assumptions embedded in SSP2 on global
economic development improves poverty levels andwages in the Current Trends pathway, these inclusive
gains come at the cost of increasing environment
degradation. This trade-off threatens to severely
undermine Earth system stability and long-term living
standards. Food production in many countries would
become increasingly vulnerable to climate change
and environmental degradation, with the likelihoodof extreme events dramatically increasing. Risingfood prices due to climate or other shocks heighten
poverty and hunger, stretch the budgets of the poorand the middle classes and lead to social tension.
Some of the more specific 2050 outcomes of Current
Trends include:→ Food insecurity and undernutrition would continue
plaguing humanity, leaving 640 million people (and121 million children) underweight in 2050, particularly in India, Southeast Asia, and Sub-Saharan Africa.
→ The global adoption of diets high in fats, sugar,salt, and ultra-processed foods would increase
the number of obese people worldwide by 70
percent, reaching 1.5 billion in 2050, or 15 percentof the expected global population.2→ Per capita food waste would increase by
16 percent compared to today, reaching 76 kg
of dry matter per capita in 2050.
→ While Latin American countries may successfully
fulfil their NDCs on deforestation, Sub-SaharanAfrica and Southeast Asia are likely to continue losing their primary forests and associated1 Using the open-source, integrated land system model MAgPIE (Dietrich et al. 2019). Model-based outcome indicators are provided at theaggregate global level, at the level of 14 world regions and three country income groups, and at a spatial grid of about 50x50km for showing
spatial heterogeneity.
2 Note that other sources estimate the direct medical costs of treating the health consequences of overweight and obesity are already estimatedto rise to almost 3 trillion USD by 2030, from 600 billion USD today (Okunogbe et al. 2022).
38

Chapter 2

The Economics of the Food System Transformation

FIGURE 2.3

Pathways for select outcome indicatorsof the food system until 2050
FIGURE 2.3A

Global AFOLU GHG Emissions
Gigatonnes CO₂ equivalent per year
12
10
8

CT

8.6

FST

-5.6

FXT

-6.7

6

GtCO₂eq/yr

4
2
0
-2
-4
-6
-8
2010

CT

Current Trends

2020

FST

2030

2040

Food System Transformation

biodiversity. Deforestation will erode a further 71
million hectares of natural forests between 2020
and 2050, an area equivalent to 1.3 times thesize of France, with far-reaching implications forcarbon emissions and biodiversity loss.
→ Nitrogen surpluses will increase from 245 Mt N ayear to about 300 Mt N in 2050. As more nitrogencontinues to leach into waterways and naturalareas, it will undermine public health and exacerbate biodiversity loss.
→ 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

FXT

2050

Food System Transformation + External(AFOLU) will drop by 16 percent from 2020 to2050. Implicit in this reduction isthat countries implement the mitigation measures necessary to meet their current NDCs
within the UNFCCC framework. However, thescale of expected non-food related GHG emissions means this progress in reducing AFOLU
emissions does not prevent an overall failure toaddress the climate crisis.

An inclusive, health-enhancing,and environmentally sustainable
food system is possible
Overall, the findings show that prioritizing rapid
implementation of all FST measures can achieve
39Chapter 2

The Economics of the Food System Transformation

FIGURE 2.3B

Global Surface Warming
Degree C, peak global warming level between 2020-2100, relative to 1850-1900
3.0

Degrees centigrade (C)

2.5

2.0

1.5

Limiting damages: transforming foodsystems together with other externaltransformations limits peaktemperatures to just above 1.5˚C degrees

1.0

0.5

0

Current Trends

External

Food System Transformation

the transformative change described by the fivegoals and effectively tackle the systemic failures andsustainability challenges that characterize Current
Trends by 2050. However, turning sharply away fromthe Current Trends pathway, with its immediate andlong-term threats to human health, climate, biodiversity, and inclusion, remains a huge challenge.
Major achievements include:
The FST alone will transform the land sector intoa net carbon sink by 2040 and limit peak global
mean temperature to just above 2.0°C. (Figure
2.3B) Heavy investment in carbon sinks, such as
forests and peatlands, and substantial reductions in
non-CO₂ emissions from agriculture are the critical
FST measures. An additional 1.4 billion hectares ofland is protected, while a further 200 million hectares are afforested and open to economic uses such

Food System Transformation + Externalas the production of timber for housing. The shift
away from diets rich in animal-sourced protein is
important too as these diets generate extreme pressure on land. As a result of these changes, emissions
under FST become net negative as early as 2040,
with Brazil and the rest of Latin America becoming
the most effective carbon sink per hectare due toextensive reforestation. These positive developments will gradually help to reduce the occurrenceof extreme weather events (IPCC 2021) and thus
safeguard future agricultural production.
Coupling the FST with external transformations(FXT) could further reduce peak global mean
temperature (that is the maximum temperaturereached over the period) to slightly above 1.5°C
and lead to global mean temperatures well below
1.5°C by the end of the century. An ambitious
40

Chapter 2

The Economics of the Food System Transformationtransformation of the food system will be a criticaland necessary component of an economy-wide
transformation to sustainability. 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.
A shift to environmentally sustainable production in agriculture reverses biodiversity loss,
reduces demand for irrigation water and almost
halves nitrogen surplus from agriculture andnatural land. Protecting ecosystems significantly reduces biodiversity loss, while adherence toregional water withdrawal limits curtails the overuse of freshwater resources without compromising
agricultural yields. These measures, combinedwith diversified cropping systems, contribute to amore resilient food system, capable of sustaininga growing population even in the context of globalchange (Isbell et al. 2015; Rosa et al. 2020; Egli et al.
2021). The adoption of technical mitigation measures together with the widespread shift towards
more plant-rich diets dramatically reduces nitrogen
pollution. (Figure 2.3C).
Greater trade integration, along with diversification of trade routes, improves connections
between regions with food surpluses
and deficits. This interconnection strengthens foodsystem resilience to shocks, helping to prevent lossof lives during extreme weather events and crop
failures (Janssens et al. 2020).
FST eradicates food insecurity, improves
diet-related health, and sharply reduces nutrition-related mortality in all regions. By ensuringthat all people have access to sufficient calories,
the FST eradicates undernutrition. In contrast,
under Current Trends prevailing food insecurity
and undernutrition would leave 640 million people

FIGURE 2.3C

Global Nitrogen Surplus
Million tonnes N per year

Million tonnes per year (Mt N/year)

350

300

CT

303

FST

171

FXT

165

250

200

150

100
2010

CT

Current Trends

2020

FST

2030

Food System Transformation

2040

FXT

2050

Food System Transformation + External

41

Chapter 2

The Economics of the Food System Transformation

FIGURE 2.3D

Global Premature Mortality
Millions of attributable deaths
20

CT

19

FST

7.7

FXT

5.5

Millions of attributable deaths

18
16
14
12
10
8
6
4
2010

CT

Current Trends

2020

FST

2030

Food System Transformation

2040

FXT

2050

Food System Transformation + External

FIGURE 2.3E

Global Obesity Prevalence
Million people
1500

CT

1461

FXT

805

FST

730

Million people

1250

1000

750

500
2010

CT

Current Trends

2020

FST

2030

Food System Transformation

2040

FXT

2050

Food System Transformation + External

42

Chapter 2

The Economics of the Food System Transformation(and 121 million children) underweight in 2050. The
FST reduces diet-related mortality from 12 million
deaths per year attributable to poor diets in 2020 to
7.7 million in 2050 by decreasing rates of diet-relateddiseases such as of cardiovascular conditions andcancers (Figure 2.3D). Compared to CT, 174 million
lives are saved by the reduction in diet-related
chronic diseases under FST. At the same time, obesity as a result of diets high in fats, sugar, salt, andultra-processed foods would increase by 70 percent
under CT and affect 1.5 billion people, that is 15
percent of the expected global population in 2050
(Figure 2.3E).

FST also reduces global demand for cropland andpasture compared to CT, as land-intensive livestock
products are replaced by plant-based proteinsin 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 fornitrogen fertilizers.

The necessary shifts in diet vary by region. (Figure 2.4) While over- and under-consumption now occur across high-, medium- and low-income regions,on average, high- and middle-income regions needto reduce their per capita intake of animal-sourced
food by 68 percent and 62 percent respectively from2020 to 2050, and increase their intake of fruits, nuts,
vegetables, and legumes. In low-income regions,such as Sub-Saharan Africa and India, overall intake– in particular intake of healthy foods – must increase to combat undernutrition. The outlook fortheir intake of meat varies. For instance, in order
to meet healthy intake levels, some countries in
Sub-Saharan Africa need to increase their intake ofanimal-sourced food to ensure adequate healthyprotein intake, but some middle-income countries
in the region need to reduce it. Similarly, high intakeof particular animal-sourced foods, such as dairy
products in India, needs to fall. In total, low-income
regions see a 33 percent aggregate decline in theintake of animal-sourced foods under FST eventhough their intake by currently undernourishedgroups in those regions should increase to improvehealth.

The FST leads to a fall in global per capita foodwaste of 24 percent between 2020 and 2050. This
contrasts with an expected increase under CT of 16
percent, which would bring it to 76 kg of food waste
per capita (dry matter) per capita by 2050. FST suggests that high- and middle-income regions, where
food waste is currently highest, will contribute mostto waste reduction, lowering it by 39 percent and 29
percent compared to 2020 respectively. Per capita
food waste in low-income regions is expected to increase by 5 percent from today’s currently low levels.
Food losses in the supply chain, although not coveredby the modeling, will also need to be reduced.

Dietary change under FST eases the need to increase crop yields further and distributes legume
production more equally around the world, withenvironmental benefits. Under the FST, conserving
biodiversity hotspots and wetlands together withmore afforestation and reforestation restrict thearea of land available for agriculture. However, theGlobal convergence towards healthy diets limits
the rise in agricultural commodity prices andstabilizes expenditures on agricultural products.
Upward pressure on agricultural commodity prices
is observed under the FST for two main reasons:first, FST improves livelihoods by ensuring minimum
wages for workers in the agricultural sector, but inturn increases production costs that ultimately leadto higher prices. Second, many of the benefits of FST
depend on changes in land use that make cultivableland more scarce. One such change is reforestation to safeguard biodiversity and mitigate climatechange. The resulting increase in agricultural commodity prices is largely mitigated by the dietary shift
away from unhealthy and unsustainable diets. As aresult, under the FST agricultural commodity prices
rise to 28 percent above 2020 levels by 2050, which
represents a much slower rate of increase than has
43Chapter 2

The Economics of the Food System Transformation

FIGURE 2.4

Intake of select food groups globally, and in low and highincome regions until 2050
2.4A Total caloric intake
2600

CT

Current Trends
Global
Low-income regions

2500

kcal/capita/day

High-income regions
CT 2400

2400

FST

2363

FST

Food System Transformation
Global2300

Low-income regions
High-income regions

2200

2100
2020

2030

2040

2050

2.4B Livestock product intake
700
600
CT 505kcal/capita/day

500
400
300
200

FST

172

100
0
2020

2030

2040

2050

2.4C Legume, fruit, nut, vegetable intake
600

FST

588

kcal/capita/day

500

400

300

CT

228

200
2020

2030

2040

2050

44

Chapter 2

The Economics of the Food System Transformation

FIGURE 2.3F

Global Agricultural Price Index
Percentage change+30%

FST +28%+20%

Percentage change

FXT +14%
+10%
0%
CT

-10%

-7%

-20%
2030

2020

CT

Current Trends

FST

2040

Food System Transformation

occurred over past decades.
At a global level, the shift away from overconsumption of food (especially overconsumption ofanimal-sourced foods) coupled with less food waste
will lead expenditure on agricultural products tostabilize by 2050 under the FST. However, in Sub-Saharan Africa and India expenditures on food will increase. This is due to differences in the compositionof 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 ofthose regions, which are relatively less costly (Figure2.4). 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
FST (Figure 2.3H).
FST does not affect the pace of poverty reduction.
Under FST, the reduction in poverty is only marginallylarger than under Current Trends. Under FST the incomes of the poor increase in aggregate, thanks to an
exogenous increase in agricultural wages and universal transfers financed by the recycling of environmen-

2050

FXT

Food System Transformation + External

tal taxes. However, the increase in production costs
puts pressures on prices which largely neutralizes thereal income impacts of those measures. More people
would be lifted out of poverty if transformative action
is taken beyond the food system. Measures external
to the food system that result in more equitable GDP
growth and faster human development in line with
SSP1, as shown by the FXT, would help to raise another 610 million people above the poverty line by 2050
and bring the number of people in poverty worldwide
down to 225 million. However, further measureswould be needed to completely eradicate poverty
and ensure food is affordable in all regions, especiallyfor those working outside the agricultural sector.
FST amplifies the reallocation of labor from agriculture, but other parts of food systems are likely
to absorb more jobs, particularly in lower income
countries. Under CT, mechanization and increases in labor productivity will reallocate 309 million
people from agriculture towards other sectors. FST
would add 75 million more people formerly employed in primary food production to that flow – 37
45

Chapter 2

The Economics of the Food System Transformation

FIGURE 2.3G

Global Expenditure on Agricultural Products
USD per capita per year (MER 2005)
625
600

USD/person/year

575
550

CT

576

FST

539

525
500
475
450

FXT 452

425
2010

CT

Current Trends

2020

FST

2030

Food System Transformation

2040

FXT

2050

Food System Transformation + External

FIGURE 2.3H

Global Poverty HeadcountMillion people below USD 3.20 per day (PPP 2011)

Million people below USD 3.20/day

3000
2500
2000
1500
1000

CT

852

FST 835500

FXT 225
02010

CT

Current Trends

2020

FST

2030

Food System Transformation

2040

FXT

2050

Food System Transformation + External

46

Chapter 2

million in Sub-Saharan Africa, the region that overall
would see the largest drop in the share of working
age population employed in agriculture; 13 million in
China; 12 million in India.
One reason for the further reallocation of labor
under FST is that the shift away from animal-sourced
foods generates a 50 percent drop in global livestock
production, reducing employment in that sector.
Other factors decreasing employment in production are additional waste reduction and improved
efficiency through increased trade. In contrast, thespread of certain labor-intensive agricultural practices under FST – such as more efficient use of nitrogenand the production of fruits, vegetables, nuts, andseeds – will increase demand for agricultural labor.
However, such impacts are not enough to compensate fully for the fall in employment arising fromlower livestock production.
Other parts of food systems can be expected
to generate more labor demand under FST even
if these additional employment effects cannot

The Economics of the Food System Transformation

be modelled. For example, investments in nature-based solutions and providing plant-rich dietsare likely to create new employment opportunities.
The ILO estimates that the dietary shift in Latin
America alone could create an additional 15 million jobs (Saget et al. 2020). Nature restoration andprotection interventions can provide significant job
opportunities, particularly when large in scale. The"Great Green Wall" initiative by the African Union for
the Sahel and Sahara region has the potential to create 10 million jobs (GCA 2021). The scope for creating
additional jobs in the downstream food economy(e.g., trade, processing, and storage and its financeand infrastructure) is largest in regions where current food system employment is still overwhelmingly in production, such as Sub-Saharan Africa (Christiaensen et al. 2021; Allen et al. 2018). Non-farm foodsystem jobs in this region currently account for 22
percent of all food system jobs, compared to a global average of over 40 percent (Davis et al. 2023; FSEC
Africa Brief).

47

Chapter 2

The Economics of the Food System Transformation

Chapter 2
Annex
Main regional aggregates
Regionally specific modeling can help identify
challenges and opportunities for each region, allowing for targeted measures and policies. In modeling
FSEC pathways, regional decomposition allows fora more nuanced understanding of food systems
transformation by identifying which regions deviate
from global trends. In this modeling assessment, 14
world regions were allocated geographically (FigureA.1). Based on current per-capita income, these14 regions can be classified as low-income (LIR),
middle-income (MIR), and high-income regions (HIR)(Table A.2). In this Appendix, regional outcomes ofthe food system transformation (FST) are analysed
for four regions: Sub-Saharan Africa (SSA), Brazil
and the rest of Latin America (BRA + LAM), China(CHA), and South and Southeast Asia, excluding
India (OAS). The choice of these regions reflects theirclassification as low- and middle-income regions.

48

Chapter 2

The Economics of the Food System Transformation

FIGURE A.1

Map with world regions used for the modelling of FSEC pathways.
Regional abbreviations are in Table A.2.

ANZ

BRA

CAN

CHA

EUR

IND

JKO

LAM

MEA

NEA

NEU

OAS

SSA

USA

TABLE A.2

World regions used for FSEC pathways and their classification into
low-income, middle-income, and high-income.
ANZ

Australia & New ZealandHigh-income region (HIR)

BRA

BrazilMiddle-income region (MIR)

CAN

CanadaHigh-income region (HIR)

CHA

China

Middle-income region (MIR)

EUR

European Union

High-income region (HIR)

IND

India

Low-income region (LIR)

JKO

Japan & South Korea

High-income region (HIR)

LAM

Latin America (excl. Brazil)

Middle-income region (MIR)

MEA

Middle East & North Africa

Middle-income region (MIR)

NEA

Northern Eurasia

Middle-income region (MIR)

NEU

Europe (Non-EU)

High-income region (HIR)

OAS

Other Asia

Middle-income region (MIR)

SSA

Sub-Saharan Africa

Low-income region (LIR)

USA

United States of America

High-income region (HIR)
49

Chapter 2

Regional outcomes
The FST and CT pathways can be compared at
the sub-global level using the aggregated regionsin Table A.2. The regional decomposition provides
a comprehensive view of the impact of the foodsystem measures, as delineated in Chapter 2, on thesame key outcome indicators discussed at the global level (Table A.3). The disparities and similarities
across regions relative to the global trend are shownas indicated by the colours and legend.
Sub-Saharan Africa
From today until 2050, FST would spare nearly
99 million people from undernutrition in Sub-Saharan Africa and further safeguard 39 million hectaresof primary and secondary forests (and their biodiversity) that would have otherwise been deforested
under CT. Measures that increase agricultural wages
and recycle emission tax revenues are fundamental

The Economics of the Food System Transformation

to a successful transformation, as they ensure thesebold interventions do not endanger the well-being ofagricultural workers. Of all world regions, Sub-Saharan Africa is subject to the largest decline in employment in primary production by 2050, with 37 million
fewer people working in agriculture compared to
the CT pathway. Global dietary change can lower
scarcity and prices on agricultural markets, reducing
poverty in SSA by 40 million people. Yet, when all
food system measures (FSMs) are combined, expenditures for agricultural products will increase by
33 percent over a period of 30 years in FST, caused
predominantly by implementing a minimum wage
in the agricultural sector, following Goal 2 of FSEC.
Should a minimum wage for agricultural workers
be implemented, livelihoods for those working in
agriculture will improve, but rather than decreasing,overall poverty levels would remain stable.

50

Chapter 2

Brazil and rest of Latin America
By 2050, the FST pathway shows that increases
in the rate of reforestation and afforestation cantransform Brazil and the rest of Latin America into
the world’s largest sequesters of GHG emissions.
Fundamental to this evolution is the protection of
the Amazon, critical to mitigating climate change
and biodiversity protection. To ensure a successfultransformation in this region, of particular significance will be a widespread shift in demand awayfrom meat products either pastured on–or fed
from–deforested land in the Amazon. This shift carries large co-benefits not only for health, reducing
the number of lives lost due to diet and weight-related diseases by 7.6 million through 2050, but also forwater scarcity, as environmental flow violations decrease by 15 km³ per year. If FST is accompanied bya broader, cross-sector sustainable transformationand liberal trade policies, Brazil would benefit fromincreased bioeconomy-related production. If implemented alongside stringent biosphere protection,
this sector can capitalize on sustainable forestry andbiofuel demand to achieve economic revenues of
134 billion USD per year.

The Economics of the Food System Transformation

China
FST in China is characterized by a dramaticabatement in land-based GHG emissions compared to CT, shifting from emitting 753 Mt of CO₂eq
per year in 2050 under CT to sequestering 472 Mt
CO₂eq per year in 2050. Measures protecting uniquebiodiversity hotspots will strongly bend the curveof China’s biodiversity loss. These measures would
be facilitated by a transformation towards healthy
diets, with enormous co-benefits for human health,reducing premature deaths from diet and weight-related disease by 35 million until 2050. A further
co-benefit of this dietary transformation–of particular relevance in China–will be the mitigation of
nitrogen pollution, as the FST halves total pollution
levels in 2050 from 60 Mt N to 33 Mt N per year. Alʳʳ
though employment in agriculture is reduced by 11
percent in the FST, this represents an acceleration of
ongoing demographic trends. The agricultural sector
does benefit, however, from the diet transition, as
the production of legumes increases by 180 percent
compared to CT by 2050.

51

Chapter 2

The Economics of the Food System Transformation

South and Southeast Asia
South and Southeast Asia (excluding India, asa separate model region) sees a historic reduction
in malnutrition in FST, helping 163 million people inthe year 2050 achieve healthy weights. This region inparticular strongly increases its intake of fruits, vegetables, nuts, and seeds in the FST pathway, morethan doubling intake compared to current values.
Coupled with interventions increasing nitrogen use
efficiency in agriculture, this broader shift towards
healthy and sufficient consumption patterns reduces nitrogen pollution in 2050 from 52 Mt N per yearʳ
under CT to 34.4 Mt N per year in FST. Over the nextʳ
30 years, FST would further eliminate 40.5 Gt CO₂eq
of land-based emissions from being emitted in theregion, turning the region into a net sink of 400 Mt
CO₂eq per year in 2050.

52

Chapter 3
The Net Benefitsof the Food System
Transformation
53

Chapter 3

Chapter 3→ The hidden costs of food systems are mortgaging our future, undermining
future productive potential by well over 10 trillion USD a year.
→ Pursuing the Food System Transformation pathway can yield substantial
environmental and health net economic benefits, estimated at a minimum of
5 trillion USD annually. Factoring in the full impact of rising incomes as partof the transformation could potentially elevate net economic benefits to an
average of 10 trillion USD per year. Global convergence towards healthy diets
would contribute as much as 70 percent of the total economic benefits of
pursuing the Food System Transformation pathway through direct effects on
dietary health and indirect impacts on the environment.
→ The costs of food system transformation are remarkably modest whencompared to the expected benefits. FSEC estimates a cost range of between
200 and 500 billion USD annually, depending on the extent to which theexpenses of ensuring food affordability for the most vulnerable are factored in.
→ 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.

Introduction1
The preceding chapter mapped a Food System
Transformation (FST) pathway leading to a more
equitable, health-enhancing, and environmentally
sustainable global food system. This chapter explores the hidden costs of current food systems andthe economic costs and benefits of pursuing FST ona global scale.
The economic benefits of pursuing FST are potentially very large: on the order of at least 5 trillion
USD a year. FSEC draws on two complementary
methods for economic valuation described in Box
3.1 and later in this chapter to derive this value.

1

A bottom-up approach to assessing thenet benefits of pursuing the FST pathway:
measuring the reduction in hidden costs
A bottom-up approach to estimating the net
benefits of pursuing FST divides the evaluation into
two components: estimation of the gross benefits
resulting from hidden costs avoided and estimationof the costs to transform food systems.
Estimating the gross benefits of pursuing FST fromthe bottom-up entails calculating the hidden costs
avoided by moving from Current Trends to FST. As discussed, the hidden costs are calculated item by item ineach scenario. This involves multiplying physical flows
by either market or shadow prices (Lord 2023).

Unless otherwise specified all monetary values in this chapter are expressed in USD PPP (Purchasing Power Parity) (2020)

54

Chapter 3

The Economics of the Food System Transformation

BOX 3.1

FSEC’s tools for assessing the economics of transforming the global food system
The food system pathway analysis in Chapter 2
showed how alternative developments in the global
food system pathways lead to a variety of outcomesfor people’s livelihoods, their health, and theenvironment. The economic value of those outcomesneeds to be visible to decision-makers if they are tochoose the best food system pathway for society.
However, standard estimates of the economic
value of food systems ignore or capture them only
marginally. For example, they do not show whether
the food produced by a system leads to healthy andproductive lives or whether production practices
harm local biodiversity or the environment.
Different economic tools can make those largely
hidden impacts of alternative food systems visible
and comparable with the other economic variables
that decision-makers focus on, such as GDP. The
FSEC analysis presented in this chapter has used
two such tools (Figure 3.1).
A top-down social welfare function approach.
This assesses the overall value of the food system
based on directly estimating the well-being thatpeople derive from it. This approach tries to capture
all the ways in which food systems contribute topeople’s well-being, positive or negative, whether
or not these are included in conventional economic
statistics, across different pathways.
A bottom-up hidden cost approach. This assesses
the hidden costs of food systems related tohealth, environment and poverty, item-by-item.
This approach compares the hidden costs of foodsystems across different pathways to arrive at an
estimate of the gross benefits of transforming foodsystems. To derive the net economic benefits oftransforming food systems comparable to the one
provided by the top-down social welfare function

These gross benefits then need to be comparedwith the costs of transforming food systems globally(Passaro et al. 2023). A more rigorous estimate of
the benefit/cost ratio of transforming food systems
globally would require country level analyses. Nevertheless, it is clear that the orders of magnitude involved are such that the costs of transformation areapproach, estimates of the costs of implementing afood system transformation are needed.
These two approaches give a “top-down” and“bottom-up” representation of the same effect,
namely the economic impact of moving to aparticular food system pathway as compared
to predicted trends. The former attaches amonetary value to the combined impact of alla pathway’s outcomes related to health, theenvironment and income growth and the lattervalues those outcomes one by one (Figure 3.1). A
notable difference between the two methods, asemphasized in the text, is that the latter values
income growth for the poor only, while the former
factors in the benefits of income growth for thewhole distribution.
In an ideal world, where everything could becomprehensively understood and precisely
measured, the top-down and bottom-up
approaches would yield identical estimates. In
practice, they both encounter distinct challenges
and have different strengths and weaknesses.
FSEC’s view is that using these two conceptuallycoherent yet operationally divergent approaches
to assess the economic impact of the FST shouldmake the analysis more robust overall. The
convergence of both approaches in yielding similar
results underscores the large economic benefitsof the FST compared to the Current Trends
pathway. This affirms the FSEC conclusion that
pursuing FST to make the global food system more
inclusive, health-enhancing, and environmentally
sustainability is economically highly beneficial aswell as biophysically and technologically viable, as
shown in Chapter 2.
Sources: Dietz 2023; Lord 2023; Passaro et al. 2023

certainly small compared to the potential benefits.
The hidden costs of the food system
The first step in evaluating the benefits of the
FST using the bottom-up approach is to assess
the hidden costs of food systems today, that is thepresent value of their unaccounted for negative im55

Chapter 3

The Economics of the Food System Transformation

FIGURE 3.1

FSECʼs approach to the economics of the foodsystem transformation
Benefits

Costs

Top-down approach

Net Beneﬁts(Applied social welfare analysis)
Bottom-up approach

Bottom-up approach

Gross Beneﬁts(Avoided hidden costs)

Gross Transformation
Costs

pacts over time and space. The last few years haveseen different studies attempt to quantify thesehidden costs comprehensively. All estimates point tosignificant costs, with most of them well above the
10 trillion USD mark (FOLU 2019; Lucas et al. 2023;
World Bank 2021; Hendriks et al. 2023). The variation
between different hidden cost estimates is driven bydifferences in the items they consider, their attribution to food systems of specific effects, and in themodels they use to estimate the quantities to which
they apply the costs of externalities.
FSEC estimates the hidden costs of the Foodsystem arising from GHG emissions, freshwater use,land use conversion, nitrogen pollution, under- andover-nourishment, poverty, and dietary risks. FSEC
estimates the value of the hidden costs from thesesources in the likely range of 14 to 18 trillion USD PPP
a year, with a central estimate of 15 trillion, whichis equivalent to 12 percent of GDP PPP in 2020. The
costs break down as follows:→ Health costs are calculated by estimating theextent of labor productivity lost to poor diets.
The health costs of the global food system are 11
trillion USD PPP at least. These costs are largely
driven by the high incidence of obesity (730 million
people) and the high burden of chronic health conditions such as diabetes, hypertension, and cancer.
The impacts of malnutrition are not captured fully
as the impacts of other health conditions linked tofood, such as maternal mortality due to anaemia,
are not included in these estimates.
→ Environmental costs are the negative effects oftoday’s food systems on ecosystems and climate.
Estimation at 3 trillion USD PPP, they include thecosts of current agricultural land use and foodproduction practices. Environmental costs also
include the costs of biodiversity loss and environmental damage caused by nitrogen surplus,
which leaches into waterways and pollutes the air.

56

Chapter 3→ Poverty costs arise from food systems’ contribution to structural poverty through the cost offood. Such costs are estimated as the income gap
from the poverty line – that is the amount needed to bring all poor people to the 3.20 USD PPP(2011) poverty line. This amounts to 900 billion
USD.2
The gross benefits of transforming food systems
FSEC’s estimates of the gross benefits associatedwith the FST pathway are determined by evaluating
the extent to which it reduces the hidden costs evaluated under Current Trends. Following this bottom-up
method, FSEC estimates that FST provides cumulative gross benefits from avoided hidden costs of 104
trillion USD PPP between 2020 and 2050, equivalent
to 5 trillion USD a year (annuitized). Over time, thepresent value of hidden costs decreases both under
Current Trends and the FST pathway. This is mainly
due to discounting, which reduces the present valueof hidden costs the further in the future they occur.
But it is also due to policy actions. In Current Trends,
these include the Nationally Determined Contributions pledged by countries to fight climate change.
The FST pathway includes a much broader and more
ambitious set of actions to transform global foodsystems. The difference between Current Trends andthe FST widens over time, so that the gross benefits
grow even in present value terms.
Figure 3.2 looks at the evolution of the grossbenefits of the FST compared to Current Trends overtime, without annuitization. These gross benefits
derive from environmental and health factors inequal amounts, even though different effects playout at different times. Early and comprehensive
implementation of the environmental measures in
the FST leads to an annual reduction in hidden costsof around 500 billion USD, providing lasting benefits over time. These benefits stem from restoring
forests and ecosystems, which effectively offsets theresidual harm caused by methane emissions and nitrogen pollution from food production. Additionally,

The Economics of the Food System Transformation

the efficiency of nitrogen use significantly improves
under FST. In contrast, the reduction in healthrelated hidden costs becomes more pronounced,
steadily increasing FST’s impact over time as people
gradually adopt healthier diets.
The total reduction in hidden costs between 2020
and 2050 under the FST breaks down as follows:→ Reducing health-related hidden costs accounts
for 55 percent of the total reduction. Less overconsumption reduces the number of years of life
lost (YLLs) to non-communicable diseases that it
causes. These estimates do not account for the
benefits that changing diets generate indirectly
through their effects on food production, such as
their impacts on land use.
→ Reducing hidden environmental costs accounts
for 45 percent of the total reduction. Hidden environmental cost reductions arise from decreased
GHG emissions from agricultural production
under the FST (13 percent), halting or reducing
the loss of intact habitats (17 percent), and lower
nitrogen pollution (15 percent).
→ The hidden costs of poverty are virtually unchanged, accounting for less than half a percentage point of the gross benefits of the FST. This isbecause food prices increase under FST and while
its income support measures compensate for that
increase, they do not eliminate poverty. Externalmeasures such as those included in the FXT pathway would reduce the hidden costs of poverty
more significantly (see Chapter 2).
FST alone does not eliminate the hidden costs ofthe global food system over time. Residual hidden
costs are largely derived from the residual burdenof disease. In contrast, under FST, the food system
gradually produces net environmental benefits on
aggregate as it becomes a net carbon sink. This
result displays the balancing interactions between
different regions. In particular, initiatives such as afforestation and increased ecosystem services from

2 A more conservative approach could take as a starting point the over two thirds of workers in agriculture alone are estimated to live in poverty.
Such an approach would however leave unresolved the issue of how to attribute the poverty of the dependents of those working in agriculture.
57

Chapter 3

The Economics of the Food System Transformation

restored forest habitats in Latin America effectively
counterbalance residual environmental costs linked
to nitrogen pollution and the expansion of agricultural land, particularly in China.
The gross benefits of the FST pathway varyacross regions. Most regions experience substantial
benefits from better health and better environmental outcomes in the FST, though the main drivers
vary by region.
→ In many high-income regions, like the USA andthe European Union, the most significant driver ofgross benefits is a shift in dietary patterns.
→ In Brazil and Latin America, restoring forest
habitats and reducing GHG emissions result in net
environmental benefits, which offset remaining
diet-related hidden costs in the region.
→ In China, adopting the FST can reduce healthrelated hidden costs stemming from obesity andnon-communicable diseases by 30 percent between 2020 and 2050, amounting to an estimated300 billion USD average annual benefit comparedto the Current Trends pathway. The country canalso reduce environmental costs. Being the larg-

est contributor to agricultural nitrogen pollution
today, under FST, China manages to reduce thecosts of its pollution by 30 percent (equivalent toa benefit of approximately 100 billion USD annually) (see Spotlight on Change 6).
→ Sub-Saharan Africa faces a triple economic burden amounting to 540 billion USD by 2050 under
the Current Trends pathway. Its components
are the environmental hidden costs of escalating nitrogen use, labor productivity losses fromunhealthy diets and hidden costs of persistentpoverty. Adopting FST in the region could halve
this burden from health-related hidden costs andeliminate environmental costs by 2050.
The costs of transforming food systems
To compute the net benefits of transforming
food systems from the bottom-up, it is necessary to
determine the costs associated with the implementation of the food system transformation.
Those costs can be derived by identifying the set of
specific measures required to make the transformation and pricing those actions using detailed unit

FIGURE 3.2

Reduction in hidden costs compared to Current Trends
Trillion USD PPP 2020

0

2020

2025

2030

2035

2040

2045

2050

Trillion USD/year

-1
-2
-3
-4
Poverty
The diﬀerence in poverty
hidden costs between
CT and FST is minimal androughly constantat 4 billion USD throughout
the period-5-6Greenhouse Gas Emissions
Nitrogen Pollution

Land Use Change

Dietary Intake

Poverty58

Chapter 3

price information (Passaro et al. 2023).
To estimate the transformation costs, a list ofareas for action aimed at achieving the changes
broadly captured by the FST was curated through aseries of expert consultations and thorough literature reviews. The additional costs of implementing those packages of measures on top of current
expected sectoral expenditures is 215 billion USD(See Figure 3.3). In addition, a broad estimate of thepossible safety nets for the most vulnerable people

The Economics of the Food System Transformationneeded to cushion them from impact of FST on foodprices and keep food affordable in the transition
period has been considered.
This exercise offers a first rough approximationof the costs of global food system transformation.
Considerably more detailed and contextual analysis would be needed to cost national food systemtransformation strategies, as discussed in Chapter 4.
In addition, while FSEC has tried to obtain
detailed local unit costs to build up a global picture,

SPOTLIGHT ON CHANGE 6

Changing gear on nitrogen
Attitudes to synthetic fertilizer are shifting.
Where once this source of nitrogen was seen
as an unambiguously reliable ally in the global
quest for food security, now the environmental
impact of excess nitrogen is forcing changes onnational policy agendas.
The Netherlands and China are two countries
adopting new nitrogen policies.
In the Netherlands, excessive use of nitrogenhas been the subject of public policy debate forseveral years. Before 2018, the managementof nitrogen in Dutch agriculture was based ona nitrogen-licensing system. After both theEuropean Court of Justice and the Dutch StateCouncil judged this system insufficient to protect
Natura 20001 areas, it was suspended. The
resulting uncertainty and immediate blockageof thousands of construction projects triggered
farmer protests and heated public debate.
In 2022, the Government introduced a policy
framework for halving pollution from nitrogen
emissions by 2030. This includes a transition
fund of 25 billion euro until 2035 to compensate
farmers and reduce the number of livestock inthe country. The highly confrontational natureof policy debates on nitrogen in the Netherlands
shows the importance of including farming
communities in transformational policymaking(Selnes 2023).
China also has a nitrogen problem. It is thelargest consumer of synthetic fertilizer in theworld, using an average 226 kg per hectare–3.3
times more than the global average–but at only
half the world’s average efficiency. In 2015,
the Ministry of Agriculture and Rural Affairs
launched a “Zero Growth in Synthetic Fertilizer
Use” policy. This removed subsidies on fertilizer
manufacturing and introduced four new
measures: fertilization standards for different
regions; adjustments to the structure of N, P,
and K fertilizers and application of highefficiency fertilizers; improved fertilization
methods; and substitution of organic manure forsynthetic fertilizer. This approach of combining
new technologies for more efficient use of
nitrogen with taxes on surplus nitrogen has
already proved effective in several European
countries at cutting nitrogen use withoutcompromising yields.
Sources: Selnes 2023; Wang et al. 2022;
Zhang et al. 2015.

1 Natura 2000 is a network of core breeding and resting sites for rare and threatened species, and some rare natural habitat types which areprotected in their own right, established across Europe by the EU member states.

59Chapter 3

The Economics of the Food System Transformation

information is irregular, making it difficult to scalecosts between local, regional, and national levels.
Finally, the quantities to be considered can also vary
widely across contexts and policies, depending on
the level of ambition and implementation capacity
assumed. For example, a new program might beintroduced gradually, reflecting the time needed
to create new delivery mechanisms, or it might beintroduced rapidly, where need is urgent and all thenecessary interventions can be made immediately.
The need for further contexual analysis is particularly strong for our estimates of the safety nets
provision, which are based on the average global
income gap and the share of food in the consumption basket of the poor in low income countries,

approximated with evidence from Sub-SaharanAfrica (World Bank 2021). This estimate needs to berefined depending on local circumstances, including national programs’ ambition and how they are
scaled up over time, the specific income groups
expected to benefit, local household vulnerability to
price increases and the availability of resources andcapacity needed to operate transfer programs.
Taking those caveats into account, FSEC estimates the costs of transforming food systems at
between 200 and 500 billion USD PPP a year to 2050.
This broad range is comparable to the 300 to 400
billion USD a year estimated by the UNFSS financelever (World Bank 2021).
The estimated costs of safety nets account for the

FIGURE 3.3

FSEC transformation costs, by operational goal
Operational Goal

Intervention/Measure

Average transformation
cost per year
(in billion USD PPP 2020)

Diets
Consumption ofhealthy diets by all

Diversification of protein supply

3

Behavioural interventions for shift in demand

1Child nutrition

17

Restrictions, taxes and regulations

1

Livelihoods
Strong livelihoods
throughout the
food system

Rural infrastructure development

24

Training of agricultural entrepreneurs

1

Financing of smallholder farmers

6

Biosphere
Protection of intact
land and restorationof degraded landProtection of forests and other ecosystems

78

Management of forests and other ecosystems

3

Restoration of forests and other ecosystems

7

Production
Environmentally
sustainable production
throughout the
food system

Reduction of emissions

28

Improvement of emission sequestration

42

Agricultural public research and development

3

Reduction of food loss and waste

2

Total

215

Safety nets
(Measures to ensure food affordability for the poor)

292

60

Chapter 3

largest share of FST costs – beyond the actual valueof these interventions, this is an important pointer tothe significance that FSEC attaches to addressing the
distributional impacts of food system transformation,
both for justice reasons and because the politicalfeasibility of transformation is jeopardized within theimplementation of safety nets (Chapter 5). Next comemeasures to protect and restore degraded land andthose needed to shift to environmentally sustainable
food production. These comprise annual expenditures of almost 90 billion USD for managing andrestoring forests and ecosystems, below 70 billion
USD to reduce greenhouse gas emissions in crop andlivestock production through improved management
practices, agroforestry, soil organic carbon enrichment of croplands and grasslands, and biochar applications. Measures targeting the reduction of foodloss and waste and investments in public agriculturalresearch and development account for the rest of the
projected costs of shifting to sustainable food production.
Spending to ensure the transformation is
inclusive is expected to absorb some 30 billion USD
per year. This money would go towards providing
small producers with training and better access tofinancial resources, as well as developing vital rural
infrastructure such as roads, electricity, internet
connectivity and irrigation systems.
Finally, over 20 billion USD a year is expected tobe needed for measures to support shifts to healthy
diets. As Chapter 4 discusses further, action in thisarea encompasses a range of measures including support for diversifying protein supply, promoting childnutrition through breastfeeding and school feeding
programs, informational campaigns and regulation oftrans-fatty acids and sugar-sweetened beverages.
As the main elements of the food system transformation differ by region, so do regional implementation priorities. In low- and lower-middle income
countries, four areas are critical: forest and ecosystem protection; improved emission sequestrationin agriculture; rural infrastructure development;
and child nutrition. Within SSA, forest protection
accounts for over a quarter of total transformation
costs. In Southeast and East Asia, forest protection
and rural infrastructure development each repre-

The Economics of the Food System Transformation

sent one quarter of the total costs. In high-income
regions, emission reduction in agriculture accounts
for the largest fraction of transformation costs. And
in middle-income regions, almost half of total costs
are absorbed by safeguarding forests and otherecosystems, with emission sequestration improvements in agriculture requiring more than 20 percent
of transformation spending.

A top-down approach to assessing
the net benefits of pursuing the FST
pathway: applied social welfare analysis
The top-down approach to assessing the net economic benefits of transforming food systems uses anapplied social welfare function. The first step entails
directly estimating global social welfare under Current
Trends and the FST pathways (Dietz 2023). The difference in welfare between these two pathways is thentranslated into monetary terms to quantify the net
economic benefits under FST. This comprehensive
approach encompasses the impacts on welfare stemming from health and environmental improvements
within the food system, as well as from real income
growth along the whole income distribution.
Using this top-down approach, the estimated net
economic benefits of FST amount to approximately
10 trillion USD a year until 2050, roughly equivalent to
8 percent of global GDP PPP in 2020 (see Figure 3.4).
Accumulated net welfare gains would amount to 270
trillion USD by the middle of the century.
Like the bottom-up approach, the social welfare
analysis captures FST outcomes linked to criticalchanges in environmental quality and human health.
But this methodology takes a broader approachto valuing the income component of FST than thebottom-up approach does since it values incomechanges in the population as a whole rather thanamong the poor only. This difference between the
two approaches accounts for the much higher
valuation of benefits under the top-down than thebottom-up approach.
Figure 3.4 shows the decomposition of net benefits of pursuing FST globally by its final outcomes.
It values improvements in two of the three social
welfare outcomes targeted by the FST, environmental quality and incomes, at approximately 4 trillion
61

Chapter 3

The Economics of the Food System Transformation

FIGURE 3.4

Net benefits of the FST compared to Current Trends, overall anddisaggregated by food system outcome, top-down approach
Trillion USD PPP 2020

10
8
6
4
2
0

Environment

HealthUSD per year each, equivalent to about 3 percent
of global GDP in 2020. Improvements in health, thethird outcome targeted by FST, can contribute up to
2 trillion USD per year (about 2 percent of global GDP
in 2020) to the increase in social welfare.
Crucially, the results of assessing the net economic benefits of pursuing FST using the top-down
approach are remarkably consistent with the findings from the bottom-up approach. Notably, in both
exercises, the environmental and health benefitsof the transformation are in the range of 5-6 trillion
USD PPP a year. This convergence of results is both
remarkable and reassuring as it underlines the reliability of the findings.
In addition to FST and Current Trends, thetop-down approach has been applied to pathways
implementing bundles of measures each targeting
directly one specific operational goal. The measuresconsidered affect both production and consumption, illustrating the likely overall effectiveness ofeach individual bundle. Figure 3.5 shows that thebundle of measures targeted at shifting diets by itself achieves about 70 percent of the overall impactof the FST, roughly equivalent to a 5 percent increasein global GDP in 2020. This is because a dietary shift

IncomeCombined
net benefits

not only produces the direct health benefits on the
demand side but facilitates the reallocation of land,enabling countries to invest in forest protection andreforestation which result in the far-reaching societal
benefits of climate change mitigation, more biodiversity and less agricultural pollution.
Implicit in Figure 3.5 is that by integrating bundlesof measures targeting different operational goals, thewelfare benefit from the different bundles adds up toa value higher than the welfare benefit from the FST.
This is due to the decreasing marginal utility of an increase in one bundle; income, health, or environment.
As more measures are added, the additional benefit
derived increases at a decreasing rate and the initial
implementation of measures will have a larger effecton the welfare benefits than later ones.

The financing gap of the transformation
as a major barrier towards reaping
its benefits
This chapter has shown that investment tomake food systems inclusive, health-enhancing andenvironmentally sustainable is likely to produce verylarge economic benefits.
The additional annual costs of such a transfor62

Chapter 3

The Economics of the Food System Transformation

FIGURE 3.5

Net benefits of the FST compared to Current Trends, when implementing
seperately bundles of measures and overall, top-down approach
Trillion USD PPP 2020

10
8
6
4
2
0

Diets

Livelihoods

Biospheremation worldwide are equivalent to between 0.2
and 0.4 percent of global GDP PPP in 2020, so thenecessary investment is clearly affordable at a global level. However, these costs burden low-income
countries disproportionately and are beyond theirfinancing capacity. To reap all the potential benefitsof a global food system transformation, it needs tobe financed in full everywhere.
Figure 3.6 shows how the transformation costs,
as assessed by FSEC, are unevenly distributed
among different country income groups. Even at thelower bound cost estimates, paying for the transformation in low-income countries would require theequivalent of almost 2 percent of their GDP PPP in
2020. The financial burden of financing the food system transformation becomes even greater for them
if it includes the cost of safety nets to ensure foodaffordability. In contrast, the financial burden on
high- and upper-middle-income countries is proportionally much lower, at 0.03 percent and 0.26 percentof their GDP respectively.
This suggests that funding a long-term, comprehensive food system transformation will be hardfor many countries. There are a number of options
for closing their financing gaps, some national and

Production

Combined
net benefits

others involving international redistribution.
At the national level, all governments could reallocate public expenditures, target spending moreaccurately to vulnerable populations and strengthen
both tax law and compliance with that law. However, low- and lower-middle-income countries mightfind that funds yielded by these measures fall shortof their requirements, particularly since they face
many competing needs. Private investment via thebanking system and capital markets could also
be a significant source of funds for transformation
investments. However, private flows from banks andcapital investors in low- andmiddle-income country (LMIC) food systems has so
far been limited: for instance the annual flow of formal loans to LMICs for agriculture, forestry, and fisheries between 2015-2019 is estimated at 14.2 billion
USD (Díaz-Bonilla 2023), although this figure would
be higher if informal finance flows are included.
A lot of attention has recently been paid to thepotential funding that could be released by repurposing environmentally damaging subsidies (Damania et al. 2023);→ Developing countries allocate approximately 300
billion USD per year to fossil fuel subsidies, which
63

Chapter 3

The Economics of the Food System Transformation

FIGURE 3.6

Gross Transformation Costs (without safety nets), by income country classification
Incomeregions

Annualtransformation
costs(billion USD)

GDP in 2020
(billion USD)

Transformation
costs as share of
GDP PPP(in %)

Investments
in 2020(billion USD)

Transformation
costs as shareof investments(in %)

High-income

22

63,282<0.1%

14,041

0.2%

Upper-middleincome

126

48,241

0.3%

16,7040.8%

Lower-middleincome

42

21,532

0.2%

5,786

0.7%

Low-income

25

1,338

1.9%

315

8.0%

World

215

134,7480.2%

36,846

0.7%

Table 3.3: The table shows the annual transformation costs in billion USD 2020 PPP necessary to transform the foodsystem per country income group (World Bank classification), compared to key macroeconomic indicators such as GDP
and investments in billion USD per country income group. Sources: Passaro et al. (2023) for the transformation costs,
and Díaz-Bonilla (2023) for the estimates based on World Bank WDI for savings and investment.

is about two thirds of the total of 455 billion USD
in 2021 spent on such subsidies globally (Parry et
al. 2021). The Glasgow Climate Pact, establishedat COP 26 in 2021, calls for all fossil fuel subsidies
to be gradually phased out.
→ Globally about 400 billion USD of public resources are allocated to agricultural subsidies (OECD2023). Those could be reallocated to promote
environmental public goods and the shift to sustainable diets, as well as target resources more effectively towards agriculture and social assistanceprograms for the impoverished and vulnerable(Díaz-Bonilla et al. 2021; Díaz-Bonilla & Echeverría
2022; Parry et al. 2021; Laborde et al. 2020).
Unlike the repurposing of fossil fuel subsidies, thislatter strategy is less relevant to lower-income developing countries, which have limited agricultural subsidies to reallocate. Laborde & Pineiro (2023) explore
a scenario in which international redistribution adds
to repurposed subsidies as a source of finance for a
global food system transformation. This additionalsource ensures that as production moves to low-income countries there is available finance to invest in
closing their productivity gap, which in turn reduces

the potentially damaging environmental impact ofthat geographical shift in production. This scenario
highlights that reaping the global benefits of thefood system transformation calls for new ways of
doing things.
It seems inescapable that profoundly reshaping
the global food system will involve some elementof international redistribution. Currently, international funding for food systems is very low. Only 4.5
percent (approximately 12 billion USD) of all international development funds are earmarked for agriculture, forestry, and fishing (Díaz-Bonilla 2023). And
currently, only 3 percent of public climate finance isdedicated to food systems, despite these systems
contributing one third of global greenhouse gas
emissions. This is astonishingly low compared to thefinancial amount allocated to greening the energy
and transport sectors which is 22 times larger (GAFF2022). A good starting point for mobilizing additional
financing for food systems could be the ongoing
discussions on the multilateral development banks’
agenda for reforming.

64

Chapter 4
Designing Strategies to
Make Change Happen:
Incentives andregulation, Innovation
and Investments
65

Chapter 4

Chapter 4→ Transforming food systems calls for wide ranging and coordinated national
strategies, informed by science-based, quantitative pathways and setting
monitorable targets.
→ 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 coordinatedgovernance and be supported by adequate implementation capacity.
→ Policy bundles can span incentives and regulation; innovation; and investment.
The specific combination of policies adopted needs to reflect local needs,
though global priorities emerge in terms of favoring a shift towards healthy diets,
repurposing government support and targeting revenues from new taxes tosupport the transformation.
→ Adopting an inclusion lens through the choice of specific policies, compensation
schemes, and measures to ensure that poor and disadvantaged groups canaccess new opportunities, is essential to address the pervasiveness of tradeoffs between different transformation objectives and the interests of more
vulnerable and marginalized groups.

Introduction
Previous chapters have highlighted that a foodsystem transformation towards inclusive, health-enhancing and environmentally sustainable outcomes isbiophysically and technologically possible and coulddeliver enormous economic benefits. Such a transformation would require major shifts in dietary behaviour,
rural livelihoods, nature conservation, and the management of production. This chapter asks how public
policy can help make those major changes happen.
Given the diversity of food systems around theworld, there can be no universal policy blueprint forreshaping them. Food systems vary greatly in theways they are regulated (Lowder et al. 2022b; 2022c)
and the extent to which their activities are informal
and thus largely fall beyond the direct reach of regulation (see Box 1.1).
This chapter synthesizes principles for designingsuccessful food system transformation strategies
drawn from the literature. It then discusses the available policy tools broken down into three categories:(i) incentives and regulations; (ii) innovation; and(iii) investment. Box 4.1 provides an example of how
co-ordinating action across these three levers caninform the design of policy strategies to address
obesity. Lastly, the chapter examines the need toapply an inclusion lens to the choice and design ofpolicies. The policies highlighted in the chapter aresupported by either robust evidence where this isavailable or widespread agreement among scientists that implementing them will be effective andfeasible.
While the chapter’s recommendations aim
to help with the choice of policies for a national
food system strategy, successful implementation
depends on grounding strategy design in a clear

66

Chapter 4

understanding of the political economy1 of food systems. The recommendations in this chapter therefore complement those in Chapter 5, which focuseson the roles of interests, institutions, and ideas andinformation in shaping the political economy of foodsystems and how to work with different stakeholders to effect planned changes. National food systemstrategies need to combine effective policies, local
context and political viability in order to be feasible.

Designing food systemtransformation strategies
This report calls for all countries to put in placewide ranging and coordinated strategies for transforming national food systems aimed at realizing avision for change shared by all system stakeholders. The design of national strategies needs to be
informed by pathway modeling exercises similar
to those presented in Chapter 2 and tailored to the
local context. Strategies that offer long-term goals
and monitorable progress indicators will set investment expectations and also make accountability for
progress towards the goals transparent.
Evidence suggests that for best effect, national foodsystem transformation strategies should adhere to
the following principles:
Make sure new and existing policies affecting
food systems are coherent and tackle inconsistencies. For example, a new tax on sugar-sweetened
beverages to reduce national sugar consumption
could be undermined by long-standing subsidies
on corn production which aim to support farmers’
incomes but produce a large supply of inexpensive
corn syrup as well (Dilk & Savaiano 2017). Starting
the design of a national food system strategy with apolicy audit to identify such policy inconsistencies
helps to ensure the strategy itself addresses them(Parsons 2021).

The Economics of the Food System Transformation

Use “policy bundles” to maximize synergies between different interventions and offset adverse
effects (Lowder et al. 2022 a). The pathway analysis
in Chapter 2 has highlighted trade-offs and synergies
between pursuing different operational goals, forexample between the protection of pristine habitats and changing diets towards healthier patterns.
Translating this insight into national food systemstrategy design means combining complementarypolicies in “policy bundles” tailored to optimize potential synergies in the local context. Detailed simulations of the impacts of a standardized set of policy
bundles across the world indicated that in somefood systems, particularly those classified as “ruraland traditional” (largely located in Sub-SaharanAfrica and South Asia), income support or subsidies
targeted to low-income households would have tobe added to the bundles to mitigate the impact on
those households of potential food price increases(Kuiper et al. 2023).
Exploit synergies with transformations taking
place in other systems, such as energy or water.
As discussed in Chapter 2, meeting all the goals of asustainability transformation in food systems calls forcomplementary measures in interrelated systems. A
concrete example is offered by the Paris food systemstrategy, which uses the transformation of local foodproduction to improve the city’s water quality at thesame time (see Spotlight on Change 7).
Focus on areas of food systems where policy will
have maximum impact. These are areas where
policy intervention is likely to speed the pace ofchange and/or trigger related changes in other partsof food systems (Lenton et al. 2022). Action in theseareas of food systems, often through downstream
links in food value chains, will have disproportionate
effects on the system as a whole because of theleverage of their demands on other areas (Lenton etal. 2022). For example, supermarket retailers have

1 Political Economy is an analytical approach that focuses on agency, power relations, and institutional structures. The concept is used toanalyse the interaction of political and economic processes by primarily looking at the interests and constellations of relevant actors, the power
relations between them, the structures and institutions that influence these relationships, the resulting inequalities, and how these dynamics
change (Duncan et al. 2019; de Schutter 2019; Swinnen 2018).
67

Chapter 4

The Economics of the Food System Transformation

SPOTLIGHT ON CHANGE 7

An integrated strategy for food system change
The city of Paris
Several cities are already developing integrated
food system transformation strategies. This may
have something to do with complex reforms withmultiple objectives being easier to coordinate
in cities than at a national level because city
populations live close together and are relatively
small. More than 250 cities have signed the Milan
Urban Food Policy Pact and 16 cities have signed
the C40 Good Food Cities Declaration, which
commit them to reforming their food systems
as a means of tackling climate change andextending access to healthy foods.
The Paris plan sets targets to increase the amountof food both consumed and produced in the Paris
Basin to 50 percent of the total, compared to 25
percent now. It also aims for 20 percent organic
production and 75 percent organic consumption.
In addition, the strategy aims to eliminate foodinsecurity (which affected 6 percent of the
population in 2016), reduce the incidence ofsufficient buying power to impose their strategies
on their suppliers further downstream (Reardon
2006; Humphrey 2006). However, the distribution infood value chains has so far rarely been targeted bypolicies aimed at reshaping food systems (Lowder et
al. 2022c).
Ensure governance of food system reform is coordinated by establishing governance mechanismsthat span government departments, different levelsof government and key stakeholder groups. Drawing
representatives from all these areas into the governance of food system transformation is a means of
ensuring that the transformation’s guiding vision forchange is shared by all the relevant actors (see also
Spotlight on Change 11). Switzerland’s citizen assembly on food policy (Bürgerrat 2022) and Ireland’s
agri-food system stakeholder committee(Government of Ireland 2021)

obesity to less than 5 percent of the populationand support a general shift to a diet rich in fruitand vegetables with less meat and fish.
The local public sector is investing significantly
to achieve these targets. Municipally owned Eaude Paris is providing 37 million euro and the city
itself providing 10 million euro over twelve years
to help farmers shift to organic and less polluting
forms of production. This shift will also reducethe cost of water treatment. The initiative isjust one example of how the Paris food systemstrategy is helping the city to progress towards
multiple civic goals in an integrated fashion, all
the while reinforcing the local economy and its
relationships with adjacent communities. Paris
noted that Europe’s Common Agricultural Policy(CAP) would have been an appropriate source offunding for the strategy but the city had to act
on its own as the CAP does not yet provide forsuch investment.
Source: Mairie de Paris 2018both demonstrate this approach.
Have enough implementation capacity tocarry out and enforce the strategy. The complexity of food system reform requires countries to haveadequate implementation capacity at relevant levelsof government to carry out and monitor complex
and multi-sectoral strategies, to enforce regulations
and to provide supporting infrastructure. Implementation capacity comprises three elements: organizational capacity, such as the expertise and know-how
to implement the changes; technical capacity, suchas the digital infrastructure and information technology needed to monitor policy performance orcompliance with new rules; and financial capacity, topay for all the public sector workers and the public
services and investments needed to transform foodsystems (Bardhan 2022).

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Apply an inclusion lens to policy design. This critical requirement for successful food system transformation strategies is discussed in detail below.

Incentives and regulations
Government policies and regulations create
incentives that steer the choices of all food system
actors – producers, processors, transporters, intermediaries, consumers, and investors. Ideally, theseincentives would align with the true economic valueof what is being produced and consumed. As highlighted in Chapter 3, today they rarely do, resulting in
USD trillions of economic damage unaccounted for in
economic statistics. Designing incentives to reduce
negative externalities2, increase positive ones3, andmake food systems generally more responsive to therevised incentives is therefore a top priority for any
food system transformation design team.
A variety of policy tools for creating incentives
is available: fiscal tools such as taxes or subsidies;
mandatory instruments such as restrictions orbans; and market-based policies such as trading
schemes and voluntary certification. The choice oftools needs to be closely tailored to each food system context as the evidence for their effectivenessvaries notably in different circumstances (Lowder
et al. 2022b; Willenbockel 2023). Policymakers alsoneed to be alert to the risk that new incentives may
increase burdens on disadvantaged groups.
Individual policies for incentivizing specificchanges are discussed below. As noted above, bundles of policies tailored to the context can maximize
synergies among interventions. This might involve,
for example, combining fiscal policy interventions to
reduce food waste and losses with public investment
in equipment and training that help food system
actors to achieve reduction targets.

The Economics of the Food System Transformation

Reducing negative externalities
Possible policy responses to a food system’s
pervasive externalities include taxing harmful substances, imposing mandatory restrictions or banson their use and repurposing agricultural support.
Taxing. Taxes on sugar-sweetened beverages andon nitrogen fertilizers, have proved effective in
reducing the use of both by making them more expensive. Evidence for the effects of these measuresis robust and generally consistent across different
settings, although larger in some places than others.
→ Research on the effects of taxes on sugar-sweetened beverages is starting to identify positive but
small health benefits beyond reduced consumption, including decreasing prevalence of overweight and obesity and fewer adolescent girls
with a high Body Mass Index (Gračner et al. 2022).
However, such findings are not universal (Fletcher
et al. 2010) suggesting that this policy would need
to be bundled with other interventions, such as
behavioural incentives or urban planning directed
at increasing physical activity, to reduce obesity
significantly (see also Box 4.1 at the end of
this chapter).
→ Taxing nitrogen is similarly considered an effective
way to reduce negative environmental effects,
including ground water pollution and GHG emissions, especially when accompanied by measures
to make nitrogen use more efficient (Henseler et
al. 2020). So far, policies to limit GHG emissions
have rarely been applied to agriculture sectors forfear of raising food prices. However, this may bechanging. New Zealand is considering a carbon
tax on agriculture and the European Union is
discussing whether to extend emission trading
schemes to the sector. Modeling shows that
imposing a tax on agricultural GHG emissions orbringing the agricultural sector into a carbon pricing scheme in just a handful of countries would

2 Negative externalities are the costs or harmful consequences caused by the consumption or production of a good which are experienced by athird party and which are not reflected in the price of the good.
3 Positive externalities are the benefits generated by actions of a producer or consumer which are experienced by a third party, and which are
not reflected in the price of the good.
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reduce global agricultural emissions significantly,
especially if the tax revenues were reinvested inabatement technology (Stepanyan et al. 2023;
Henderson & Verma, 2021).
Imposing mandatory restrictions. The restriction
or banning of the industrial use of transfatty acids(TFA)–food ingredients with negative externalities–
provides evidence for the effectiveness of this typeof policy. Countries pioneering such a ban have seen
dramatic reductions in the TFA content of foods and
TFA-related disease, particularly among the mostvulnerable socioeconomic groups (see Spotlight on
Change 10 in Chapter 5).
Repurposing agricultural support. Agricultural support is often misaligned with the objectives of efforts
to transform food systems. Such support programs,
estimated to cost 470 billion USD in public resourcesa year worldwide (OECD 2022), largely incentivize theproduction of staples rather than more diverse andnutrient-rich crops. They also encourage inefficientuse of inputs and cause environmental degradationand excessive GHG emissions (Rosegrant 2023). New

The Economics of the Food System Transformation

modeling commissioned by FSEC shows how redirecting agricultural support currently linked either toproduction volumes of specific commodities or theuse of certain inputs ("coupled" producer support)
towards boosting farmers’ incomes would result in
global rises in GDP, lower food prices and less poverty, and also make healthy diets more affordable(Laborde & Pineiro 2023). However, subsidy repurposing strategies have an important global dimension toensure that to the extent that production is displaced
to less efficient countries, investments are in place
to improve productivity and contain environmental
impacts.
Supporting positive externalities
Costa Rica pioneered the use of payments forenvironmental services with great success in 1996.
Since then, the idea that incentives and regulations
can support the provision of public goods has started to infiltrate the design of food system policies in
the form of instruments that are mandatory, market-based, or voluntary (Moros et al. 2022).
Two common mandatory incentive instruments
for nature conservation are emissions trading sys-

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tems and the clean development mechanism (CDM).
Both raise finance for carbon sequestration oremission reduction projects in developing countries.
Payments for Ecosystem Services (PES) schemes are
an example of market-based instruments. These areconditional payments made to groups or individuals to encourage the restoration or enhancementof ecosystem services. They are used, for example,
to dissuade farmers from turning uncultivated land
into farmland or encourage them to adopt sustainable agricultural practices such as silvo-pastoral
systems. Other market-based instruments are theREDD+ schemes that incentivize forest rich countries
in the tropics to keep forests standing and manage
forest and agricultural systems sustainably. Lastly,
voluntary approaches include voluntary sustainability standards, such as supply chain codes of conductand certification schemes, and stricter voluntarybans or moratoria, which incentivize producers tomeet to forest conservation standards in order to be
included in a supply chain (Moros et al. 2022).
All these incentive instruments can be both publicly and privately financed. For instance, in publicly
financed PES schemes, governments finance theprovision of ecosystem services through taxes andfees whereas in private PES schemes, companies
make direct payments to ecosystem protectors
because the company’s business relies on the ecosystem in question continuing to provide services(Moros et al. 2022).
While these three types of incentive instruments
have been found to improve environmental conservation and promote more sustainable agricultural
practices to varying degrees, they have also drawn
many criticisms. To make them more effective andinclusive, they need better accompanying compliance and monitoring mechanisms along with secure
payment systems (Moros et al. 2022). Payment
strategies and compliance mechanisms for specificschemes also need to prevent leakage effects4 inareas not targeted by the schemes. To increase theirbeneficial impact, they should target areas providing

The Economics of the Food System Transformationa greater density of ecosystem services or at higher
risk of degradation and do more to make sure theirintended outcomes do not undermine other goals,
such as protecting biodiversity, water or agricultural
productivity (Moros et al. 2022).
Making payment-for-nature schemes truly
inclusive entails making them easier to join forsmall-scale farmers and preventing unintended
consequences that would exacerbate rural poverty,
for instance, increases in local land values or restrictions on access to previously common goods. It may
be necessary to bundle these schemes with social
protection and compensation measures and to alignpayment schemes with the opportunity costs tofarmers of preserving protected lands, i.e., the lossof income they would otherwise gain from converting the protected land to agricultural uses (Vorlaufer
et al. 2017; Moros et al. 2022).
Reduce transition costs and increase system responsiveness. Revising incentives and regulations
might not produce intended changes if some or all
food system actors lack the resources to respond.
Constraints in their general environment might prevent them. For example, restricted access to markets, credit, technology, or information can all limit
farmers’ ability to adopt new agricultural practices.
Individual constraints might also hold them back,particularly not having enough money to shift to thenew practice. Governments can invest to make thegeneral environment more enabling of the desired
response to revised incentives and regulations. They
can also use certain policy instruments as “carrots”
to complement regulatory “sticks."
Policy bundles that combine interventions on
both the supply and demand sides of a market are acase in point. For instance, a government introducing a tax on sugar-sweetened beverages to reduce
their negative health outcomes may offer complementary behavioural interventions to help consumers reduce their demand for sugary drinks. In addition, giving people the resources to adapt to a new

4 Leakage is said to have occurred where, for example, a policy or project designed to protect forests leads to a shift of deforestation toanother region.
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policy, for example, subsidizing some of the costsof shifting to a new production practice, makes thepolicy more effective (Pilditch et al. 2023). Bundlingcomplementary policies to create positive feedback
loops and entrench change is also likely to reduce
the overall costs of the change. Lastly, it makeschange more politically feasible as citizens are likely
to support even burdensome policies when they are
combined with attractive complementary measures (Fesenfeld et al. 2020; Fesenfeld 2024, see also
Chapter 5).

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 forlivestock to enhanced fertilizers (Herrero et al. 2021).
This trend bodes well for food system transformations. However current food system research andinnovation (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. Instead of concentrating on single objectives—for instance, increasing
yield from a particular crop—innovations should bedirected at multiple food system objectives and address trade-offs between them (Barrett et al. 2020).
For this reason, and to account for complexity offood systems in general, food system R&I needs toenable collaboration across a wider range of stakeholders. More transdisciplinary R&I is needed using
integrated approaches, which stimulate knowledge
sharing between different scientific and technicalcommunities (den Boer et al. 2021). Consistent support and funding for international multistakeholder
innovation platforms and networks would accelerate this shift towards more participatory agricultural
R&I (Rosegrant 2023).

The Economics of the Food System Transformation

Public funding can be particularly significant
in effecting these changes in low- and middle-income countries, where public money pays for thelion’s share of food system R&I. It accounts for 60-70
percent of the yearly spend in those countries oninnovation in agriculture, estimated at 50-70 billion
USD a year (Prasad et al. 2023). Public sector bodies
may also draw on the finance, expertise and driveof private sector actors as long as public-private
partnerships for innovation address the needs ofsmaller-scale and marginalized groups, such as
smallholder farmers, women, and youth, which
are the least likely to benefit from privately fundedinnovation today. Most private investment goes toglobally-traded commodities, such as maize andsoybeans, and bypasses crops like cassava, yams
and sweet potatoes that are economically significant in many low- and middle-income countries,
particularly in Africa.
Progress in the following seven areas of foodsystem R&I is particularly important to accelerate
sustainable and inclusive food system transformations (Rosegrant 2023).
Modernizing plant breeding in low- and middle-income countries (LMICs). This requires investment ininnovative data collection, digitization, and information management systems in LMICs to increase theefficiency of R&I undertaken in them5. Institutional
reforms are also needed to support modern information platforms (Kholová et al. 2021). These improvements should be implemented by partnerships
between national and international public researchsystems, universities, farmer-led breeding initiatives and, where appropriate, private sector bodies.
Strengthening research capacity in LMICs in this way
would help to improve development of locally relevant crops and overcome the barriers to technology
transfer currently created by international protectionof intellectual property rights.

5 These include high-throughput phenotyping, GIS, genomic-wide association selection, meteorology, and soil characterization as well as
monitoring of farm management practices, including the performance of cultivars.
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Developing more environmentally sustainable
farming systems. Farming systems can incorporate
a variety of practices to become more environmentally sustainable, notably: rotation of a wider rangeof crops including legumes and cover crops; conservation tillage and residue management; improved
water management through precision agriculture andwater harvesting; improved pasture management;
applications of natural pesticides and biofertilizers;
and improved manure management systems inlivestock-crop systems. Over time, these practices improve productivity and produce a variety of environmental benefits. New precision agronomy technologies can help in tailoring the design of sustainable
farming systems to local agroclimatic conditions at
subnational and field scale (Rosegrant 2023).

The Economics of the Food System Transformation

Digitizing agriculture for small farmers. Advanced
digital technologies such as satellite imaging,remote sensing and in-field sensors can all support
precision farming for small farmers, and especiallyprecision agronomy, by delivering essential information to them at a practical scale (Rosegrant 2019).
To date, these technologies have been mostly usedby larger farmers. Rapidly reducing their costs andembedding them in applications that address smallholders’ problems will make them more useful andaccessible to small farmers. Easily accessible digitaladvisory services can help small-scale producers tomanage climate risks or crop disease threats (seeSpotlight on Change 8). Government investments
are key to extending digital technologies to small
farmers at scale. They are needed to provide the

SPOTLIGHT ON CHANGE 8

Digital climate informed advisory services build small
farmers’ resilience to climate change
Climate change makes the kind of extreme
weather events that can decimate crops more
frequent and intense in many geographies.
Changes in weather patterns also make thespread of some crop diseases more likely.
Digital climate-informed advisory services(DCAS) can build small farmers’ resilience tosuch potential calamities. These early warning
systems provide farmers and governmentswith advance information about bad weather,pests and diseases, giving them more timeto prepare. Data from around 50 projects in
Africa suggests that DCAS there have resulted
in productivity gains ranging from 23 to 168
percent and increased incomes by 30 to 57
percent (Ferdinand et al. 2021).
A new early warning system in Nepal and
Bangladesh shows how DCAS work. The system
uses weather information, field surveillance data
and disease modeling to give farmers regular
updates on their future risk from fungal wheat
diseases, such as wheat blast or wheat rust.

These are highly damaging to crops and canspread quickly across large distances. Advancewarning gives farmers time to apply fungicide to
the parts of their crop most at risk from disease.
The risk updates and accompanying advice
go first to expert advisory groups, comprisingnational farming bodies like the Nepal
Agricultural Research Council and Bangladesh
Wheat and Maize Research Institute. These
disseminate the updates in their countries using
SMS, radio and other channels. By 2022, over
500,000 farmers were receiving information
directly from the service and passing it on toother farmers (Ogoi et al. 2022).
More than 300 million small farmers worldwide
have limited or no access to DCAS, according
to estimates. Getting DCAS to all of themwould greatly boost their resilience to the risksof climate change and associated disruption
to local food supplies. It needs significant
investment (Ferdinand et al. 2021).
Sources: Ferdinand et al. 2021; Ogoi et al. 2022.

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essential digital infrastructure as well as access toelectric power for those small farmers who still lackelectricity (Goedde et al. 2021).
Integrating small producers into modern value
chains through improved digital information systems.
These extend small producers’ access to markets andaffordable inputs by improving links between farmers and processors, reducing post-harvest losses,
tracking provenance, and improving access to cheap
credit and crop insurance (USAID 2017). Their further
integration into modern value chains will depend on
institutional innovations, such as aggregating andcontract farming. For instance, small producers canincrease their power in input and output markets byaggregating in cooperatives or farm clusters. These
give them competitive scale in inspection, packaging,food safety regimes and quality management. They
also give farmers access to agricultural inputs at lower costs and to microfinance, thanks to economies ofscale, as well as facilitating knowledge sharing among
members (Rosegrant 2023).
Developing clean cold chains to reduce
post-harvest losses by scaling efficient, zero-emission cooling technologies. These include the"Dearman engine" a novel cooling unit for delivery
trucks that could replace traditional diesel-poweredsystems, and adopting the "Cold economy" concept
across cold chains. This concept calls for innovations in both technology and business models to
exploit the vast potential to improve cold chain
efficiency that lies in using "waste" or surplus energy
and coldness to produce liquid air or liquid nitrogenfor storage (Center for Sustainable Cooling 2020).
Supporting the shift to healthier and moresustainable diets. "Gamifying" for consumers thetasks of improving their diets and nutritional knowledge and choosing sustainably-produced food is
one option. "Gamifying" means using applications,programs and services with game-based elements,
such as interactive challenges, rewards and progress
tracking, to encourage consumers to change their
behaviour (Suleiman-Martos et al. 2021). Anotheroption is to motivate investment in supply chains

The Economics of the Food System Transformation

for alternative foods, such as fermentation-derived
microbial proteins (Humpenoeder et al. 2022; Linder2019). For instance, the Danish plant-based food
fund is incentivizing the supply chain investments
needed to provide "planetary health diets" at scale
and make high-quality, sustainable alternative
proteins more accessible, complementing private investment in meat substitutes, which is already quite
substantial (Fesenfeld 2024).
Smart scaling of critical innovations. To diffuse
useful technologies at speed across food systems,
institutional innovations will be just as importantas the new technologies. Policymakers need to pay
attention to both, as the experience of the Green
Revolution illustrates. The new agricultural technologies this revolution introduced would probably nothave spread without their accompanying packageof targeted policies and sociocultural accelerators.
These provided the rural infrastructure, agricultural extension services and secure land tenure thatmade it possible for farmers to grow the new cereal
seeds. They were tailored to mobilize all the actors
and interests involved in adopting a new way of producing cereals, ranging from farmers, input suppliers
and wholesalers to researchers and governments.
Policymakers today need to tailor similarly innovative socio-technical policy bundles to particular foodsystems, in all their social complexity, to increase
the chances of new technologies leading to beneficial change at scale. The bundle of policies being
used to combat micronutrient deficiencies offer acontemporary example of this approach (Barrett etal. 2020b; Spotlight on Change 9).

Investment
Chapter 3 presented FSEC’s estimates of thecosts of implementing a global food system transformation. While public investment is needed tofinance some of those costs directly, public policy
and spending can also support additional investment in and implementation of the food systemtransformation by acting as an enabler, a catalyst
and a stabilizer.

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The Economics of the Food System Transformation

SPOTLIGHT ON CHANGE 9

Scaling innovation
Lessons to be learned from the development
and diffusion of biofortified sweet potatoes
Biofortifcation is the process of selective breeding
to improve a crop’s nutritional content. Getting
biofortified crop varieties to malnourishedrural populations is a cost-effective way todiversify and improve their diets since these
populations generally have limited access to foodsupplements and commercially fortified foods.
One successful example of this approach is thedevelopment and dissemination of biofortified
pro-vitamin A varieties of orange-fleshed sweet
potatoes undertaken by the International Potato
Center (CIP) and its partners.
The initiative had five phases: from 1991 to 1996
the new idea emerged; its potential was thenproved to the nutrition community between
1997 and 2005; then the possibility of scaling
the idea cost-effectively was evaluated between
2006 and 2009; from 2010 to 2014, significant
investment went into research to address
breeding and other bottlenecks and to launch
the Sweet potato for Profit and Health Initiative(SPHI); lastly, the new varieties of biofortified
sweet potatoes were disseminated at scale torural populations across Africa and South Asia
from 2015 to mid-2019.
Intensive piloting of the new varieties on
farms and rigorous biomedical researchdemonstrating their nutritional efficacy wereboth key to the success of the whole process.

Public investment as an enabler. Changes in foodsystems are influenced by developments well outside them (see Chapter 2). A food system transformation is much more likely to attract investment inan environment that enables equitable growth, andpublic policy and related public investment is criticalto creating such an environment. Macroeconomic

CIP’s collaboration with national sweet potato
breeding programs accelerated breeding forbiofortification and helped to develop morethan 100 pro-vitamin A varieties adapted to
local agro-ecologies and consumer preferences.
CIP and its partners followed an integrated“agriculture-marketing-nutrition” approach,combining innovations in seed quality andnutrition management technologies withpartnerships in marketing and food processing
to boost acceptance of the orange-fleshed sweet
potato in Africa and South Asia and speed its
dissemination. This approach was supported
by an array of integrated activities. Planting
material, gender-responsive agronomic training
and nutrition education were all distributed
through health programs and schools. Raised
awareness of the importance of diversified diets
boosted consumption of orange-fleshed sweet
potatoes, benefiting families at risk of vitamin
A deficiency. Promotional campaigns, cooking
classes, and increased use of sweet potato inprocessed food products continued to raise
demand, consumption and the market returns
to growing sweet potatoes, inspiring more
farmers to cultivate the crop. Over 6.8 million
households in Africa and South Asia now growand consume vitamin-A-rich sweet potatoes,
making their development and dissemination an
object lesson in how to scale innovation using
the power of policy bundling.
Source: Low & Thiele, 2020stability is one essential element, in part because
it fosters private investment. Another is the market
and physical infrastructure that allows actors inall segments of a food system to respond to new
incentives and take advantage of new opportunities.
Growing evidence that once basic infrastructure,such as roads and an electricity supply, is in place
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the middle segment of food supply chains develops rapidly reinforces this point (Reardon 2015). So
do advances in digital service delivery within andoutside agriculture. Guaranteed property rights canhave a similarly galvanizing effect on change (Postet al. 2021). Another crucial but often neglected
activity in need of public investment is building thecapacities required to implement a food systemtransformation at all levels of government.
Public investment as a catalyst. Public funding
can catalyse private investment through public private partnerships (PPPs), by providing an accelerator
or an incubator for innovations, or by using blended
finance instruments to de-risk private investment infood system projects.
Public-private partnerships in food systems
combine the resources of public and private bodies
to reach a specified objective, often in a particular
locality. Typical objectives for such PPPs are to develop agricultural value chains, promote the uptakeof agricultural innovations and technology, build
and upgrade market infrastructure, and to provide
business development services to farmers and small
enterprises (FAO 2016). There are concerns that PPPs
can increase the already large influence of corporations on food systems. However, PPPs also augment
limited public resources for improving operational
efficiencies and reducing costs, especially when they
are designed to be fully transparent, accountable
and trustworthy (Fanzo et al. 2020). Private partners
in PPPs provide capital, technical expertise andknow-how. Public partners can act as catalysts byproviding complementary investment, access toland, research or extension services, and enabling
regulations such as environmental standards which
provide a level playing field for competing businesses (Obayelu 2018; Dunning et al. 2015).
Business accelerator and incubator programs
help innovations to scale by providing start-up
developers with guidance, financial and technicalsupport, and access to networks. Such programs
typically concentrate on specific types of innovationor purpose. Several focus on supporting ‘impact-oriented entrepreneurs’ in food systems in venturesthat could improve food security and environmental

The Economics of the Food System Transformation

sustainability. Accelerator and incubator programs
have been launched by both private food companies and public actors. They offer opportunities toalign private innovation and market developmentwith public policy goals (Newell et al. 2021).
Finally, public investment can catalyse private
finance for food system projects through blended
finance instruments. Blended finance is the term
used for a combination of public and/or philanthropic and private capital in a project where the publicor philanthropic element bears a sufficient proportion of the project’s risk to make it "investable" forcommercial private investors who would otherwise
not have participated. Typical blended finance instruments are tailored to mitigate risks arising fromproject-specific technical, institutional, political,
demand/off-take, operational, currency or liquidity
issues. They are especially useful for projects in theirearly stages to help make them attractive investment opportunities. Instruments used in blended
finance packages include public or philanthropic
grants and technical assistance as a precursor
to investment; impact investment, various debt
and equity instruments; and first-loss capital andguarantees (Bove et al. 2023). To succeed, blended
finance instruments must include strong accountability mechanisms.
Public investment as a stabilizer. Food systemtransformations can put private companies’ assets
at risk of becoming stranded. Rapid implementationof new regulatory norms, such as the recent nitrogen regulations in several countries in Europe, or
arrival at consumption tipping points (as may now
be the case with consumption of plant-rich diets),
can suddenly turn production assets into liabilities.
If several companies decide to wind down obsolescent production plants at the same time, a sudden
unanticipated gap in essential supply may open up
before it can be filled by new producers (Jain & Palacios 2023). Public investment can help to stabilize
such transitional shocks in a number of ways. For
example, it may support development of optimal
pathways for retiring specific assets and expanding
their substitutes to guide investment and retirement
decisions in highly capital-intensive areas of food76

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systems such as fertilizer production.
Public funds could speed the diffusion of innovations by financing schemes for getting rid of obsolete
machinery and owning or renting new, environmentally sustainable equipment, such as no-till machinery, or precision fertilizer applicators. Public investment may also fund the retraining, redeployment andgeneral support of workers displaced by innovations.

The Economics of the Food System Transformation

Applying an inclusion lens tofood system transformation

formation strategies through an inclusion lens.
They can apply this lens to; their choice of policy
instruments and strategy design, to ensure theseminimize negative effects and maximize benefits forlower income groups; the combination of policies inpolicy bundles, to check that these include sufficient compensation for any negative effects on themost vulnerable including on food affordability; anymeasures that take effect beyond food systems, tobe sure these help the poorest and most disadvantaged groups to access new opportunities.

Transforming food systems to make themmore inclusive is a matter not only of social justice
but also necessity: 3.8 billion people’s livelihoods
depend on food systems (Davis et al. 2023) and theiropposition to reforms can easily slow down or halt
progress. This report highlights the pervasivenessof trade-offs between different transformation
objectives and the interests of more vulnerable andmarginalized groups. Making sure new opportunities from food system transformation are inclusive
is a constant challenge and one central to FSEC’s
approach to transformation strategy design.
To address this challenge, policymakers needto examine the design of their food system trans-

Choosing policy instruments and design throughan inclusion lens. The choice of incentives, innovations and investments in a food system strategy
needs to prioritize the needs of marginalized andlower income groups. To this end, public research
can focus on the development or diffusion of newpractices that will benefit small producers while
improving environmental outcomes or the nutritional content of food; new incentive schemes canbe combined with information strategies tailoredto the cognitive and behavioral characteristics ofsmall-scale farmers so these groups get the full benefit; and policy can favor production models that77

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rebalance market power disparities in value chains(Pilditch et al. 2023).
Policy design can also explicitly promote inclusion. For instance, the energy transition strategy
in Canada distributes rebates from its carbon tax
scheme disproportionately to lower-income groups(Environment Journal 2023). Such a bias towards thepoorest does not necessarily disadvantage otherincome groups. Modeling shows that if a similar
carbon tax and rebate approach was adopted in Latin
America, targeting resources to the poorest groups
would absorb only one third of the total revenue
raised, leaving the other two thirds to be spent on
public goods which could also benefit the rest of the
population (Feng et al. 2018).
Compensating poor and marginalized groups forany negative effects of policies. Transformation
strategies need policies promoting a broad set ofobjectives, including changing how food is produced
and distributed, shifting food consumption towards
healthy diets, and supporting food system actors in
adapting to change. Trade-offs between these objectives and the interests of poor and marginalizedgroups are pervasive. Policies that have negative
effects on poor and marginalized groups, in terms ofincomes, jobs, or food affordability, call for complementary compensating policies in comprehensive,
policy bundles (Gatto et al. 2023; Willenbockel 2023).
One set of simulations conducted for FSEC models the effects of carrying out a basic set of food system transformation interventions6 uniformly acrossthe globe. This shows that trade-offs between different food system transformation objectives and theinterests of vulnerable groups vary depending on
local contexts. The analysis illustrates the need to
tailor short-term social protection measures, such astransfers or subsidies, to certain income groups ordemographic cohorts and their local circumstances.
The simulated policies have different effects indifferent food system settings. Price interventions areless effective in shifting consumers towards healthy

The Economics of the Food System Transformation

diets in more industrialized settings, where demandis less responsive to prices. In these contexts, priceincentives need to be complemented by non-pricemeasures to accomplish substantial changes inbehaviour of consumers and producers. By the same
token, the need for targeted compensation is lessened in these settings because of the limited effectsof the price interventions on consumers. However, inmore traditional food systems, there is a risk that thesame price policies have negative effects on nutrition as demand for food will be more responsive to
prices. In these settings, targeted income support for
low-income households and subsidies on staples areneeded alongside the new price policy to maintainand improve nutrition (Kuiper et al. 2022).
In the medium term, new jobs arising from afood system transformation will be central to itsdelivery of inclusive outcomes. As discussed in
Chapter 2, transforming food systems is likely toamplify the ongoing structural economic transformation, particularly in lower income regions where
this transformation is less advanced (FSEC Africa
Brief). Specific interventions may be called for where
significant and localized job losses occur, for instance when a production plant becomes obsoleteand closes. In locations at risk, job guarantees, orpriority placements could be effective off-setting
measures. Relevant public bodies need to engage
with the local community to plan and provide services before and after a plant closure, coordinating
multiple stakeholders and agencies in drawing up
the plans. Additional research is needed to identify
how opportunities can be created in settings where
vast numbers of people work in the informal foodeconomy.
Taking complementary measures beyond foodsystems to make sure poor and disadvantaged
groups can access new opportunities. These measures are essential because of the impact of the foodsystem transformation on jobs. While new employment opportunities for displaced farm workers are

6 The policy bundle includes subsidies on fruit and vegetables financed by a tax on non-perishable food items; a carbon tax to reduce GHG
emissions from the food system; and subsidies on low-skilled labor in agriculture.
78

Chapter 4

likely to open up downstream in food systems, or inlabor-intensive nature-based food system projects,
interventions are needed to create additional employment opportunities for displaced workers within
and beyond food systems.
Investments in infrastructure and skill development, together with innovation, can help to change
practices within the agricultural part of food systems and develop new income opportunities. Measures to secure property and tenurial rights, which
reinforce livelihoods by giving rightsholders an
incentive to invest in their land, can have the same
effects. They encourage the diffusion of innovations
and uptake of farming practices with longer term
environmental and health benefits rather than less

The Economics of the Food System Transformation

beneficial practices with immediate returns, suchas burning forest to gain land for cultivation. Addressing land rights insecurity can also significantly
empower women (see Spotlight on Change 2 in the
introduction to this report). More broad-based measures within and beyond food systems are needed
as well. These include investment in human andinfrastructural capital, so less advantaged actors
in food systems can access new livelihood options,and adequate transfers to the poor to mitigate any
negative impacts of the transformation on them, as
described above.

BOX 4.1

The three policy levers of Incentives and regulation, Innovation and Investment
to transform food systems: an application to strategies to tackle obesity
This chapter presents the policy levers for a foodsystem transformation in terms of a “Three I's policy
framework” focused on Incentives and regulation,
Innovation and Investment, complemented by an
Inclusion lens.

Strict regulation of food marketing also changes
consumption patterns (Boyland et al. 2016; Smithet al. 2019). To complement such regulation, foodcompanies should spend more on marketing
healthier foods (Kraak et al. 2019).

This box offers an application of this framework to
identify the constituent elements of a strategy totackle obesity, based on existing evidence.

Behavioural incentives can work too. These
include changing the menu and placement offoods in school, work and community canteens tomake healthy foods more available and attractive(Bucher et al. 2016; Deliens et al. 2016; Roy et al.
2015; Mikkelsen et al. 2021; Arno & Thomas 2016;
Nugent et al. 2023; Acker e.V. 2022). Digital healthapps successfully use behavioral “nudges” and also
“gamification” to encourage people to eat betterand exercise more (Patel et al. 2017).

Incentives and regulation: Taxes and subsidies
that make unhealthy products more expensive
and healthier ones cheaper can significantly
alter consumption patterns (Powell et al.
2012; Willenbockel 2023). For maximum effect,
governments would need to harmonize their healthpromoting taxes on sugar-sweetened beverages,
alcohol and tobacco across countries (WHO 2015;
Thow et al. 2022), drawing on policy learning (WCRF
2023). They should also consider taxing ultraprocessed foods (Finkelstein et al. 2014; Leicester& Windmeijer 2004; Barnhill et al. 2018). And theymight want to redirect agricultural subsidies
towards healthy high-fiber and high-protein crops,
like fruits, vegetables and nuts, to increase supply
and lower prices (Springmann & Freund 2022;
Franck et al. 2013).

Innovation: Evidence suggests governments
need to back R&D on reformulated foods thatare both nutritious and palatable (Gressier et al.
2020; Onyeaka et al. 2023). They might also wantto support the discovery of additional anti-obesity
drugs to increase the range available and bring
down prices (Levi et al. 2023). Research on theeffects of school- and community- programs toprevent obesity needs funding as well (Mazzucca etal. 2021).
79Chapter 4

The Economics of the Food System Transformation

BOX 4.1

The three policy levers of Incentives and regulation, Innovation and Investment
to transform food systems: an application to strategies to tackle obesity
Investment: Fighting obesity calls for a broad
range of intervention, including interventions
outside of food systems. Urban planning andurban infrastructure can support healthierlifestyles and weight loss. One study in Chennai,
India, found that living in a neighbourhood
where walking was impractical made inhabitants
1.8 times more prone to overweight or obesity(Adlakha et al. 2020). So investing in urban
infrastructure that encourages walking makes
sense (Howell & Booth. 2022; Buregeya et al. 2019).
Women or other minorities in cultures that limit
their movement in public need targeted initiatives,
such as group exercise programs (Adlakha et al.
2020) or dedicated spaces for physical activity(Danielli et al. 2021; Bouch et al. 2011). Introducing
exercise spaces to communities in Massachusettsbrought overweight and obesity down almost
30 percent below the level seen in communities
without them (Economos et al. 2013). European
cities have applied bundles of interventions to
reduce car travel in urban centers. These include
reducing speed limits to 30 km/h, making public
transportation free (and adding new routes),
doubling the density of bicycle lanes, providing

vouchers for the purchase of electric bicycles,
requiring advertisement for both cars and fast
food to include disclaimers that physical mobility
is good for health, complemented by public service
announcements on the increased safety, air
quality, and environmental impact of pedestrian
and bicycle transportation. Shifting foodenvironments to more dispersed, neighbourhood
stores, rather than concentrated big-box stores
further combines physical mobility, with increased
access to healthy foods.
Sources: Powell et al. 2012; WHO 2015; Thow et al.
2022; Finkelstein et al. 2014, Leicester & Windmeijer
2004; Barnhill et al. 2018; Springmann & Freund 2022;
Franck et al. 2013; Boyland et al. 2016; Smith et al.
2019; Kraak et al. 2019; Bucher et al. 2016; Deliens
et al. 2016; Roy et al. 2015; Mikkelsen et al. 2021;
Arno & Thomas 2016, Nugent et al. 2023; Patel et al.
2017; Gressier et al. 2020; Onyeaka et al. 2023; Leviet al. 2023; Mazzucca et al. 2021; Adlakha et al. 2020;
Howell & Booth, 2022; Buregeya et al. 2019; Danielli
et al. 2021; Bouch et al. 2011; Economos et al. 2013;
WCRF 2023; Acker e.V. 2022; Willenbockel 2023

80

Chapter 5
Designing Strategies to
Make Change Happen:
Negotiating Interests,
Institutions, and Ideas
81Chapter 5

Chapter 5→ Transforming food systems will give rise to unavoidable tensions among
potential winners and losers. Such tensions are shaped by the different interests,
institutions and ideas and information characterizing food systems.
→ The concentration of power among few market players in the food system,
the close connections with other parts of the economy, and governments’direct interests in food systems heavily shape the political economy of afood system transformation.
→ The political feasibility of transformation strategies can be bolstered by:building coalitions of stakeholders; establishing new governance arrangementsthat facilitate balanced stakeholder representation and policy coherence;
shaping narratives and providing information; calibrating policies to gain
acceptance from key stakeholders; and holding governments and businesses
to account for progress.

Introduction
Transforming food systems offers significant
benefits but will also give rise to unavoidable tensions among potential winners and losers. Thesetensions are intrinsic to the political economy1 offood system transformation. Concerns over foodprice rises or job losses can paralyse reforms if left
unaddressed. This chapter explores how the designof transformation strategies can manage these tensions and identify policy bundles that are not only
effective and appropriate for the local context but
also politically feasible.
This chapter describes the political economy offood systems in general in terms of the interests of
their constituent groups; the institutions includingorganizations, rules and processes which shapethem; and the ideas and information surrounding potential changes, which also shape different
interest groups’ responses. It then sets out partic-

ular food systems features that make their political
economy so complex. Despite this complexity,
evidence from successful efforts to change food systems suggests that including five distinct elementsin the process can increase their political feasibility,
making transformative change achievable. Theseelements are detailed in the chapter’s final section.

Interests, institutions and ideas shape
the political economy of food systems
To explain the general nature of the political
economy of food systems, this section draws on theso-called “Three I's framework” presented in Vos
et al. (2022), comprising interests, institutions andideas and information.
Interests
Economic and technical considerations may
dominate the content of food system policies, but the

1 Political Economy is an analytical approach that focuses on agency, power relations, and institutional structures. The concept is used toanalyse the interaction of political and economic processes by primarily looking at the interests and constellations of relevant actors, the power
relations between them, the structures and institutions that influence these relationships, the resulting inequalities, and how these dynamics
change (Duncan et al. 2019; de Schutter 2019; Swinnen 2018).

82

Chapter 5

process of policymaking is also heavily influenced by
the interests of actors who stand to gain or lose frompotential changes. Depending on whether they arewinners or losers from a given policy or program, they
are likely to mobilize to support or hamper its adoption and implementation (Vos et al. 2022).
Potential losers can stymie progress by exerting
direct influence over policy decisions. They may
also exert indirect influence, for example, by funding
research that shapes discussion of the policy and/or public outreach that communicates a specificframing of food system reform to stakeholders.
Different stakeholder groups whose interests on
certain policies intersect tend to form coalitions that
conduct collective lobbying to halt policy interventions or spur them on. These coalitions are not static: the same actors may join forces with membersof different interest groups along food value chainsdepending on the issue (Swinnen 2018).
The degree of stakeholder mobilization for oragainst a proposed change depends on the anticipated distribution of its benefits and costs among
the stakeholders it affects, the concentration of
those benefits and costs among particular interest
groups, and the groups’ ability to coordinate action. Policy changes that lead to diffused benefits
and concentrated costs are less likely to succeed.
For example, policies to reduce dependence on
animal-sourced food in regions where these areover-consumed offer large benefits in terms ofhealth and the environment to whole populations
but relatively small perceived benefits to individuals. They would also lead to high costs for global
food processors. Although a relatively small group,
global food processors are likely to mobilize strongly
against such policies, while their myriad beneficiaries are less likely to mobilize in favor of them because they perceive the net personal benefits as too
small. Similarly, dairy and sugar industries, which
often comprise small groups of closely coordinatedprocessing firms, have historically achieved high levels of political support in contrast to the vegetable

The Economics of the Food System Transformationindustry, which comprises large numbers of smallerfirms and farmers who are more geographicallyspread out (Cerrutti et al. 2022; Vos et al. 2022).
Institutions
Institutions2 shape how reform policies aredesigned and implemented. They also mediate the influence of interest groups on policymaking. The scopefor actors to influence political processes depends on
the nature of the relevant institutions, such as prevailing forms of decision-making, political participation,and financing rules. Changes in any of these factors
can change the pace and character of reform.
For instance, in Europe, the 2001 Treaty of Nice
introduced majority voting on decisions concerning
the European Union Common Agricultural Policy. By
removing the veto power of countries opposed toagricultural policy reforms, this institutional change
ushered in an era of major reform (Swinnen 2018).
Institutional change can also spur broader policychanges. After accession to the World Trade Organization, many countries have shifted away from using
market-distorting agricultural subsidies in favorof “green box” direct income transfers that do not
distort markets (Swinnen 2018).
Ideas and information
Ideas, including economic theories, narratives,
norms and beliefs, also shape interests and policy
preferences (Campbell 1998). In food systems, social
attitudes towards different types of food production
and consumption are highly influential. For example,
emerging public concern regarding modern slavery infood systems or the environmental impacts of foodsystems have recently been important in driving policy change (Cerrutti et al. 2022). Similarly, the formerly
prevailing idea that food security depended on foodself-sufficiency had far-reaching impacts on policies
shaping food systems. In particular, many low-income
countries focused their agricultural policies on subsidizing fertilizer and also on protecting home markets.
For some, the resulting isolation from trade led to

2 Institutions describe the rules and processes according to which changes are negotiated, as well as the arenas where these negotiations
take place. Examples are political regime types, established decision-making processes, forms of political participation, the characteristics ofgovernmental agencies or international organizations, and international agreements (Cerrutti et al. 2022).
83

Chapter 5high food costs and volatile prices (Vos et al. 2022).
In the US and Germany, the growing media debate about meat consumption and meat substitutes
over the past ten years has been changing the policy
environment: statements favoring plant-based foods
and meat substitutes have become more prominent
in the media, as have links between meat consumption and climate change, human health and animal
welfare. And ideas can change quickly: during thepeak of the COVID-19 pandemic, bad working conditions, pandemics, and epizootic diseases became
prevalent in framing public discourse on meat consumption (Fesenfeld 2024).
Information about the impacts of policies ingeneral and on the most vulnerable stakeholders

The Economics of the Food System Transformationin particular can shape the public perception ofreforms, depending on the credibility of the information’s source and on its diffusion (Dechezlepretre
et al. 2022). For instance, in experiments in China,
Germany, and the US, Fesenfeld & Sun (2023) foundthat providing information on the benefits of policies
to transform food systems and reduce meat consumption compared to their costs can significantly
increase public support for ambitious policies onfood systems and meat consumption (see also
Spotlight on Change 10).

SPOTLIGHT ON CHANGE 10

Ideas have been powerful drivers of the dramatic drop in
consumption of trans-fatty acids
Consumption of trans-fatty acids (TFA) is linked
to an increased risk of cardiovascular disease.
Worldwide, more than 500,000 deaths were
attributed to TFA consumption in 2010 (WHO2021) and in the US it causes one in five heart
attacks (Amico et al, 2021). For this reason, in 2018
the WHO called on governments to remove TFA
from the global food supply by 2023. National
policies adopted in response include calls forvoluntary bans, mandatory labelling, limits on
TFA in restaurants, and mandatory TFA bans.
The latter have been particularly effective incutting out TFA and greatly reducing the risk of
diet-related disease – especially among the mostvulnerable socioeconomic groups (Downs et al.
2017). For instance, Denmark’s ban on industrial
TFA accounted for 11% of its total fall in coronary
heart disease deaths between 1991 and 2007,
with the most deprived groups benefitting themost (Bjoernsbo et al. 2022). In the US, the Foodand Drug Administration banned the use ofpartially hydrogenated oil – the primary origin of
artificial TFA – in 2018 (Amico et al. 2021).
The widespread acceptance of these successfulpolicies was driven by changes in social attitudes
and public narratives about TFA. Two factors
made people change their minds: the expanding
body of scientific evidence of the health risks
of TFA and the persistence of scientists andadvocacy organizations in raising awareness ofthese risks (Amico et al. 2021). Forward-thinking
food companies helped defuse opposition in
their industry by voluntarily reducing TFA in theirproducts and demonstrating that it was feasible
to replace it with healthier substitutes (Amico etal. 2021). Careful policy sequencing also helped,
as in the US, where a gradual introduction of TFA
labelling rules in the early 2000s followed by stateand local limits on TFA prepared the ground forthe 2018 national ban.
Sources: Amico et al. 2021; Bjoernsbo et al. 2022;
Downs et al. 2017; WHO 2021.

84

Chapter 5

What is special about the political
economy of food systems
Interests, institutions, and ideas and their interactions are relevant in analysis of system change in
general. In the case of food system change, interactions between these three I's are subject to three particular features: the concentration of power over foodsystems among large corporations, the close links
between food and other systems, both economic andpolitical, and the role of governments in shaping foodsystems through regulation and incentives.
Concentration of power to shape food systems
Food is a universal need and concern, but
the power to shape food systems is paradoxicallyhighly concentrated. An estimated 3.8 billion people
worldwide depend on agri-food systems for theirlivelihoods (Davis et al. 2023), either in production
or further along the complex and diverse value
chains of the world’s food industries. In contrast, a
few large corporations control key segments of foodsystems. For example, over 60 percent of the international agrochemical market is controlled by justfour firms (Global Agriculture 2022), while four othercorporations have controlled over 70 percent of the
global grain market for decades (Clapp 2023).
Market concentration per se cannot conclusively be linked to market power, narrowly defined as
the ability to influence prices. But large actors canmobilize and lobby against regulation and they canshape the relationships between food buyers andsuppliers. Increased market concentration has also
strengthened the significance of private governancearrangements. For instance, a change in the sourcing policy of a big player may become de facto standard across the sector and influence both upstream
production and downstream markets (Hernández etal. 2023; de Schutter 2019). Corporations’ ability toexert power is also closely related to their ability tocoordinate action in coalition with other companies
who share their interests.
The power of corporations and the nature of
institutions are often intertwined. While institutions
can affect the level of concentration in a market and,
therefore, the distribution of power in food systems,
in markets that are already concentrated, the result-

The Economics of the Food System Transformation

ing corporate power can also shape institutions.
Despite the concentrated nature of power infood systems, a growing number of diverse interests
are emerging. Topics of policy debates concerning
food have shifted beyond food security to embrace
nutrition, health, profits, job security, and environmental protection as well (Selnes 2023; Vos et al.
2022). An increasing plurality of interest groups isseen 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.
Close connections with other systems
Close connections between food and other systems, both economic and political, yield opportunities for actors in different systems but with similar interests to influence policy. Such links are particularly
strong between food systems and the energy sector.
For example, the growth of biofuel demand andsupply in various regions has created an opportunity
for new political alliances between grain farmers
and biofuel industries, but their common interests
are at odds with those of livestock farmers, consumers and other sectors hurt by rising feed and foodcosts (Swinnen 2018). Broader coalitions are also
visible. One example from the US is the "iron triangle
of food aid" comprising NGOs, agribusinesses, andmaritime transport businesses who all benefit fromcurrent food aid policies and regulations. These
three groups of actors have resisted calls for foodaid reform for more than 60 years (Swinnen 2018).
Food systems’ close connections to othersystems also mean that food system reforms might
gain from new ideas, political as well as economic,
taking hold in adjacent systems. For example, the introduction of subsidies for producing environmental
services on farms (or Payments for Ecosystem Services, see Chapter 4) may have been enabled by therising importance of sustainable development on
the international political agenda after the Rio Earth
Summit of 1992 (Cassou et al. 2018). Recent global
discussions covering the relationship between foodsystems, climate change, the environment and pub85

Chapter 5

lic health, such as the United Nations Food Systems
Summit and the COP26 on climate change in 2021,
have broadened opportunities for repurposing agricultural support (FAO et al. 2022).
Role of governments and of a complex
web of regulatory institutions
Governments are major stakeholders in food systems, even though they rarely produce food directly.
Agricultural support is the most common form of policy directed at food systems (Lowder et al. 2022c) withroughly 400 billion USD a year of transfers to producers from public budgets (OECD 2023). Governments
also influence food systems through the regulations
and other policies discussed in Chapter 4, generalbusiness regulations, the public procurement of food,and regulations and incentives governing private
investments. In addition, through their international
engagement national governments play a part ininternational food system governance and regulation.
For example, European Union food regulation has
catalysed the integration of horticultural value chainsin Africa and growth in vegetable exports from thecontinent (Swinnen 2015).
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 wellas the more obvious agriculture department (Vos etal. 2022). For instance, in England, responsibility forpolicies affecting food systems is held by as many as
16 key government departments and public bodies (Parsons 2021). On the international level, foodsystems are ostensibly shaped by a complex global
governance architecture. But this highly fragmented
arrangement lacks the capacity to address someof the most urgent issues. Despite international
statements on the right to adequate food for all,international institutions have yet to prioritize and

The Economics of the Food System Transformation

implement principles of global fairness and equity
that would address imbalances in states’ capacity to
manage crises, improve livelihoods, ensure food security, and make the transformation of food systems
inclusive (Ocampo et al. 2022). Their fragmentation
impedes coordination between international institutions, reducing their effectiveness and efficiency. For
example, there are still multiple international arrangements and agreements on food aid, with separate
rules, reporting mechanisms and norms, and little
coherence between them (Ocampo et al. 2022).
In addition, while no single international treaty
regulates food systems per se, food systems directly affect the international community’s capacity toachieve the global conventions. The Paris Climate
Agreement cannot be achieved without transforming
food systems, which currently produce about a thirdof global GHG emissions (Crippa et al. 2021). Similarly,
the Global Biodiversity Framework and its recently
approved Kunming-Montreal Convention on Biodiversity include multiple targets that cannot be met
without a worldwide transformation of food systems.3

Designing politically feasible foodsystem transformation strategies
Understanding the interests, institutions andideas shaping a particular food system gives policymakers and food system stakeholders a betterchance of designing transformation strategies thatare embraced by their key actors and successfully
implemented. Acknowledging the importance ofthat understanding, we suggest five elements toinclude in designing food system transformation
strategies: building coalitions of stakeholders; establishing new governance arrangements that facilitatebalanced stakeholder representation and policy
coherence; shaping narratives and providing information; calibrating policies to gain acceptance fromkey stakeholders; and holding governments andbusinesses to account for progress. By influencing
the nature and distribution of interests, ideas and3 Including Target 1, which calls for halting the conversion of remaining wilderness areas and intact lands, Target 10 on sustainable production
and scaling of biodiversity friendly production practices, Target 7 on reducing pollution from nutrients and pesticides; Target 16 calling forsustainable consumption, and Target 18 which aims to eliminate subsidies harmful for biodiversity, and reducing them by at least 500 billion USD
per year by 2030.
86Chapter 5

institutions in food systems, these elements help to
produce politically feasible policy choices (Vos et al.
2022; Resnick & Swinnen 2023).
Building coalitions of stakeholders. Policy changes generate winners who are likely to support themand losers who will oppose them. So it makes sense
to identify winners from proposed changes to foodsystems, make them aware of what they standto gain, and mobilize their support. For instance,
underscoring the intended public benefits of a dietshift, such as better child health and lives saved byhealthier diets, can help build constituencies forreform. Indeed, broad-based, multi-stakeholder
coalitions to challenge corporate power were instrumental in persuading governments across Latin
America to raise taxes on sugars despite corporate
lobbying (Colchero et al. 2016). It also makes sense
to create more winners, if possible. This might entail
offering compensation to losers, or investing in new

The Economics of the Food System Transformation

opportunities that would benefit them.
Case studies from China, the US, the EU, Israel,and Singapore demonstrate that NGOs and “green
business” entrepreneurs have formed coalitions topush for policies fostering the sustainable practices and product alternatives along the food supply
chain which both groups want. Highlighting new
business opportunities arising from innovations
such as cultivated meat, regenerative agriculture
and agri-photovoltaics can shift perceptions of theinnovations among interests vested in the statusquo from “certain cost” to “potential benefit” (Fesenfeld 2024). Concrete incentives to turn losers into
winners can help. For instance, financial measures
such as the "Danish Fund for Plant-based Foods"that supports farmers and businesses in the transition to plant-based production, support for R&D on
plant-based foods, and lower VAT on plant-based
products could all build support for a shift to lower
meat consumption. Such incentives not only create
87Chapter 5

new business opportunities. They can also generate
new interest groups and change beliefs about thecosts and benefits of the shift (Fesenfeld 2024).
Reframing narratives to highlight a commonality of interests among groups hitherto agnostic
to a change, may also help to create new coalitions for the change. The harnessing of major faithdenominations to the cause of climate change byhighlighting the planetary stewardship role given
to humankind in religious texts offers a powerfulexample. Similarly, identifying the impacts of foodsystems on a broad variety of outcomes can help
mobilize constituencies interested in only a subsetof those outcomes. Finally, advocacy to increase thevisibility of diffused costs and benefits can increase
the ranks of those who feel they have a stake in thetransformation of food systems and help to coordinate diverse stakeholders.
Establishing new food system governancearrangements to balance stakeholder representation and ensure policy coherence. Institutional
barriers to change will be different in different foodsystems but two are likely to be present in most.
The first is the imbalance of power over food systems among stakeholders. This imbalance has been
instrumental in shaping food systems that optimize
the production of calories at lowest cost without
taking the resulting costs to health and the environment into account.
New food system governance arrangementsthat facilitate inclusive political consultation can help
challenge this paradigm. New governance bodies
should comprise multiple interest groups, be independently moderated and base their deliberations onevidence. Ideally, such bodies would be given formal
responsibilities by national parliaments so they havelong-term legitimacy beyond electoral cycles (Fesenfeld et al. 2023). The Food System Dialogues of the
UNFSS have added a richness of perspectives onfood systems to UN deliberations that similar national
bodies could contribute to the design of national foodstrategies. Similarly, the creation of a broad-based
coordination forum to revive the fortunes of cocoa
production in Liberia enabled coordinated action
among its members against disruptive changes to

The Economics of the Food System Transformation

export regulation in the country (Kazadi 2022).
The second ubiquitous barrier to change in foodsystems is the general lack of coherence in policies
affecting them because of the fragmentation offood system governance. New governance arrangements are needed that facilitate thinking acrosstraditional silos, a shared understanding of themany interlinked challenges, and the provision of
the capacities needed to implement reform policies.
Such arrangements can take different forms, e.g.,cross-government food-themed working groups,
overarching food policy strategies, dedicated foodpolicy bodies, or even "Super-Ministries" that combine multiple policy sectors (Parsons 2022). Theirperformance can be enhanced by independent
monitoring bodies set up to evaluate policy progressand make evidence-based suggestions for policy
reforms (Fesenfeld et al. 2023) (see Spotlight on
Change 11).
Shaping narratives and providing information.
Information about the costs of the status quo andthe benefits of reform can catalyse action (seeSpotlight on Change 12).
Information about the expected impact of apolicy can similarly change perceptions of its worth.
Experimental evidence has shown that support for a
climate policy increases when respondents perceivethat the policy is effective in reducing emissions,does not adversely affect lower-income households’
costs of living and does not hurt the respondent’s
household financially (Dechezlepretre et al. 2022).
This suggests that strategic communication abouta food system transformation that highlights its
effects on the interests of current and future system
stakeholders is crucial to winning support for thetransformation. Ensuring that the dynamic benefitsof the transformation are broadly communicatedcan unlock opportunities for dialogue. For example,
in discussions of crop diversification, more attention
can be paid to how this helps to diversify income
sources and make farmers more resilient.
Calibrating policies to gain acceptance from key
stakeholders. The distribution of a policy’s costs
and benefits can be adjusted to make them accept88

Chapter 5

The Economics of the Food System Transformation

SPOTLIGHT ON CHANGE 11

Political coordination mechanisms for food system change
Recent examples from Uganda and Vietnam

Uganda launched its National Food Systems
Coordination Committee (NFSCC) in 2022. Thisis chaired by the Prime Minister’s Office andincludes representatives from the Ministries andgovernment agencies that cover agriculture,
health, water and environment, gender, andlocal governments. The committee also speaks
to food system actors and influencers including
farmers, youth leaders, academics, and private
businesses. The Committee helps to coordinate
the different policy sectors’ contributions totransforming Uganda’s food system, prevent‘siloed’ policymaking and reduce capacity
bottlenecks. It has undertaken strategic analyses
to inform a shared transformation roadmap andaction plan and drive implementation of planned
measures. It is now establishing reporting
mechanisms and indicators to track progress
towards the plan’s objectives.

similar approach. In March 2023 it issued a“National Action Plan to establish a Transparent,
Responsible and Sustainable Food System in
Vietnam until 2030”. The plan recognizes thatthe food system is interdisciplinary, so different
ministries and diverse food system actors
need to collaborate to transform the systemcoherently. An intra-governmental partnership
coordinates the plan’s development andimplementation. This partnership, led by the
Ministry of Agriculture, comprises the ministries
responsible for industry and trade, natural
resources and the environment, and health. As in
Uganda, the partnership is chaired by the Prime
Minister. Its work is supported by collaboration
with international partners including UN
agencies, NGOs and other national governments,
as well as ongoing and wide-ranging dialogue
with representatives from local and national civilsociety and business and industry associations.
The plan’s main objectives are to shift to moreenvironment-friendly food production, facilitate
vibrant rural communities and innovation
among farmers and address food loss and foodwaste.

The Government of Vietnam has taken a

Sources: FSEC Governance Brief

Both Uganda and Vietnam have recently
introduced new governance arrangements tomake sure policies affecting their food systems
are coordinated and complementary.

able to key stakeholders. Appropriate compensation
mechanisms for losers are one form of adjustmentthat can be essential to making a food systemtransformation feasible (see Chapter 4). Similarly,
active labor market policies and investment can beharnessed to address the additional farm job losses
resulting from the food system transformation.
To win wider support for a reform policy, links
between the policy and the compensation alsoneed to be clearly visible to all and compensation itself readily accessible to those eligible. Experiments
in China, Germany, and US show that a majority ofpeople support demand-side food policies that will

add to living costs (e.g., higher taxes on meat) if they
are combined with targeted compensation policies(e.g., discounts for fresh or minimally processed
whole foods, plant-based alternatives and meat
substitutes) and supply-side regulations (e.g., higher
animal-welfare standards) (Fesenfeld et al. 2020).
Canada’s decision to reward lower carbon emissions
with a simple cheque instead of income tax rebatesis one example of a highly visible compensation
strategy (Government of Canada 2021).
Other policy design features may also help tomake measures more widely acceptable (Box 5.1). In
regulating emissions, policies that give stakeholders
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flexibility, such as emissions quotas, allow stakeholders to identify solutions that are lowest-cost forthem. In addition, when incentives are changed by
new taxes or other fiscal measures, like reductions
in subsidies, spending the revenues gained directly
on interventions that command broad support, suchas the provision of public R&D, can help to make thefiscal changes more acceptable. For example, Bolivia
finances its healthy school meal programs from a
tax on hydrocarbons, converting natural capital into
human capital (The Education Commission 2022). In

The Economics of the Food System Transformation

the same vein, policies that offer financial benefits
to those who take up desirable practices–throughconditionality or subsidies–are more likely to be
accepted than taxes and mandatory regulations.
Both in China and the EU, recent agricultural
policy reforms have been accompanied by such
benefits for shifting to more environment-friendly
practices instead of penalties for failing to. The Chinese government introduced subsidies to promote
the use of organic fertilizers instead of chemicalfertilizers and pesticides. EU reforms under the

SPOTLIGHT ON CHANGE 12

The role of stakeholder coalitions in the adoption anddevelopment of Brazil’s soy moratorium
The Amazon Soy Moratorium was establishedin 2006 in the wake of a Greenpeace report on
the dangers of agricultural encroachment on
the rainforest called “Eating up the Amazon”.
The moratorium is a voluntary agreement madebetween a diverse group of signatories to refuse
to buy soybeans grown in areas of the Amazon
deforested from 2008 onwards. It was drafted by
the Soy Working Group (SWG), a forum for dialoguethat initially comprised representatives fromcivil society organizations and from companies
affiliated to the Brazilian Association of Vegetable
Oil Industries and the National Grain Exporters
Association. In 2008, the Brazilian government
joined the Soy Working Group, raising it to a newlevel of influence and paving the way for it todevelop effective long-term strategies. Shortly
afterwards, the National Institute for Space
Research, Banco do Brasil, and the European Soy
Consumer Group became members too.
Expansion of the SWG’s membership has
gradually enhanced the moratorium’s
effectiveness, especially through better
monitoring and greater transparency. Advancesin land registration, high-resolution mapping
and trade data have all boosted compliance.

By 2020, 98 percent of land planted withsoybeans lay outside the area protected by
the moratorium, a measure of its success. The
scheme’s impact has prompted new regulatory
ideas focused further downstream. For instance,
the EU wants to make companies identify the
suppliers of all agricultural commodities theypurchase.
The moratorium could still improve in someareas. For instance, it has yet not been adopted
into Brazil’s national legislation. Deforestation
data is still monitored and evaluated by Brazil’s
space and environmental agencies alone, whichmeans indigenous groups, the most importantstewards of biodiversity in the Amazon, arelargely excluded from the monitoring process.
This process also does not yet record smallscale land conversions, which in aggregate may
cause significant deforestation. That said, themoratorium has already done a great deal toprotect the world’s largest tropical rainforestfrom further encroachment. It shows how muchdialogue between diverse stakeholders with acommon interest in protecting the environmentthat supports them all can achieve.
Source: Rausch & Gibbs 2022

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Chapter 5

Farm-to-Fork strategy include payments to farmers
conditional on them reducing their use of pesticides
and fertilizers, shifting to organic farming practices,
and adopting new technologies that reduce GHG
emissions from agriculture (Vos et al. 2022).
In addition, the technical content of policies mustmatch the capacity of targeted stakeholders to makerequired technical changes. Transformative policies also need to be sequenced in line with growing
support for them won by earlier measures: when thebenefits 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

The Economics of the Food System Transformation

for plant-based food (like the Danish Fund for Plantbased Foods described above) to win initial support.
This could be followed by a more fundamental reformof the current CAP funding scheme and eventually the
introduction of emission pricing schemes and stricter
nitrogen regulation (Fesenfeld et al. 2023, Fesenfeld
2024).
Holding governments and businesses to accountfor progress. Finally, transforming food systems isa long game. Clear transformation pathways, clear
targets to direct progress along the pathways andtransparent monitoring of progress are all essential
to set shared expectations among stakeholders andmake sure the decisions of economic and political decision-makers keep pulling in the same direction overBOX 5.1

Financing the sustainable intensification of beef production in Brazil
Transforming the global food system depends inlarge measure on transforming Brazil’s. Not onlyis Brazil the world’s largest net exporter of foodproducts, it is also the world’s most biodiverse
country, with extensive forests and natural lands
threatened by agricultural encroachment.
Transforming Brazil’s food system is therefore notstraightforward. While the country stands to gainsignificant environmental and health benefits,transformation threatens to negatively impact
Brazil’s GDP and employment. In particular, it puts
pressure on Brazil’s beef farmers. Demand for
Brazilian beef will fall along with global demand
for meat, as food systems transform worldwide,
while stricter environmental standards for beefexports will raise the competitive bar for Brazilian
beef. Livestock farmers will also need to use landmuch more efficiently and reduce the area underfeed crops and pasture if they are to halt andreverse encroachment.
Sustainable intensification of beef production
offers Brazil’s beef farmers a solution that will
also make their beef more competitive on tightly
regulated international markets. However, thenecessary innovation, capacity-building andphysical capital will all cost money. Brazilian
beef farmers, especially smallholders andfamily farmers in remote regions, need better
access to credit. Both government programs
and private instruments can fill the finance gap.
They can help by designing attractive, investableprojects, issuing green bonds, constructing
public credit programs linking (subsidized) loans
to environmental conditions, and introducing
payment for ecosystem services (PES) schemes.
Blended finance instruments can de-risk
investments, making them more attractive to
private investors. However, private investment
is unlikely to flow freely without more work tostrengthen institutions and to enforce laws against
deforestation. Brazilian beef must guarantee
its detachment from deforestation to meetinternational investors’ concerns and comply withinternational rules protecting forests. Brazil has
recently introduced several helpful incentives
including a Green Beef Stamp, which allows
sustainable beef producers to charge a premium,and new PES schemes following the introductionof its PES Law in 2021.
Source: Köberle et al. 2023

91

Chapter 5

the long term. Equally crucial is holding relevant foodsystem players to account for progress. Independentagencies can hold governments to account for thecoherence of their short-term policymaking with overarching policy goals. Corporate boards and investors
can hold management teams to account for aligning
strategic decisions with societal objectives.
Establishing credible, ambitious, long-term commitments and sticking to them is particularly important to avoid the kind of sudden policy reversals that
often follow external shocks to food systems. Shocks
such as an outbreak of war or a flood can push
economic decision-makers into making short-term
policy adjustments to protect those worst affected by
the consequences, for instance, food price spikes or
shortages. Similarly, when shocks suddenly improve
returns to “old” system assets, investors may reconsider their commitment to new ways of producing.
Such reversals risk delaying food system transformations and any delay will erode the possibility

The Economics of the Food System Transformationof success. Making sure key decision-makers in foodsystems “stick to the transformation pathway” inrough times is all the more important as the dynamics of a system transformation may generate
additional volatility (Jain & Palacios 2023). Expectations about future policy developments informproducers’ long-term investment decisions, which
are often made with a planning horizon of several
decades. Managing these expectations is importantto mitigate volatility and the risk of reversing course(Pilditch et al. 2023).

92

FSEC Background Papers
93

FSEC Background Papers

The Economics of the Food System Transformation

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