Ireland's State of the Environment Report 2024

247 Chapter 10: Environment and Agriculture Topic Box 10.2  The hidden costs of agri-food systems The Food and Agriculture Organization of the United Nations (FAO), in its recent flagship report The State of Food and Agriculture (FAO, 2023), states that there are two sides to our agri-food systems: on the one hand they provide benefits to society through food, culture and jobs, but on the other hand they contribute to climate change and degradation of our natural resources, and they fail to provide healthy diets for all. The report attempts to uncover the hidden environmental, health and social costs that are embedded in our food systems, many of which are not reflected in market prices and are therefore unaccounted for. These hidden costs affect the wellbeing of current and future generations. Understanding the hidden costs could bring to light the breadth of our sustainability challenges and inform policymakers about what changes are needed to transform how food travels from farm to table. FAO carried out a preliminary assessment using a true cost accounting approach and has used it to estimate these hidden environmental, social and health costs globally, and specifically for 154 countries worldwide including Ireland (FAO, 2023). The hidden environmental costs accounted for by the FAO included the impacts of nitrogen emissions to waters and ammonia emissions to air, the contribution of greenhouse gas emissions to climate change, and the costs of land use change and water use. The hidden social costs were associated with poverty and undernourishment, which can be significant in low-income countries but are usually less so in upper-middle and high-income countries such as Ireland. The hidden health costs came from unhealthy dietary patterns leading to obesity and non-communicable diseases and productivity losses, which negatively impact the economy. Globally, the report highlighted that hidden costs from agri-food systems reached US$12.7 trillion in 2020, which is equivalent to 10% of global gross domestic product (GDP). Even after taking uncertainty into account, the hidden costs were estimated to exceed US$10 trillion with a 95% probability. The hidden costs in Ireland’s agri- food system were estimated at US$23 billion per year, or approximately 5% of GDP, just over half of which was attributed to the environmental costs, with the majority of the remainder associated with health costs. The report notes, however, that this was a phase 1 preliminary modelling exercise, using readily available data that did not include many other hidden costs and benefits and incorporated a high level of uncertainty (FAO, 2023). More detailed phase 2 analyses carried out at the national scale could take into account the specifics of each country. It was nevertheless a useful exercise to raise awareness of the magnitude of the challenges. Addressing hidden environmental and health costs need not necessarily result in higher food prices according to FAO. For certain highly processed foods or foods with substantial environmental hidden costs, prices may indeed go up. However, prices of nutritious and whole foods without substantial processing are likely to become more competitive, and thus may be favoured by consumers. Such foods are also likely to contribute to a reduction in hidden health costs. Better policies and investment in more sustainable agri-food systems can reduce hidden costs by addressing their root causes. Some 90% of the food produced by Ireland’s farmers, fishers and agri-food companies is exported to over 180 countries worldwide, divided almost equally among the UK, EU and international markets (Figure 10.1). In 2022, agri-food exports were worth €16.7 billion (€18.8 billion including non-edible items), an increase of €3 billion (22%) on 2021 (Bord Bia, 2023). The food and drink sector accounted for 38% of all exports from Irish-owned firms in 2020. The agri-food sector sustains 170,400 jobs (7% of total employment). Beyond direct employment, the estimated output multipliers are around 2.5 for beef production and 2.0 for dairy production and food processing, demonstrating the importance of the sector in the wider rural and local economy (DAFM, 2022a). The latest agricultural census data for 2020 (CSO, 2021) show that there are 135,000 farms in Ireland, encompassing 4.5 million hectares (ha) of agricultural area, the vast majority of which is grassland (4.15 million ha). Just over half the farms are classified as specialist beef (55%), while specialist dairy accounts for 11% of farms, specialist sheep 13% and specialist tillage a little under 4% (Figure 10.2), with the remainder being mixed farming. The average farm size nationally is 33 ha (about 80 acres), although farms in the south-east of the country are larger (44 ha). Dairy farms are the largest of all farm types (with an average size of 65 ha).