A new study highlights the contrasting effects of climate policies on food prices in wealthy and poor nations, revealing significant disparities in farm share and consumer costs. Understand the global implications.
In a new study published in Nature Food, researchers have shed light on the profound disparities in how agricultural climate policies impact food prices across rich and poor nations. The study reveals that farmers in high-income countries receive a much smaller share of food spending compared to their counterparts in Sub-Saharan Africa.
“In high-income countries like the U.S. or Germany, farmers receive less than a quarter of food spending, compared to over 70% in Sub-Saharan Africa, where farming costs make up a larger portion of food prices,” lead author David Meng-Chuen Chen, a scientist at the Potsdam Institute for Climate Impact Research (PIK), said in a news release. “This gap underscores how differently food systems function across regions.”
As economies grow and food systems become more industrialized, farmers are projected to receive an even smaller share of consumer spending, a measure known as the ‘farm share’ of the food dollar.
“In wealthy countries, we increasingly buy processed products like bread, cheese or candy where raw ingredients make up just a small fraction of the cost,” co-author Benjamin Bodirsky, a PIK scientist, said in the news release. “The majority of the price is spent for processing, retail, marketing and transport. This also means that consumers are largely shielded from fluctuations in farm prices caused by climate policies such as taxes on pollution or restrictions on land expansion, but it also underscores how little farmers actually earn.”
To reach their conclusions, the research team used a combination of statistical and process-based modeling to assess food price components across 136 countries and 11 food groups, analyzing prices for food consumed both at home and away.
“Most models stop at farm costs, but we went all the way to the grocery store and even the restaurant or canteen,” added Chen.
By examining the entire food value chain, the researchers provided new insights into how greenhouse gas mitigation policies impact consumers.
“Climate policies aimed at reducing emissions in agriculture often raise concerns about rising food prices, particularly for consumers. Our analysis shows that long supply chains of modern food systems buffer consumer prices from drastic increases, especially in wealthier countries,” Chen added.
However, the impact of these policies varies significantly between wealthy and low-income regions.
“Even under very ambitious climate policies with strong greenhouse gas pricing on farming activities, the impact on consumer prices by the year 2050 would be far smaller in wealthier countries,” Bodirsky added.
In these nations, consumer food prices would be 1.25 times higher with climate policies, even if producer prices are projected to be 2.73 times higher by 2050.
Conversely, in lower-income countries, consumer food prices could rise by a factor of 2.45 under ambitious climate policies by 2050, with producer prices increasing by a factor of 3.3.
Despite these challenges, the study suggests that food price inflation due to climate mitigation policies does not necessarily have to disadvantage poor consumers. A previous study by PIK indicated that if carbon pricing revenues were used to support low-income households, these households could be better off despite food price rises, owing to higher incomes.
Hermann Lotze-Campen, head of the Climate Resilience research department at PIK and co-author of the study, underscores the necessity of climate policies for the long-term sustainability of agriculture.
“Climate policies might be challenging for consumers, farmers and food producers in the short term, but they are essential for safeguarding agriculture and food systems in the long run,” he said. “Without ambitious climate policies and emission reductions, much larger impacts of unabated climate change, such as crop harvest failures and supply chain disruptions, are likely to drive food prices even higher. Climate policies should be designed to include mechanisms that help producers and consumers to transition smoothly, such as fair carbon pricing, financial support for vulnerable regions and population groups, and investments in sustainable farming practices.”
The findings provide critical insights for policymakers worldwide, emphasizing the need for balanced approaches that consider the diverse impacts on different economies and strive to protect vulnerable populations while advancing climate goals.