 What is the true cost of food? Climate change, obesity, child labor, plastic pollution, and so on. These are all food-related problems and costs we don't take into account when buying our groceries. How can we include these hidden costs in order to pay the real price, the true cost, for our food products? A German supermarket made the news in 2020 with double price tags for a selection of their products. One for the price you need to pay at the cash register for a certain product, and another for the true price, or the price including the social and ecological impact of the production of that food. The German supermarket asked researchers from the universities of Augsburg and Greifswald to calculate the true cost of 16 products. The result? Gouda cheese should be 88% more expensive than it is, and a kilo of ground beef at a stunningly 173% increase. Differences are smaller when it comes to fruit and vegetables. With a 19% price difference for bananas, 12% for tomatoes, and 8% for apples. For organic products, the difference is smaller as well, but even then organic meat would have to become 126% more expensive to include all hidden costs. So how do you calculate the true cost of food? It's not an easy task to calculate the true cost of a product, because what exactly do you include in a model? Environmental damage like carbon and nitrogen emissions, the energy used, the consequences of over-fertilization, and what about social costs like working conditions and child labor? How do you quantify all those factors? When looking at the retail cost versus the true cost of products, there are two important concepts we can use. The Farmgate price, which means the price of the product available at the farm, excluding any separately billed transport or delivery charge, and then there's the external costs of conservation, also called true price gap, which means the costs created by economic activities which are not reflected in the Farmgate price. External costs can also be classified as environmental costs if they have a direct effect on the environment, and as social costs if they have a direct effect on the well-being of people. The German researchers are not the first to make these calculations. Scientists from various disciplines are looking for ways to provide insights into external costs. The Dutch organization TruePrice has been working on calculating the true cost of products already since 2012 and is now the world-leading expert in methods and tools to measure and monetize social impact. Together with the initiative Sustainable Trade, IDH, TruePrice published four review studies on the real price of coffee, cacao, cotton, and tea with a clear list of 14 types of external costs, divided between environmental and social costs. The studies are a good example of comprehensively calculating the true cost of food. Each of the four products core differently on these 14 aspects. This means that the true cost of certain products are not always driven by the same factors. For example, the true cost of certain foods might be driven by environmental costs, while others could be determined by the social cost of manual labor. The true cost of cacao. When taking a closer look at the cacao from Ivory Coast, the calculated true price of conventional cacao beans is 7 euros and 10 cents per kilo cacao beans. This is the sum of the farm gate price, 1 euro and 35 cents per kilo cacao beans, and the external cost of cultivation, or the true price gap, 5 euros and 75 cents per kilo cacao beans. The true price gap is more than four times as large as the farm gate price of cacao beans. This shows that at farm level, there are substantial healing costs relative to the market price. Social costs account for 84% of the total external cost of cacao cultivation and environmental costs are relatively low, mainly due to low pesticide and fertilizer application rates and neither water nor energy used during cultivation. The true cost of coffee from Vietnam is mainly determined by environmental issues, like water use and water pollution. As you can see, understanding how much a product should really cost is a very complex matter. But step by step, we can find out how much we should actually pay for a cup of coffee or a bar of chocolates. Why should we know the true cost of food products? OK, now we have an idea of what the true cost consists of, but why is it important to know what we should be paying for a product? The German supermarket claimed raising awareness for their customers as the reason for showing the true cost next to the market price. However, according to True Price, this is not the only reason why it's important to quantify all those extra costs. Quote from their report, the aim of calculating a true price is to manage risks, steer innovations and reduce social and environmental costs by improving transparency throughout the entire supply chain of a product. So this information is not only useful for consumers, but also to businesses. By knowing the external costs, businesses can improve the social and environmental impacts of their own operations and their supply chain. They can identify alternative modes of production that are more sustainable and cost effective. But in which ways could this information be applied to really impact food production and consumption? The case for carbon taxes. Since companies might not make the switch to sustainable production on their own accord, the German researchers advised to start introducing a carbon tax. This would help allocate costs to make all the stakeholders along the value chain pay up. The companies can then decide whether they pass on the external costs, so the true cost of production they have to pay for now to the consumer, or try to eliminate the external costs. A carbon tax would make polluting businesses pay, in turn, favoring companies that invest in more environmentally friendly production. This is what the German study has shown. If we paid the true cost of products, organic produce would actually be cheaper in the long run than conventional farming. A true price gap is smaller because organic products, external costs are less significant. The same goes for factory products. They tend to cost a bit more, but have a much smaller true price gap, because like organic products, they already include the external costs in the production chain. A study published in 2017 by True Price and the British Organization True Cost on the True Price of Bananas Around the World shows fair trade bananas have 45% lower external costs than the sector average. That happens because fair trade pays farmers a better farm gate price for their produce. So by applying this sort of tax, dirt cheap products would suddenly become insanely expensive. Of course, a carbon tax wouldn't be easy to implement in this globalized world. After all, setting a higher bar for everyone would require new international rules. How supermarkets are bringing more awareness to true costs. Although changing the food system towards fairer price products is hard, we see more and more experiments like the one in the German supermarket popping up. A Swedish supermarket was the first in the world to start with a carbon tax to increase consumer awareness of the true impact of their food choices. In their pop-up shop, the climate store, the currency is carbon. Customers who shop in a supermarket have a weekly budget of 18.9 kg of carbon dioxide equivalent. Carbon intensive items such as animal products are priced higher than their vegetable counterparts. The company thinks that it will be an eye opener for many to see how certain choices affect their footprint. By giving consumers a carbon footprint budget, they hope to have the effect of the average shopping basket on the climate. In Denmark, a supermarket presented an app that allows customers to see the estimated carbon impact of their products and several brands are announcing unpacked carbon footprint information. Would you pay the true price of food? Also, if even healthy and sustainable food will in many cases cost a little more? Let us know on our social media channels linked in the description box. This article was written and read by me, Marika van Schoonover, originally posted on foodunfolded.com. FoodUnfolded explores the stories behind the food on our plates, reconnecting us to the origins and future of our food co-funded by the EU empowered by EIT food.