Incurred and avoided external costs from the removal of agricultural trade barriers and farm sector subsidies

Report

Based on changes in costs that are not visible in most markets, global removal of current government agricultural support and border measures aimed at market price support of agricultural commodities and food products would impose on current and future economies, globally, ~450 billion 2020 USD PPP (Purchasing Power Parity) in additional damages compared to current policies. Subsidy removal would incentivise a net loss of ~11 million ha of forest and other land habitat, the net global costs of which outweigh net global benefits from reduced greenhouse gas emissions, reduced reactive nitrogen emissions, and reduced blue water withdrawal. Redistribution of agricultural sector value add under removal of current support is limited, with net global benefits from reduction in extreme poverty and undernourishment uncertain in direction and 1-2 orders of magnitude less than the net costs of changes in natural capital.

Previous studies have considered changes in greenhouse gas emissions for removal of agricultural support. The current study shows the role of land-use change. Government support of the present food system through direct support and trade distortion may be associated to large external costs, which in turn may be distorting optimal markets for present and future economic growth and sustainable development. However, the current study shows the need for targeted and well-studied repurposing of agricultural support. Repurposing needs to produce structural change in demand toward affordable diets with lower environmental pressures using less land, and incentivise technological advances and practices for sustainable production including the distribution of those incentives so that developing markets can partake in the rewards for sustainable production. To not do so is likely to impose additional cost-bearing on the global community.

Authors: Lord, S

• Publication status: Published
• Peer review status: Reviewed (other)
• Publisher: Environmental Change Institute, University of Oxford
• Place of publication: Oxford, UK
• Publication date: 2024-01-29
• Language: English