Food: “What the customer pays at the checkout is not the real price”

Deforested forests, polluted groundwater: who pays for the true costs of producing food? Economist Tobias Gaugler has an idea.

BRIGITTE: We’re in the middle of inflation, notice it every day in the supermarket – and you say that groceries should cost even more. How can that be?

Prof. Dr. Tobias Gaugler: What the customer currently pays at the checkout is not the real price. There is damage such as nitrate pollution of soil or climate emissions that arise from production and cause costs. Resources are consumed, CO2 is emitted. With the current food prices, it’s like going to the supermarket and only paying for every second product. And at the checkout I said, “Someone else will pay the rest for me later.”

What exactly is the cost of this rest?

A distinction is made between environmental and social consequential costs. The first include the costs incurred by the emission of greenhouse gases, but also the deforestation of the rainforest in South America, and the energy required for the production and processing of food. Over-fertilization also causes “external costs”. For example, over-fertilization causes nitrate to enter the soil. As a result, drinking water suppliers have to spend more money on treating the water or dig deeper wells.

And what is hidden behind the social costs?

This is about animal welfare issues, but also about fair prices and good working conditions for producers. There are also follow-up health costs, such as medical expenses due to being overweight or eating a lot of meat. Ultimately, all taxpayers pay them – regardless of how they actually eat.

Greenhouse gases are not priced in here, are they?

Some of these costs are incurred in other countries where climate change is already clearly noticeable. With us, they will only become visible in the future, when there will be more and more severe weather events here too and we will have to support agriculture with greater financial and technical effort. And that’s a real problem, because many people ask themselves: why should I pay today for something that only affects me to a limited extent here in Germany or only affects future generations?

Which products would theoretically have the highest surcharges?

The more animal, the higher the external costs. The climate backpack of the animal feed is already very high. Also, you have to feed eight to ten calories of feed to an animal to get one calorie of milk or meat. Then there are manure and methane emissions. By the way, a cattle on the pasture causes less environmental costs because CO2 is bound in the soil. Basically, the more natural the material cycle, the lower the environmental damage. That’s why organic is on average better than conventional. The degree of processing also plays a role, but less so.

By what percentage should prices be increased?

We have determined that if you only calculate the environmental costs mentioned, an apple would have to cost eight percent more. Mozzarella would be 52 percent more expensive, organic meat 126 percent, conventional even 173 percent. And: We assume that the subsequent social costs will be even higher than the environmental costs. Roughly speaking, one would have to double the price surcharges determined by us.

Are we even allowed to talk about price increases when everything just got so expensive?

Yes, we even have to! Because even if we don’t want to talk about it as a society, the costs still arise. We cannot afford to use crisis situations such as the corona pandemic or currently in Ukraine to talk our way out of the climate crisis.

There is a Penny branch in Berlin-Spandau that shows the true cost of some products. You and your team accompanied the True Cost project scientifically. How are the reactions?

Customers say they would pay extra, at least when the prices are slightly higher, such as for vegetables and fruit. But in reality they all too often resort to cheap goods, the phenomenon is called “attitude-behaviour-gap”. So we cannot expect the consumer alone to take action.

So what has to happen?

In some cases, trade has already progressed, for example with the voluntary animal welfare label. Such initiatives would have to be more and much more ambitious. The individual farmer, on the other hand, can do little; he is usually the weakest link in the chain. It is not possible without binding specifications from the legislature.

What could they look like?

The state or the EU could introduce a climate dividend. This means that every tonne of climate gas emitted costs something across all sectors. Initially, this price would not have to be so high, but then increase significantly over the next ten years. The state collects money from all those who bring greenhouse gases into circulation. So everything would be a bit more expensive at first, but companies would be forced and able to choose climate-friendly alternatives. However, the state should not keep the income, but pay it out in full – in equal parts – to every citizen. That means those who have a low carbon footprint even get money back, and that’s everyone except the really wealthy people who have very high levels of consumption.

The economist Tobias Gaugler researches at the Technical University of Nuremberg and the Universities of Greifswald and Augsburg.

Bridget

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