True Cost Accounting in Food and Agricultural Policy

Oxford Real Farming Conference 2014

True cost accounting in food and farming – 3 UK examples of the approximate negative costs Nitrogen fertiliser £2.9 bn - £15 bn pa

True cost accounting in food and farming – 3 UK examples of the approximate negative costs Nitrogen fertiliser £2.9 bn - £15 bn pa

Antibiotic resistance £300 m to £1.1bn pa

True cost accounting in food and farming – 3 UK examples of the approximate negative costs Nitrogen fertiliser £2.9 bn - £15 bn pa

Antibiotic resistance £300 m - £1.1bn pa

Total loss of pollinators £3.6 bn - £5 bn? pa

Example 11 nitrogen fertiliser – costs and benefits Ammonium nitrate fertiliser - current price approximately £270 per tonne and contains 34.5% N

Therefore each kg N fertiliser:

costs approximately 78p (plus costs of handling and applying)

1. All examples in this presentation are illustrative, and intended only to demonstrate the likely scale of the externalities. The figures are based on published research, but do not take into account all the factors that need to be considered. Individually most of these would only make modest differences to the but cumulatively their impact could be more significant. The data to undertake all the necessary calculations is not readily available at the present time.

Example 1 nitrogen fertiliser – costs and benefits Each kg N fertiliser:

costs approximately 78p

benefits farmers in the UK and other Northern European countries by £2.50 (less in Southern European countries)

To a wheat grower therefore, using 180 kg N/ha the nitrogen brings a net benefit of approximately £290/ha (£450 - £160) - £140 for the fertiliser, £20 for handling and spreading (but actual benefit fluctuates with price of farmgate price of crops as wll as the price of fertiliser.

Example 1 nitrogen fertiliser – costs and benefits Each kg nitrogen fertiliser:

costs approximately - 78p

benefits a farmer by - £2.50

but costs taxpayers and society - £2.95 - £15.222

However nitrogen fertiliser is easy for farmers to use, greatly increases food production and keeps down the price of food

2. These calculations do not fully take into account the nitrogen in imported livestock feed or natural deposition of nitrogen on farmland, part of which comes from transport and industry emissions, part from previous agricultural emissions and part from natural processes

Nitrogen Fertiliser –true costs (c.75% associated with human health) GHGs during production, transport & use

Ammonia : production (emissions) & use (volatilisation)

Ozone in the air we breath (from NO, NO2 and N2O) and Particulate Matter from HN3, NO and NO2

Damage to ozone layer by nitrous oxide

Nitrates in drinking water above 25 mg/l increasing colon cancer incidence

Eutrophication of rivers & coastal zone enrichment

Biodiversity loss

Cost of associated damage in EU27 £34bn - £175bn/yr3,4

(Total costs of reactive nitrogen in EU27: 70-320 billion Euros, c.70% from agriculture, 30% from power generation and transport)

Example 1 – Nitrogen Fertiliser - sources

4. Data reworked from - The European Nitrogen Assessment 2011 http://www.nine-esf.org/ENAEEA 2011 – Revealing the costs of air pollution in Europe

3. Emissions of NO and NO2 account for a high proportion of the health costs. An arbitrary 50:50 (instead of 70:30) split has been used for these, to reflect the high emissions from transport.

Examples of negative costs of nitrogen fertiliser use:Wheat -180 kg/ha- cost £531 - £2,739/ha/yrDairy – 260 kg/ha- cost £767 - £3,957/ha/yr

Example 2 – Antimicrobial resistance – the contribution of farming

Current cost to UK estimated £10 billion (c. £5 bn NHS, c. £5 bn societal costs)5

Farm use contributes to AMR E. coli (c. 50%?), ESBL E. coli (c. 20%?) (MDR salmonella and campylobacter (more than 50%), MRSA (1-4% but increasing), VRE and others (unknown. Possible spread of ESBL resistance in UTIs (from gut bacteria) to gonorrhoea would create major health crisis

Overall maybe 10% of AMR costs i.e. £1 billion pa, maybe more

5. The economic burden of antimicrobial resistance: Why it is more serious thancurrent studies suggest. Report for the NHS, Smith R and Coast J 2013

AMR – the future Last new major class of antibiotic 1987

Peak antibiotics about 1954!

We currently have the best antibiotics we are ever likely to have

c.40 new antibiotics under development, 5 in phase III trials, but only one new Gram-negative antibiotic and this only active against one infection

Heading towards breakdown of healthcare systems as we know them : no safe joint replacements, Caesareans, cancer treatment or organ transplants. Likely costs to society unknown and hard to imagine

Pollinators Multiple causes of decline:

Monocultures and biodiversity loss – lack of nectar continuity Increasing levels of disease in honey bees due to importation of diseases

and resistance to treatments Use of neonicotinoids in food crops attractive to pollinators – now

possibly ended? But other insecticides and some fungicides also possibly implicated

Climate change and wet summers Maybe also high use of sugar and excessive transport?

Pollinators true costs Globally - pollination worth £128 billion6

UK - worth £430 million7

Some evidence already of sub-optimal yields in apples and field beans. Fruit nuts and stimulants very dependent on pollinators. In UK pollinators

However, if we were to lose all or most of our pollinators, costs increase by £3 billion or more (£1.5 billion for hand pollination, £1.5 billion for loss or partial loss of 90% of wild plants), plus unknown costs due to food shortages.

6.Economic valuation of the vulnerability of world agriculture confronted by pollinator decline, Gallai et al. 2009; 7. UK National Ecosystem Assessment 2011

Policy issuesDefra advises using maximum profitability, based on fertiliser price and commodity price as the sole criterion for deciding application rates, and recommends levels up to 360kg/ha for dairy farms with high-yielding cows and very high stocking rates (4 cows/ha), 370kg/ha for intensively grazed dairy steers and heifer and some lowland suckler herds and 240 for high stocking rates on extensive hill and moor land8

8. Defra 2011, Fertiliser Manual RB209

Policy Instruments Most scientists and policy-makers focusing only on:

Reducing meat consumption, energy, transport and water use Using technical fixes to increase efficiency of fertiliser use9

9. The European Nitrogen Assessment www.nine-esf.org/ena

Needs an EU-wide nitrogen tax, calculated to reflect the true-costs to society of nitrogen usage, part of the income could be used to provide additional support to those on low incomes.Fertiliser prices partly kept low by imports from countries where production of nitrogen is subsidised. It is also claimed that only 3.5 billion people would be on the planet today without nitrogen fertiliser.

Role of the SFT Our task is to:

explain to consumers the true price they are already paying, and the even greater price they will pay, if action is not taken to reduce reactive nitrogen emissions

point out the finite nature of natural resources and the issues associated with nitrogen fertiliser, antibiotics, pollinators and other negative externalities

promote greater use of legumes as a benign and durable alternative to fertiliser, better welfare systems in relation to antibiotic use and diverse rotations in relation to pollinators

demonstrate the multiple benefits of mixed and integrated farming systems bring different groups of scientists and policy-makers together to consider these

issues in a broader context than they usually do when working in silos

Please send comments on this presentation to

Richard YoungPolicy Director

Sustainable Food Trustrichard@sustainablefoodtrust.org

www.sustainablefoodtrust.org