9 May 2017

Food waste reduction - an economic perspective

Jan writes:*

In the past decade public perception on the unsustainable nature of Western European consumption has been on the rise. One such specific area that has been receiving attention by the public and policymakers alike is food consumption and its related waste. France, for instance, has just passed a law forcing supermarkets to donate unsold produce to food banks. Other countries have attempted to tackle the problem by offering unspoiled passed sell-by-date products at a large discount. However, food waste is often criticized from an environmental point of view whilst its economic impacts remain remarkably under discussed. This is a big shame as there are many economic benefits to ameliorating European food waste.

Scope of the problem
In 2016 the Economist published an article stating that we globally waste as much as one third of the world’s food on a yearly basis; this equates to roughly $750 billion dollars (1.3 billion tonnes). From an environmental point of view food waste creates 3.3 billion tonnes of greenhouse gasses due to the energy lost producing it. The Economist states that if these emissions were to be compared to countries, it would be the third biggest polluter in the world, with the United States and China topping the rankings. Within this global picture of food waste Europe is a big sinner, wasting roughly $160 billion of food (88 million tonnes).

If food waste is bad why is it happening in the first place? From the supply side food gets wasted in transport and production, and due to consumer preferences. A lot of fruits and vegetables get wasted as they do not visually meet consumer standards, even though they are perfectly edible. From the demand side food gets wasted due to consumer behavioral patterns. First, people have the erroneous idea that expiration dates are an indication of edibility. Second, Porpino states in his paper that over-preparation and buying too much food “are embedded in cultural practices such as hospitality, the good mother identity, taste for abundance, and food seen as wealth”. These factors are the main drivers of food waste.

Benefits of food waste reduction
Wageningen University recently published an article that stated that if Europe would be able to reduce its food waste in the retail sector and private households by 40%, €75.5 billion would be saved. This would mean €123 saved annually per person in the EU, bringing us to the first benefit of reducing food waste. An increase in capital for individuals would mean that they could spend this on their welfare. This would further be increased by the fact that food prices would drop as a result from a decrease in demand.

Wageningen University went further to state that with a 40% reduction in food waste, and said decrease in demand there will be less land needed for agricultural use. We are talking about a very large amount of land; 28,940 km2, roughly the size of Belgium. This ‘freed’ agricultural land could potentially be used for the growth of biofuels, thus further reducing Europe’s environmental impact and energy dependence problem.

If opted not to reduce farm land Europe could deal with the problem it faces due to being fed by the rest of the World. By having more agricultural land Europe could use this to become less dependent on food imports. Between 2001 and 2010 the EU imported 59 billion tonnes of food, roughly the same as the continent of Africa. By becoming less dependent on imports Europe will be able to reduce the costs of food associated with taxation and transport (good for the environment too). From a long term perspective the reduction of food waste will save Europe vast amount of money tackling the looming environmental issues due to pollution.

Bottom Line: There are a multitude of economic and welfare benefits that Europe can gain from reducing its food waste. Maybe by highlighting these more prominently (instead of mainly the environmental perspective) we can better motivate or incentivize food waste reduction, especially as the biggest contributor to food waste are consumer preferences and behavior.

* Please comment on these posts by students in my growth & development economics course. It really helps if you highlight unclear analysis, alternative perspectives, better data, etc.