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.

3 comments:

  1. Hi Jan, thank you for your webpost! You bring up a lot of interesting points. While reading there were two things that came to mind:
    First, the fact that you largely focus on government initiatives to reduce food waste like is the case in France. I believe it is important to note that food waste is not only the responsibility of the government. Yes, governments should facilitate minimising food waste through legislations etc. But as you also mention, there are also informal institutions that the government cannot do anything about. Changing these informal institutions is of course not evident, but it can be improved through the food industry, businesses as well as individuals playing a bigger role. For instance, supermarkets donating food that is about to expire to soup kitchens, or restaurant (e.g. Instock in The Hague) who purchase food that is about to go off and make meals out of them. This helps to address the informal institution to a certain extent through raising awareness thereby drawing the attention of consumers to the problem of food waste.
    Secondly, the fact that you primarily focus on the economic factors involved. Even though you do recognise that environmental factors are important, I hope these factors are considered in more depth in your essay. I believe environmental factors play an immense role in food waste and is also the key reason why the economic implications of food waste are so vast. In addition, it is also not solely environmental and economic factors that should be considered in the benefits of the reduction of food waste as there are also social benefits by bringing food to shelters, providing education etc.

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  2. This is a very insightful blog post that gave me a new perspective on how to reduce food waste! I find this to be a valuable contribution, as this may give citizens and governments an economic incentive to waste less food. The cultural or informal aspects of food waste that you highlight are particularly interesting to me, as it shows how certain institutions can be ingrained in society and difficult to change. This makes me wonder if it will be possible to overcome this with regulations only, and within what time horizon this could be achieved.

    You are also talking about how this would 'free land', as less land will be used for agriculture. This is a statement that I find fascinating as it proposes an increase in biofuels that could potentially lower green-house-emissions. However, you argue that decrease in demand will reduce consumption in Europe. This makes me wonder whether this ‘freed land’ poses a supply issue for developing economies. Will developing economies dependent on agricultural export to Europe successfully adapt? I am not claiming that we should avoid the reduction of food waste because other economies might suffer (potentially only in the short run), however, we should take this into consideration before drastically changing import-export policies. Also, is it more environmentally sustainable to depend on European agriculture rather than relying on import? Despite the benefits of food reduction, it is questionable whether the aim to reduce import is more sustainable in terms of both transport and production. This might particularly be a concern for the colder regions in Europe that would be dependent on green-houses for food production.

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  3. Kristine, thank you for taking the time to comment on my blog post. You highlight the key issue that my paper will discuss. It is indeed a big problem that a decrease in consumption in Europe will have an impact on the agricultural supply from developing countries. My paper will focus on the sectors and markets that will can be negatively effected by a decrease in demand. As of now, Western consumption is in part the driver of global food prices, making agriculture profitable for farmers in said developing countries. When demand decreases the global prices will drop too, potentially putting these farmers out of business. This is especially problematic as recent OECD research has highlighted that agriculture is often the backbone of growth in developing economies. Not that I am arguing for a continuation of consumption and its waste, however the issue is extremely nuanced and prudent policy decisions will be key to how this issue will play out (for good or bad).

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