Modelling the impacts of reducing food losses and waste

Transcription

1 Modelling the impacts of reducing food losses and waste Lessons from theory and applications with the MAGNET model June 21, 2013; Martine Rutten

2 Background Economic and food crises (moral) obligation to save on use of scarce resources and to avoid waste Suggestion: less waste less hunger?. Focus of World Food Day in the Netherlands in 2010 (October 16): We don t know! Lack of knowledge on impacts of (reducing) food losses and/or food waste!

3 Definitions Food losses / waste: not agreed upon difficult to analyse impacts Impacts commonly presented as: Value of resources embodied in the waste (land, water) Value of output of: what could have been done with the waste: feeding people saving money & using it for something else or what could have been avoided: emissions Are these truly impacts? No: indication of size of problem, not of impacts as this ignores interactions between demand and supply, role of prices; interactions between actors and sectors in the food system and in the wider economy

4 Literature on impacts: qualitative and applied Qualitative literature (claims): Food security is negatively affected by FLW, food prices are likely to be much higher and incomes are likely to be much lower Combatting FLW would benefit food security: it would increase food available for consumption at lower prices for households it would reduce production costs and increase sales (and incomes) for producers Note: food security = concern in developing countries, but impacts on food consumption, food prices and incomes, are also felt and of concern elsewhere Applied study: Westhoek et al. (2011) The Protein Puzzle: The consumption and production of meat, dairy and fish in the European Union : a reduction in food waste of 15%: modelled as a 15% supply chain efficiency increase on a global scale reduces agri prices by 4% and increases food consumption

5 Lessons from economic theory: reducing food losses in supply Price Supply Supply 0 P 1 P A D B Loss Impacts: Lower price Higher quantity Consumers gain Producers gain Total welfare rises 3 P Welfare gain C Demand 0 Q 0 Q 1 Q 2 Quantity Source: Rutten, M. (2013), The Economic Impacts of Reducing Food Waste and Losses: A Graphical Exposition, Wageningen School of Social Sciences Working Paper No. 7, February

6 Underlying factors Elasticity of demand and supply / slope of curves: Demand: influences distribution of welfare gains over producers and consumers (no sign change) Supply: inter-temporal effects matter Short term (vertical): producer can be worse off if price decrease outweighs quantity increase Long term (horizontal): producer no loss, but also no gain, consumer gains Extent of food losses and extent to which they are avoidable Causes of food losses: are they independent of scale (and price)? Are they costless to diminish? Where do food losses occur in the supply chain? Ceteris Paribus : All else remains the same: lower food price may induce Higher food waste/losses Demand elsewhere: biofuel, meat... Applied model

7 Lessons from economic theory: reducing food waste in demand Price G F Waste Supply Impacts: Lower price Lower quantity Consumers gain Producers lose Total welfare loss in this market, but... Welfare loss P 1 P P E 0 3 B D A C Demand Demand 0 Q 2 Q 1 Q 0 Quantity Source: Rutten, M. (2013), The Economic Impacts of Reducing Food Waste and Losses: A Graphical Exposition, Wageningen School of Social Sciences Working Paper No. 7, February

8 Underlying factors What do consumers do with savings on previously wasted food? Depends on consumer preferences Other: Spend it now on consumption of other commodities and perhaps food welfare gains for producers and consumers in other markets Save it for future use inter-temporal effects Elasticities / curves: consumer welfare in the market analysed goes up or at best remains the same, whereas producer welfare falls or at best remains the same, resulting in an overall welfare impact ranging from negative to, at best, zero in the long-term Extent of food waste? Avoidable? Causes: scale and price factors? Costs? Ceteris Paribus : All else remains the same? Applied model

9 Implications Research: Clarification/specification of underlying factors: data! Modelling of impacts (costs/benefits) of reducing FLW Policy: use the outcomes to determine: which food commodities/products and which elements of the FSC to focus on when it comes to FLW how this compares to other policies and in the light of a changing world (what is baseline (BaU) scenario?) Depends on indicators to measure impacts: Socio-economic: GDP/income, land use, employment, food security (consumption, prices), overall welfare Other: health, environmental impacts Trade-offs! Practice: Concrete solutions for those food types and those FSC segments

10 Modelling impacts of reducing FLW: HOW? Method/model: Computable General Equilibrium type Captures flow of food commodities from farm to fork within broader economy and in a global context Firmly grounded in microeconomic optimisation behaviour clarifies underlying mechanisms LEI: Modular Applied GeNeral Equilibrium Tool, based on GTAP formerly known as LEITAP: used for agri-trade analyses Incorporation of FLW reductions: Food loss (supply) via technology shocks: agriculture: given output need less of (certain) inputs / given inputs produce more output targeted or generic (TFP) processing food industries: idem Transport:? In GTAP/MAGNET transport sector on trade side Need assumption on consumption other commodities Food waste (demand): Consumer/household: via taste shift on per capita consumption of food Retail s intermediate demand of food: via technology shocks

11 Application EU: ongoing Background Reducing food waste by households and in retail in the EU: A prioritisation using economic, land use and food security impacts Part of project Modelling Milestones for achieving Resource Efficiency' For DG Environment, led by BIO Intelligence Service Research questions GDP EU Land use EU Household C, p of food in SSA Which sectors should receive priority if interested in reducing food waste in the EU? How does this compare to a healthy diet scenario? Method: MAGNET FAO data on food waste; WHO healthy diet guidelines FW reductions: 50% - Roadmap ( ambitious ), 40% ( realistic ), 30% ( modest ) Given reductions realised from now till 2020 (target year Roadmap), no costs Results: relative to a baseline using common projections on GDP, population, demand patterns...

12 Application MENA: GTAP conference Shanghai Research questions: different strategies/policies to deal with increasing world food prices (tax, subs,...). Could reductions in food losses on the supply side reduce some of costs and trade-offs? How does such a strategy (growth agriculture by tackling food losses) compare with a strategy of manufacturing and service-led growth when it comes to food security and poverty? Method: MAGNET, data food losses FAO Starting point: BaU plus rising world cereal prices (+6pp): WCP SFS: reduce import tariffs to stabilise domestic cereal prices (-14pp) AFL: growth agriculture focused on reducing food losses in agriculture MSG: manufacturing and service-led growth (same order of magnitude: 4.5%)

13 Application MENA: AFL scenario assumptions Last column incorporated as TFP shocks Assumes food losses are given, can be avoided and that this is costless: focus on potential showing maximum/boundary impacts

14 Impacts on food security indicators in MENA Note: The food bundle refers to all agri-food commodities consumed by households, including all primary sectors, fishing and all processed food sectors, which are weighted according to their household budget shares

15 Impacts on poverty in MENA: unskilled rural wages / cereal prices

16 Application MENA: Conclusions Using the MAGNET model we find that stimulating agricultural growth by tackling food losses in MENA outperforms manufacturing and service-led growth in terms of: enhancing food security reducing dependence on and vulnerability to changes in the world food market decreasing rural poverty Whereas trade-offs occur in terms of production and employment across sectors, this policy is potentially more beneficial by avoiding fiscal consequences of tax or subsidy policies Costs associated with measures to reduce food losses may counteract beneficial impacts and should be avoided as much as possible

17 The end Thank you!