Consumer prices may rise in poor nations by 2050 despite climate policies

Even under ambitious climate policies, lower-income countries would see consumer food prices rise 2.45 times by 2050 while producer prices would rise 3.3 times, a study has found.

While the rise in consumer prices is less pronounced for farmers in lower-income countries, it would still make it harder for people in these countries to afford sufficient and healthy food, said researchers from the Potsdam Institute for Climate Impact Research (PIK), Germany.

"In high-income countries like the US or Germany, farmers receive less than a quarter of food spending, compared to over 70 per cent in Sub-Saharan Africa, where farming costs make up a larger portion of food prices," said David Meng-Chuen Chen, a PIK scientist and lead author of the study published in Nature Food.

"This gap underscores how differently food systems function across regions," he said.

The researchers projected that as economies develop and food systems industrialise, farmers will increasingly receive a smaller share of consumer spending, a measure known as the 'farm share' of the food dollar.

For the analysis, the researchers assessed food price components across 136 countries and 11 food groups, using statistical and process-based models. They studied prices of food both consumed at home and away from home.

"Most models stop at farm costs but we went all the way to the grocery store and even the restaurant or canteen," Chen said.

Analysing entire food value chains also helped the researchers provide insights into how policies aimed at mitigating greenhouse gases impact consumers.

"Climate policies aimed at reducing emissions in agriculture often raise concerns about rising food prices, particularly for consumers. Our analysis shows that long supply chains of modern food systems buffer consumer prices from drastic increases, especially in wealthier countries," Chen said.

However, these climate policies impact poor consumers differently, the researchers said.

Consumer food prices in richer countries would be 1.25 times higher with climate policies, even if producer prices are 2.73 times higher by 2050, the researchers found.

In contrast, lower-income countries would see consumer food prices rise by a factor of 2.45 under ambitious climate policies by 2050 while producer prices would rise by a factor of 3.3, they found.

"Even under very ambitious climate policies with strong greenhouse gas pricing on farming activities the impact on consumer prices by 2050 would be far smaller in wealthier countries," said author and PIK scientist Benjamin Bodirsky.

Revenues from carbon pricing -- when governments charge one for emissions produced -- could be used to support low-income households, the researchers said, citing a 2021 PIK study that showed that the households would be better off this way despite food price inflation.

"Climate policies might be challenging for consumers, farmers and food producers in the short term but they are essential for safeguarding agriculture and food systems in the long run," said author Hermann Lotze-Campen, who is also the head of the research department -- 'Climate Resilience' -- at PIK.

"Climate policies should be designed to include mechanisms that help producers and consumers to transition smoothly, such as fair carbon pricing, financial support for vulnerable regions and population groups, and investments in sustainable farming practices," Lotze-Campen said.