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True Cost Accounting

We pay for food in many ways, not just at the checkout; but the true cost varies according to how the food is produced and how well or poorly it contributes to a healthy diet. True Cost Accounting in food and agriculture is a currently evolving method for assessing the true costs and benefits of different food production systems with implications for everyone.

The predominant approaches to food production, distribution, retailing and consumption are causing significant damage to the environment, to soil, to the climate, to biodiversity, to rural communities and to public health. We are either paying for this damage in hidden ways, for instance through water charges which include the cost of removing pesticides in drinking water; taxes which fund misdirected agricultural subsidies and environmental clean up costs, including many of those relating to flooding. We are also paying the costs of diet-related disease. These costs are often deferred on to future generations or other countries, as is currently the case with climate change and soil degradation, rainforest destruction and species extinction. So although food appears never to have been cheaper, when we look beneath the surface, we are actually paying far more for it than we might possibly imagine.

True cost accounting explained

A Tale of Two Chickens is a short film which illustrates how we are paying a high price for food in hidden ways and why we need true cost accounting in our food and farming systems.

Implementing True Cost Accounting

The discipline of True Cost Accounting enables us to understand more about the scale and nature of these ‘externalities’, as economists call them, by identifying, categorising and quantifying, and where possible pricing all the different costs and benefits involved. Given sufficient public support and political will, this information would allow policy and economic interventions to be adopted which favoured the production and consumption of foods with the lowest true costs. This could be achieved by taxing those who pollute and using agricultural subsidies to encourage or discourage farming methods according to their true cost.

Example: Nitrogen

The European Nitrogen Assessment has estimated that collectively, the costs of nitrogen-related damage range is as high as €320 billion, or up to €750 per person every year throughout the EU, about two-thirds of which relates to agriculture. Although intensive farmers get somewhere in the region of a three-fold return for the money they spend on nitrogen fertilizer, because it is not taxed and its production in some countries is even subsidized, the true cost to society is estimated to be up to three times greater still. Recognising the true cost of nitrogen fertilizer would encourage greater use of clover, beans and other legumes which provide nitrogen to the soil naturally and also benefit pollinating insects.

Example: Public Health

There is now increasing evidence showing the direct links between the intensification of our agriculture and food systems and the rapid rise of a range of diseases which are now resulting in increasingly unaffordable treatment costs. These include diet-related illnesses such as obesity, type-2 diabetes, cardiovascular diseases, allergies, some cancers, and diseases of the immune system, many of which are being directly linked to the way food is currently produced and consumed. Obesity alone has a global economic impact of around $2 trillion annually, or 2.8% of global GDP, and it is estimated that in the United States its cost could be as high $344 billion by 2018, equivalent to 20% of total spending. Some experts believe that when these costs are fully understood we may find they are as high or even higher than the environmental costs, which, to date have been studied in greater detail. An investment in sustainable agriculture, or linking health insurance premiums to improve diets, could reduce these health treatment costs to the benefit of individuals and society.


Thanks to for this design

For more information about the discipline of True Cost Accounting, read this recent article co-authored by our Head of Programmes Adele Jones, published in Nature magazine: