By Chris Blake
18th September 2020
Transforming local food production with lessons from the electricity market.
The food we buy in the UK is too cheap. The true cost is not paid at the checkout but can be measured in farm closures and an unfolding environmental catastrophe. Policy makers have always been reluctant to raise food prices and, exposed to prices set in the global market, the power of consolidated buyers, individual farm incomes are kept low. So low that in the UK farmers are receiving just 5-6% of the gross value added in the food chain[i]. The challenge of high volumes and low production cost drives an increase in the carbon, chemical, and capital intensity of food production – or drives production to where land and labour are cheap. We enjoy cheap food, but we can’t easily see the loss of biodiversity, the degradation of soils and water courses. The changes have happened slowly, or somewhere else? How do we balance the need for cheap food with sustainable farm incomes and the urgent repair of ecosystems?
I think there are some important lessons we can learn from the electricity industry. Since the 1990s, the UK’s climate change commitments have required Governments to operate within a policy framework, the “energy trilemma”. This requires a balance between three, potentially conflicting, objectives: low cost, security of supply, and low carbon. The Government set an ambitious target in 2009 to get from just 6% of electricity supply from renewables in 2009 to 30% by 2020 (2019 figures were 37% renewables[ii]). This was achieved through the Renewable Obligation (RO) and, from 2010, the Feed-in Tariff (FIT) which paid a production subsidy that compensates for the fact that the market price for electricity is below the cost of production for smaller, distributed renewable generators. The cost of this subsidy does not come from general taxation but from a levy on consumers’ electricity consumption. The Government sacrificed the goal of the cheapest energy for a more secure and low carbon supply. Ten years and £10bn was enough to bring about a systematic change in the way electricity is generated in the UK.
Feed-in tariff: A renewable energy production subsidy, paid for by consumers, to stimulate investment in new low carbon generation for local supply.
Food policy in the UK is bounded (although not often acknowledged) by a similar trilemma. The corners of the food trilemma are affordability; security of supply; and sustainability (of both farm economics and environments). We don’t recognise the trilemma because the focus has been on cheap food with little or no regard to the issues of security or sustainability.
So, let’s imagine how a Feed-in Tariff (a Feeding Tariff?) could be applied to the UK food production. A production subsidy could be paid directly to farmers for products that go into the local supply chain provided they meet specified environmental production standards. Like the feed-in tariff for electricity, this feeding tariff for food would give an economic incentive to invest in new, sustainable production methods. Farmers would be getting a fair price for what they produce and not just what the global market dictates.
But how do we pay for this production subsidy? It could be funded from general taxation, or, taking a lead from the electricity market, it could be reclaimed from consumers through a levy on food purchases. Differential VAT rates could be used to collect the levy on selected foods. Not on staples, but on the added-value items, the convenience foods, the out of season imports, the products with high environmental externalities that are not included in the price we pay.
I can imagine a future where, with a feeding tariff, farmers have the confidence to invest in agroecological production and new local markets supply chains without having to match global prices. And, potentially, paid for by a tax on the luxury, added-value items. If this seems unlikely, then remember that that the owner of the electrically heated hot tub is paying for local renewable generation through a levy on the electricity bill!
Feeding tariff: a food production subsidy, paid for by (some) consumers, to stimulate investment in sustainable produced food for local supply?
[i] Lang, 2020, p 458. “Feeding Britain: Our Food problems and how to fix them.” Pelican
Chris explores these issues further in a blog for the Institute of Welsh Affairs. Read more
Chris Blake is Director of Green Valleys CIC. He has spent the last decade supporting community responses to climate change. As a founding Director of both award-winning social enterprises The Green Valleys and Community Energy Wales he has been at the forefront of the movement for community owned renewable generation. More recently he has been leading the Skyline programme delivering landscape-scale community stewardship of public land in the South Wales Valleys. He is also a Board member of Natural Resources Wales.