Opinion: Put a price on phosphorus now and drive circularity

Stephen Hinton 2016

Photo: Maj-Lis Koivisto

In My Humble Opinion:

Put a price on phosphorus now to create a circular economy before it is too late

I’ve been thinking about some interesting feedback on food prices. At a recent meeting, I presented my case: dividend-bearing import surcharges on scarce substances can encourage reuse and recycling. The received opinion is that that anything that makes food more expensive cannot be done. And shouldn’t.

Because apart from making life harder for the poor, supermarkets will not be having it and force farmers to decrease their margins even more.

I beg to disagree: prices can increase if citizens see the point and overall spending power is not affected. NOT putting a price on scarce substances that needed in food provision is what cannot be done.

Systems, like food, have a best-before date: before the risks start to outweigh the benefits. Unfortunately, we tend to stick with the system we have and take the attitude that we’ll cross that particular bridge when we come to it. When we are in deep trouble that is.

Let us break the issue down: The substance in question is phosphorus. Why phosphorus creates so much consternation for so many people is twofold: the way we use it today causes water pollution – we release it from land and from urban water treatment. Secondly, it is in finite supply – Europe gets the bulk of its needs from mining rock in Morocco and the West Sahara. It will run out sooner or later. Some say sooner.

So recycling rather than releasing it would be a good idea. But it’s cheaper to import. So far. The risk is that when the supply dries up, agriculture, having geared up for mineral fertilizers will not be able to respond fast enough and urban waste and waste water treatment will not have the equipment to recycle it to the farmers.

And then people go hungry. Not a good prospect.

Enter dynamic surcharges on import. They are called dynamic because a) they are raised until the market responds, and b) a good proportion of the money collected goes back to tax payers,  encouraging sustainable purchasing.

The Foundation I work for suggested slapping a surcharge on phosphorus imports and raising it until the market started to adapt to circularity. Preferably raising surcharges at a rate that will usher in a circular economy before supplies from North Africa run out.

It is true that would make food more expensive. Producers would simply pass the increased cost of fertilizers onto the consumer. But on the other hand, consumers would have more money in their pockets from the dividend paid out for the fees collected.

And food produced without imported phosphorus would be relatively cheaper. (Which is incidentally one of the features of organic food.)

I take my colleagues’ point that supermarkets’ purchasers are canny and will force food producers to lower their prices. They will turn to importing more food and by doing so export counter-circular practices. But they also know how much consumers are willing to spend. If consumers get more money in their pockets, and certain items are cheaper, consumer behavior will follow. And purchasers also know that governments will put surcharges on imported food in order not to disadvantage their domestic suppliers.

In simulations we have noticed that when governments inform citizens of why certain adjustments to prices are to come, and the long term benefit of the changes, and citizens see a beneficial return, they embrace the changes to a sufficient extent to make the initiatives a success. Not all will respond, but that’s the way things work.

The simulations show too how it is possible to use market based economic incentives like dividend-bearing dynamic surcharges to encourage market actors to invest in circular practices.

So no, we should not be afraid of supermarkets pressing down prices and ruining farmers even more. We should be afraid of being caught out with a food and water treatment system reliant on rock phosphorus from distant countries passing its best-before date.

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One response to “Opinion: Put a price on phosphorus now and drive circularity”

  1. stephenhinton says :

    If we look at the increasing food price caused by the increased fertilizer price, low income consumers will not believe this option is fare and disagree that ‘money will back in their pocket’. To date, no agri-environmental fiscal reform or taxation policy were designed to protect low income consumers in EU. Considering that 122 million people in EU-28 are at risk of poverty in 2014, increasing food price, even if this is created for an environmental solution such as reducing fertilizers runoff, seems inappropriate from the economic point of view if we don’t create a systems that can really compensate poor people. Completely different is the meddle income consumers approach towards an increased food price for sustainable solution. Is very easy be environmental friendly, when your salary is 5-10 time bigger than the poor people! So, the crucial point is to show and discuss, how low income people will face the increasing food price and how the fiscal reform can protect and compensate this people.

    Flavio Gazzani

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