MNI INTERVIEW: UK Net Zero May Raise Food Prices By 0.5%

UK food prices would increase by only 0.5% even if farmers pass on to consumers all of the cost of the government's Net Zero targets, which encourage them to use less fertiliser and reduce livestock numbers, a report by the Resolution Foundation think tank said on Wednesday.

"If everything was passed through by farmers, through to farm gate prices, then that impact would be about 2.5%," report co-author Zachary Leather told MNI in a phone interview.

“I think the broad conclusion is that we don't think that there will be big impacts in the short and medium term on prices.”

The report, which also notes farmers’ weak pricing power within the food distribution network, is not a prediction of how prices will evolve in the coming years, Leather stressed, but a "kind of scenario analysis looking at different places the costs might end up and the impacts that they might have."

The report notes that decarbonising agriculture will be difficult, given the lack of a "silver bullet" technology equivalent to electric cars in transportation, and also said that failing to make progress on decarbonising British agriculture this decade would add GBP12 billion to the cost of achieving net zero commitments by other means.

The government-funded Climate Change Committee's latest Carbon Budget recommends reducing fertiliser usage, adopting new soil management techniques, habitat restoration, and reducing livestock numbers as consumers are encouraged to shift away from meat and dairy products. The National Farmers’ Union has rejected the call for lowering livestock numbers and says that sustainable public funding will be needed to meet Net Zero goals. (See MNI INTERVIEW2: Scanner Data Dampens Volatility- ONS's Benford)

"If we did no further decarbonisation in this decade, and we still needed to meet the same kind of like emissions level in 2030, how much would it cost to do the extra effort that you need to do to replace everything we don't get from the agricultural land use sector?" Leather said.

Some members of the Bank of England's Monetary Policy Committee, including Catherine Mann, have expressed concern about inflation persistence and sticky inflation expectations among UK consumers. (See MNI INTERVIEW: Budget Shouldn't Prompt BOE Cuts-OBR's Miles)