FOODCoST D2.1 Policy instruments to internalize externalities in the food system

This document aims to give an overview of main public policies and economic instruments  that the EU and four national governments (France, Romania, Spain, and Sweden) have considered to internalize environmental and social externalities in the food market since 2000. In this project, we define ‘internalization’ as any policy-induced change in costs and/or final product prices. This report attempts to examine public policies holistically and comprehensively, considering their objectives, illustrating their economic mechanisms, and understanding both their intended and unintended effects. Two broad sets of instruments with the potential to internalize environmental and social externalities are considered:

• Administrative-based instruments including public procurement, regulation, and other instruments such as coexistence measures, property rights, liability and compensation schemes, tradable permits and auctions, and quotas.
• Market-based instruments including taxes and charges, subsidies, and certification and labelling instruments.

This process involves a four-step methodological process. We first collect the main public policies implemented in the EU and in the four countries. Then, based on a literature review, we identify their intended and unintended impacts on environmental, social, health, and economic externalities. We also describe, if possible, the theoretical economic mechanisms of internalization. We further provide the methodological approach and descriptive results from the mapping of public policies  selected in the report, pinpointing evidence gaps and recommending policy improvements in the food sector