The Hidden Costs of Coffee Production in the Eastern African Value Chains

Abstract

There is increasing recognition that significant hidden costs associated with agrifood systems are not reflected in market prices. Coffee is among the three most traded agricultural commodities in the world and supports the livelihoods of more than 30 million smallholder households. This study quantifies the environmental and social hidden costs of coffee value chains in three countries in Eastern Africa (Ethiopia, Uganda, and Tanzania) to guide interventions to address them. We apply and refine simplified True Cost Accounting (TCA) methodologies to quantify environmental hidden costs associated with climate, soil, water, and biodiversity, as well as social hidden costs associated with child labour, gender inequality, and the living income gap. We use the marginal damage cost approach of Lord (2023) to monetize externalities and quantify significant social and environmental hidden costs that add up to USD 5–7 per kilogram of coffee. These hidden costs equal 70%–125% of the farm gate price for Arabica and about twice the farm gate price for Robusta, relative to average prices at the time of the surveys. Hidden costs associated with the living income gap constitute the largest share, particularly in Ethiopia. Large variations in hidden costs across different production systems and regions underscore the importance of detailed value chain assessments to take action to address these hidden costs.