Agricultural Productivity, Climate Change, Adaption and Mitigation Policies: A Canadian Perspective Paul J. Thomassin McGill University OECD Workshop: Agriculture and the Environment Jeju Island, Korea June 17-18,

The Canadian Situation  Large country with diverse geography Regional variations  Agriculture – Joint responsibility – Provinces and Federal Government  Complex interaction Science interaction – Climate – agricultural production Policy interactions – local, provincial, national and international  Two case studies Cash crop farmers and climate change Carbon trading and agriculture 2

Case 1: Cash Crop Farming in Quebec (E. Seyoum-Edjigu and P.J. Thomassin)  Climate Change Changes in temperature, precipitation, CO 2 -- impacts agricultural production  Want to investigate the impact of technological and institutional change as a means of adapting and mitigating climate change  Technological Change – plant breeding or biotechnology  Institutional change -Business risk management programs 3

Study Region 4

Indicators  Economic Vulnerability indicator Olympic Margin – Current Year Margin Frequency indicator – 5 categories 100%, Negative Reference Margin  Net Returns  Crop Mix 5

Economic Vulnerability Indicator: Scenario: No CO 2 +, H 2 O Limitation, Warm/Dry Location<15%15 to <30%30 – 100%>100%-ve Ref. Ste. Martine Ref. Cult Imp. Cult Philipsburg Ref. Cult Imp. Cult Lac à la Croix Ref. Cult Imp. Cult Normandin Ref. Cult Imp. Cult

Ranges of Optimal Average Net Returns with Adaptation Cultivar Type/SiteBest Conditions: CO 2 + – No Water Limit Worst Conditions No CO 2 +- Water Limit Reference Cultivar Ste-Martine$89,488(C/H) to $98,000(W/D) $14,638(C/H) to $16,224 (Med) Normandin$523(C/H) to $4,700(W/D) -$909(W/D) to -$184 (Med) Improved Cultivar Ste-Martine$278,406(W/D)to $286,013(Med) $60,282(Med) to $63,496(W/D) Normandin$161,951(C/H) to $176,153(W/D) $96,606(C/H) to $105,377(Med) 7

Crop Mix Changes 8 LocationExistingBest Conditions Ste. MartineGrain Corn - Soybean Soybean, Grain Corn, Barley, Feed Wheat PhilipsburgGrain Corn - Soybean Soybean, Grain Corn, Barley, Feed wheat Lac à la CroixCereals - ForageCereals, Soybean, Grain Corn NormandinCereals – ForageBarley, Soybean, Feed Wheat

Conclusions  Impact of climate change were different between regions and between sites in regions.  The improved cultivar reduced economic vulnerability, increase production, and increased farm net income.  CO 2 Enhancement and water limitation were also important variables that impacted crop selection and net income  Combination of improved cultivars and risk management tools provided the best protection against economic and financial vulnerability 9

Case 2: Carbon Trading Market in Alberta  Province of Alberta has an active carbon trading market – a cap and trade system  Firms that produce more than 100,000 tonnes of CO 2e are regulated in terms of their emission output  Satisfy reductions by (1) decreasing their own emissions, (2) purchase carbon credits from other regulated firms, (3) buy carbon offset credits from agriculture or (4) purchase technological credits  Technological credits have a government set price of $15.00/credit 10

Carbon Offset Market for Agriculture  Agriculture is not a regulated sector but can sell carbon offset credits  Offset credits are project based and must show a reduction from a baseline – i.e. mitigation  Examples of Protocols that can be used: (1) conservation cropping, (2) nitrous oxide emission reduction, (3) reduced days on feed for cattle, and (4) reduce age at harvest of cattle. 11

Carbon Revenue from Reduced Age to Harvest Protocol  Agricultural producer receives approximately 40% of the carbon price  Carbon reduction is between 2.3 and 2.49 tCO 2e 12 Carbon Revenue Estimates for Reduced Age to Harvest for Cattle Carbon PriceHeifer Yearling to Heifer Calf (Carbon Revenue Head) Steer Yearling to Steer Calf (Carbon Revenue per Head) $13.00$12.93$11.98 $15.00$14.92$13.82 $40.00$39.77$36.86

Conclusion  The incentive for a farmer to adopt an agricultural offset protocol increases as the price of carbon increases  Industrial policy that limits the price of technology credits in Alberta to $15.00/tonne impacts the incentives for agricultural producers to adopt carbon offset protocols 13

Summary  Impact on agricultural productivity from climate change varies by region and scenario  Technological change in terms of R&D into improved plant varieties is important for increased productivity and adaptation to climate change  Institutional change – in terms of insurance programs – plays an important role in terms of financial viability and adaptation  Carbon trading systems can provide the incentives for agriculture to mitigate GHG emissions.  Government policy that limits the price of carbon credits decrease the incentive for agriculture to produce carbon offset credits and thus mitigation. 14