Presentation Title Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Adaptation in Agriculture Bangkok October 2012

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action As Climate Changes, How Should Agriculture Adjust? What adjustments by farmers increase farm net revenue (gross revenue minus costs) per hectare? Can markets facilitate climate adaptation? What policies by government lead to higher net revenues?

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action I. Adaptation Choices for Farmers Choose type of farm (crop, livestock, mixed) Choose type of crop Choose type of livestock Choose timing (planting, harvesting) Choose inputs (fertilizer, labor, capital, irrigation)

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action How Can Farm Adaptation Alternatives Be Evaluated? Ask farmers how to adapt to climate change –If they have not experienced climate change, not likely they know what to do in advance –Farmers have poor sense of long term climate changes Ask farmers how they adapt to extreme events –Farmers have experienced extreme events and can tell you how they have adapted Model farms and predict optimal changes –Some examples in US but little empirical work on farm models Examine choices by farmers in different climates –Propose this approach in Asia

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Climate Affects Farm Type Crops and livestock have preferred climate conditions As climate changes, farm type can change In general, wetter climates support crops and drier climates support livestock Smaller farms tend to depend on both for robust revenue- larger farms tend to specialize

Change in Farm Type in Latin America by Climate Scenario CCC CCSR PCM

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Crop Choice as Adaptation Specific crops tend to have narrow temperature and precipitation ranges Exception is crops with many varieties (maize) As climate changes, particular crops have higher net revenue Evident in where crops are grown today Farmers will switch when profitable to do so

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Crop Switching temperature Net Revenue ($/ha) wheat corn soybean millet

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action African Crops vs Temperature

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action African Crops vs Precipitation

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Crop Choice Varies by Region and Climate Scenario Three future climate scenarios lead to different changes in crop choice in China Crop choice changes are different in each region of China Adaptations are local

Region/ Scenario WheatPotatoSugarMaize Northeast PCM HADCM CCM Middle PCM HADCM CCM Northwest PCM HADCM CCM Change in Regional Crops in China by Climate Scenario

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Choice of Livestock Species Also Is Climate Sensitive High valued beef cattle and dairy cattle prefer cooler temperatures and dry climates Sheep and goats more tolerant to heat and wetter climates High temperatures and wetness can combine to yield high disease risks

African Livestock vs Temperature

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action African Livestock vs Precipitation

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Climate Affects Planting and Harvesting Dates Warmer temperatures allow both earlier planting and later harvesting by reducing frost risk Combined they lead to longer growing seasons Higher temperatures also lead to higher risks of mid season (summer) peaks

Warming and Planting Planting date (days after January 1) Change in Temperature

Warming and Growing Season Length of Growing Season Change in Temperature

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Climate and Inputs Generally, it is more profitable to invest in more inputs (fertilizer, irrigation, capital, improved seeds) in more productive locations Since climate helps determine productivity, it affects optimal inputs See hill-shaped relationship between inputs and climate Warming leads to more inputs in a cool location and less inputs in a hot location.

Warming and Inputs Input Per Ha Temperature

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action II. Market Adaptations Global markets (trade) provide robustness by combining supply across countries Although local weather leads to wide fluctuations in local production, global prices are relatively stable Global prices are sensitive to global changes- recent price hikes due to more expensive energy and biofuels (mitigation actions)

Global Price Chart

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action III. Government Roles Support research and development –New varieties and breeds suitable for future climate –New farm management techniques like green revolution Invest in irrigation supply –Irrigated farms less climate sensitive provided adequate water Strengthen private responsibility on farmland Weather insurance?

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Common Property and Private Responsibility In absence of private responsibility, common property leads to underinvestment in land –Overgrazing grasslands –Inadequate investment in soil productivity Solution is to increase private responsibility –Long term leases on land –Community ownership –Private ownership

Capacity Building Programme on the Economics of Adaptation Supporting National/Sub-National Adaptation Planning and Action Weather Insurance Weather insurance provides protection against climate variability (weather) –If premiums equal to expected risk, encourages adaptation Subsidizing insurance increases farm incomes –Helpful to poor farmers Subsidized insurance removes incentive to adapt –Leads to mal-adaptation: risk taking –Increases climate damages