RICARDIAN METHOD Purpose: value damages of climate change to agriculture Approach: cross sectional analysis of farm net revenue per hectare across climate zones

Advantage –Relatively easy to estimate –Incorporates farmer adaptation –Fits landscape Disadvantage –Not dynamic –Cannot measure price effects –Cannot measure carbon fertilization

Ricardian Methodology Regress net revenue per hectare on climate and other control variables Measure how climate affects net revenue Use to predict how future climate scenarios will affect farm net revenues across country

Example Regression Log(net revenue) = a1 + a2(temp) +a3(temp sq) +a4(precip) + a5(precip sq) + a6(sandy) + a7(clay) +a8(distance to city) + a9(distance to port) +a10(slope)+ a11(farm size)

Adaptation Captured by Ricardian Method Farmers adapt to the climate they live in Comparing farmers across climates automatically captures these adaptations The adaptations are not explicitly modeled, they are implicit in the technique For example, crop switching is captured

Crop Switching temperature Yield (kg/ha) wheat corn soybean millet

Data Need individual farm data from each climate zone in country Net revenue per hectare, soils, climate, access to markets, terrain, farm size Need future climate scenarios

Marginal impacts of Temperature and Precipitation

Marginal temperature effect on rainfed farms in China

Marginal temperature effect on irrigated farms in China