Climate Change and Agricultural

Trade: How effective is reform as

an adaptation measure?

Gerald C. Nelson
Senior Research Fellow
Environment and Production Technology Division

World Bank and WTO Climate Change and Agriculture Trade

Risks and Responses

22 September 2009

Preview of Results

ƒ Climate change alters comparative advantage

ƒ Agricultural trade flows change dramatically

ƒ Unchecked climate change will result in a 20 percent

increase in malnourished children by 2050

ƒ Reduced agricultural protection mitigates the negative

effects some

ƒ Results still considered preliminary. IFPRI Food Policy

Review released October 5 at IFPRI

Page 2
 Outline

ƒ Climate Change Modeling Methodology

ƒ Impacts: Crop Supply, Demand, and Trade
ƒ Climate Change Adaptation Costs
ƒ The Effects of Changes in Protection

Page 3

MODELING METHODOLOGY FOR

CLIMATE CHANGE IMPACTS
 Integrating Location-specific Biophysical
and Socioeconomic Modeling is Critical
ƒ Climate change will bring location-specific changes
• in precipitation, temperature and variability
ƒ Need to reconcile
• limited resolution of macro-level economic models that
operate through equilibrium-driven relationships with
• detailed models of dynamic biophysical processes –
crop models
ƒ Provide more realistic modeling of climate change
effects (biophysical and economic) on global/regional
agriculture

Page 5

Global Change Model Components

ƒ GCM climate scenarios

• NCAR (wetter) and CSIRO (drier) using SRES A2
ƒ DSSAT crop model
• Biophysical crop response to temp and precip
ƒ ISPAM
• Spatial distribution of crops based on crop calendars,
soil characteristics, climate of 20 most important crops
ƒ IMPACT2009
• Global food supply demand trade model. Results to
2050 with global hydrology
 Climate Change Affects Comparative
Advantage, Rice Importing Country
Rice
Rice imports
Wheat exports, 2000

Increases in rice
R2000 imports and wheat
R2050 exports, 2050

Pwd
Prw

W2000 W Wheat
2050

Page 7

Climate Change Affects Comparative

Advantage, Rice Exporting Country
Rice
Rice exports
Wheat imports, 2000
Key
Key point:
point: Climate
Climate change
change might
might increase
increase or
or decrease
decrease
trade
trade flow.
flow. ItIt depends
depends on
on Reduction in rice
R2000 exportsadvantage
and wheat
•• Biophysical
Biophysical determinants
determinants of
of relative
relative advantage
R2050 imports, 2050
•• Socioeconomic
Socioeconomic determinants
determinants of
of demand
demand

Pwd
Prw

W2000 W Wheat
2050

Page 8
Rising average temperatures

Source: http://data.giss.nasa.gov/gistemp/graphs/ Page 9

… could increase much more

Page 10
Source: Figure 10.4 in Meehl, et al. (2007)
 AVERAGE ANNUAL
PRECIPITATION CHANGES BY
GCM

Watch Sub-Saharan Africa, the Amazon, and South Asia

Change in Precipitation, 2000-2050

CSIRO, A2, AR4
 Change in Precipitation, 2000-2050
NCAR, A2, AR4

BIOPHYSICAL PRODUCTION
RESULTS

Climate-change-only effects on yield and area

Climate induced percentage change in yield in
2050: Irrigated Rice

NCAR A2

Climate induced percentage change in yield in

2050: Rainfed Rice

NCAR A2
Climate induced percentage change in yield in
2050: Rainfed Maize

NCAR A2

Climate induced percentage change in yield in

2050: Irrigated Wheat

NCAR A2
 FOOD SUPPLY AND DEMAND
RESULTS

IMPACT2009
Biophysical effects from crop and hydrology models
and
economic effects from global agriculture model

Impact on International Food Prices

Greater price
increases with
climate change

Page 20
Climate Change Plus Economic Impacts on
Rice Production

Page 21

Impacts on Maize Production

Page 22
Impacts on Wheat Production

Page 23

Impacts on Cereal Trade Flows

CSIRO developing country

imports are about 150
million mt

Page 24
Impact on Per Capita Calorie Availability

Per capita calorie availability

increases without climate
change Per capita calorie availability
falls with climate change

Page 25

Impact on Childhood Malnutrition

Child malnutrition falls

without climate change
Child malnutrition increases
except in SSA
with climate change

Page 26
 CLIMATE CHANGE ADAPTATION
COSTS

Our Definition of Agricultural Adaptation

ƒ Agricultural investments that reduce child malnutrition

with climate change to the level with no climate
change

ƒ What types of investments considered?

• Agricultural research
• Irrigation expansion and efficiency improvements
• Rural roads

Page 28
 Adaptation Costs are Large!

ƒ Required additional annual expenditure

• Wetter NCAR scenario = US$7.1 billion
• Drier CSIRO scenario = US$7.3 billion
ƒ Regional level
• Sub-Saharan Africa - 40% of the total, mainly for rural
roads
• South Asia - US$1.5 billion, research and irrigation
efficiency
• Latin America and Caribbean - US$1.2 billion per year,
research
• East Asia and the Pacific - $1 billion per year, research
and irrigation efficiency

Page 29

Developed Country Adaptation

Expenditures Help
ƒ With additional investments in the developed
countries, spillover effects to the developing world
reduce the need for adaptation investments slightly

ƒ NCAR scenario, developing country adaptation costs

• Developing countries investments only -> US$7.1 billion
• With additional developed country productivity
investments -> US$6.8 billion

Page 30
 What about changes in protection?

ƒ Protection in IMPACT defined as PSE and CSE

PS = ⎡⎣ PW (1 − MI ) ⎤⎦ (1 + PSE )
PD = ⎡⎣ PW (1 + MI ) ⎤⎦ (1 − CSE )
ƒ Two experiments
• Double protection – multiply PSE and CSE by 2
• Eliminate protection – set PSE and CSE to 0

Page 31

2000 Maize Prices, Protection Experiments

Compare Brazil liberalization To France
liberalization

Double protection has greater

effect than elimination
Page 32
Results from the Experiments: 2050 Cereal
Trade Flow Changes

Page 33

Results from the Experiments: 2050 Child

Malnutrition Changes

Page 34
 Conclusions

ƒ Climate change will have negative impacts on

agricultural production and food security in developing
countries
ƒ Agriculture is critical for
• Employment
• Economic development and
• Food security
ƒ Argues for significant expenditures to reduce the
adverse impacts of climate change
ƒ Reduced agricultural protection (border and domestic)
helps some.

Page 35

www.ifpri.org

Thank you