Agriculture, Climate Change and Adaptation

1. Agriculture,ClimateChangeandAdaptation Bruce A. McCarl Distinguished Professor of Agricultural Economics, Texas A&M University mccarl@tamu.edu, http//ageco.tamu.edu/faculty/mccarl ClimateChangeAdaptation Energy ClimateChangeMitigation ClimateChangeEffects Climate Change Class

2. Sensitivity • Total burden of climate change consists of three elements: • costs of mitigation (reducing the extent of climate change), • costs of adaptation (reducing the impact of change), and • residual impacts that can be neither mitigated nor adapted to IPCC FAR WGII Ch 18

3. AdaptationPolicy anditsinevitability

4. Why Adapt - Inevitability Characteristics of stabilization scenarios IPCC WGIII Table SPM.5: Characteristics of post-TAR stabilization scenarios WG3 [Table TS 2, 3.10], SPM p.23 [1] The best estimate of climate sensitivity is 3ºC [WG 1 SPM]. [2] Note that global mean temperature at equilibrium is different from expected global mean temperature at the time of stabilization of GHG concentrations due to the inertia of the climate system. For the majority of scenarios assessed, stabilisation of GHG concentrations occurs between 2100 and 2150. [3] Ranges correspond to the 15th to 85th percentile of the post-TAR scenario distribution. CO2 emissions are shown so multi-gas scenarios can be compared with CO2-only scenarios.

5. Degree of climate change – Emissions growing Emissions growing http://www.epa.gov/climatechange/emissions/globalghg.html

6. SizeofPotentialEmissions Atmosphere 800 PgC (2004) Biomass ~500 PgC N. Gas ~260 PgC Oil ~270 PgC Soils ~1,500 PgC Coal 5,000 to 8,000 PgC Unconventional Fossil Fuels 15,000 to 40,000 PgC Source Jae Edmonds, Joint Global Change Research Institute at the University of Maryland

7. What are Policy alternatives

8. Policy Directions • Policy toward climate change consists of three elements: • Let it happen – ignore • Pursue mitigation (reducing the extent of climate change), • Pursue adaptation (reducing the impact of change), and Schematic from Parry, 2009

9. Policy Sensitivity • Let it happen – ignore or only reduce • Effects on previous page • Pursue mitigation (reducing the extent of climate change) • Energy will be major thrust • De carbonize • Tax • Pursue renewable • So may be agricultural activities • Land use change – domestic and ILUC • Sequestration – tree planting, grass, tillage • Emissions, fossil fuel use, enteric, manure, rice • Offsets – biofuel and bio electricity – watch out for LUC • Pursue adaptation (reducing the impact of change) • Maintenance of current productivity • Autonomous – varieties, planting dates, crop mix, enterprise choice • Facilitating adaptation • R&D on adapted varieties, practices • Extension • Facilities • Compensation (international) • Resource competition from both

10. General thoughts on Adaptation

11. Agricultural ManifestationsofRisk • Greater plant water needs • Greater city water needs • More fresh surface water? • More water in infrequent events • More pests • altered grass • Less severe winter and cattle/hogs • Northward crop migrations • Altered water quality • Inundated facilities (not here) • GHG Emissions • Higher priced energy • Earlier lake thaw • Winter access to water transport

12. Adaptation Autonomous adaptations are actions taken voluntarily by decision-makers (such as farmers or city leaders) whose risk management is motivated by information, market signals, co-benefits, and other factors. Planned adaptations are interventions by governments to address needs judged unlikely to be met by autonomous actions—often adaptations larger in scale and/or resource requirements. We will largely deal with planned adaptations in need of some form of policy, program or investment facilitation.

13. Adaptation • Autonomous adaptations are private • Planned adaptations are needed to correct market failure induced by • divergence between discount rates • public good nature of some adaptations • differential value of resolving inequities • differential risk aversion and risk perception • local barriers to adaptation • social concerns over pecuniary externalities, • difference in information availability • Land ownership and property rights • unmanaged areas which are not subject to management

14. Adaptation • Basic resolution requires moving beyond a strict economic benefit–cost viewpoint to consider effects on a number of other factors such as • income distribution/and poverty, • contributions to society current and future, • potential secondary regional and distributions of economic activity including employment - not typically validly included in benefit cost analysis and • non monetary implications (e.g., altered water quality, habitat implications, human health, and quality of life). • Entails multi-metrics analysis unifying economic measures with non-economic environmental quality and health type measures and non-market valuation issues.

15. Adaptation • Far right-hand side vertical is a pre climate change welfare • Next vertical is an engineering technical assessment showing unavoidable residual damages, • First sloped from right considers implementation costs - more adaptation being achieved as more is spent on adaptation. • Next is competitive economic potential which shows less being adopted when considering resource competition • Finally barrier adjusted curve giving the actual adaptation that occurs reflecting limited information, human and financial capital in region

16. Adaptation One would anticipate that the returns to increasing levels of adaptation investment will likely decrease with effort. As is argued in Parry et al, the first 10% of the benefits from adaptation can be achieved with relatively low levels of effort but as the amount of adaptation increases the costs of implementation gets successively more expensive. Martin Parry, Nigel Arnell, Pam Berry, David Dodman, Samuel Fankhauser, Chris Hope, Sari Kovats, Robert Nicholls, David Sattherwaite, Richard Tiffin, Tim Wheeler: Assessing the costs of adaptation to climate change: A critique of the UNFCCC estimates http://www.iied.org/pubs/pdfs/11501IIED.pdf

17. Adaptation The emergence of adaptation funds and the likelihood of substantial project level adaptation raises issues. Baseline and additionality where it is desirable to fund adaptation strategies that would not have occurred (those not autonomously adopted). Leakage where investments may alter commodity production changing market prices and potentially affecting adaptation elsewhere as explored in a mitigation context by Murray, McCarl and Lee. Performance uncertainty where it may be worthwhile placing a lower confidence interval on adaptation potential. See Kim and McCarl in mitigation setting. Permanence where one needs to consider the duration that the adaptation investment will be effective and not assume that the result persists forever see Kim McCarl and Murray for discussion in mitigation setting.

18. Adaptation The existence of adaptation funds like the world bank one certainly raises Burden sharing issues On the donor side: Who should contribute? How much? On the recipient side: Who should receive adaptation investment assistance? and How much? There has been work done on this regarding general considerations of liability and ethics; political issues, polluters pay principles and North-South issues.

19. Adaptation and the treadmill Climate change and its continual progression raises a new demand on agriculture research and extension Traditionally in agriculture we did research on yield improvement and some maintenance for say pest resistance We could count on weather being stationary but now this is likely not so. So we must devote resources to technological adaptation in maintaining productivity at a spot

20. Adaptation Autonomous adaptation actions are undertaken by individuals and groups in their own best interest. A substantial degree of adaptation can be observed in any climate dependent industry; agricultural cropping patterns vary geographically adapting to local temperature and rainfall conditions. Autonomous adaptation is facilitated by depreciation in capital stocks and obsolescence of technology. A continual level of investments will take place updating equipment and practices facilitating autonomous adaptation The pace of climate change may impose new stresses on this.

21. Adaptation These are rival goods where investments in one strategy might preclude investments in another whether it be an alternative adaptation or alternative mitigation strategy. There is also rivalry with traditional production enhancing investment where large adaptation or mitigation investment programs preclude productivity enhancing investment. Additionally there is resource competition where for example some mitigation strategies require land-use change as do some adaptation strategies and land is limited plus can be used for traditional production of food, fiber and ecological goods.

22. Adaptation over time Just did a study on share of adaptation versus mitigation Adaptation dominates for first 100 years Wang, W.W. and B.A. McCarl Temporal Investment on Climate Change Adaptation and Mitigation

23. Agricultural adaptation

24. Agricultural ClimateSensitivity • Greater plant water needs • Greater city water needs • More fresh surface water? • More water in infrequent events • More pests • Altered grass • Less severe winter and cattle/hogs • Polewardcrop migrations • Altered water quality • Inundated facilities and lands • Winter access to water transport • Altered research returns • More yield variability

25. MeanstoAdapt • Investment to facilitate adaptation • Research • Extension • Capital investment • Ag Adaptation • Irrigation • Drought resistant varieties • Tolerant breeds and varieties • Crop and livestock mix • Tree rotation age • Abandonment • McCarl, B.A., Adaptation Options for Agriculture, Forestry and Fisheries, A Report to the UNFCCC Secretariat Financial and Technical Support Division, 2007. http://unfccc.int/files/cooperation_and_support/financial_mechanism/application/pdf/mccarl.pdf

26. Agricultural ClimateSensitivity Zilberman, D., X. Liu, D. Roland-Holst And D. Sunding, “The Economics Of Climate Change In Agriculture” Mitigation and Adaptation Strategies for Global Change 9: 365–382, 2004.

27. Agricultural Adaptation • Analytical approaches • Observe adaptation to get insights on possibilities • Observe “adapted agriculture” • Simulate adaptation • Structural modeling

28. Observe adaptation

29. Literature Livestock adaptation in Africa and South America ( papers from Seo et al.) Climate change and animal performance in the U.S. (Frank et al. 2001; Mader et al. 2009) Few empirical studies focused on climatic conditions and livestock stocking rate.

30. Objectives of this study Mu, J.H., and B.A. McCarl, "Adaptation to Climate Change: Land Use and Livestock Management in the U. S", Presented at the 2011 annual meeting of the Southern Agricultural Economics Association, Corpus Christi, February, 2011. Examine how climatic factors impact land allocation decisions between crop and livestock along with cattle stocking rates Examine under climate change, what are the directions and magnitudes of likely adaptation

31. Method Assuming the net revenue from and agriculture operation is written as, The probability of choosing land use Fractional Multinomial Logit estimation with

32. Stocking rate, individual animal performance, gain per acre, and net return per acre. Source: Redfearn and Bidwell

33. Data District-level data for Census years of 1987, 1992, 1997, 2002 and 2007 Land use for crop and pasture plus total aniaml population from the Agriculture Census Climate data on historic temperature, precipitation, drought, extreme heat waves, precipitation intensity and the temperature-humidity index (THI) from NOAA Regional dummies and cattle stocking rate

34. Land use allocation and climate Temperature and land use Precipitation and land use

35. Projections under climate change The third version of Hadley Center Coupled Model (HadCM3); Changes of temperature and precipitation for the years 2010-2039, 2040-2069 and 2070-2099; Three emission SRES scenarios: B1,A1B, A2 Holding other variables at mean.

36. Projections under climate change

37. Changes of the probability of land allocation across regions under climate change pasture crop Under B1 Scenario pasture Under A1 Scenario crop

38. Conclusions Observed data suggests stocking rate and land use adjustments are to be expected under climate change Fractional Multinomial Logit (FMNL) Model lets us estimate this; We expect less crop land and lower stocking rates under projected climate change

39. Observe results of adaptation No time Mendelsohn Schlenker Land value studies

40. Simulation of adaptation

41. Simulate adaptation by planting cultivars that are better adapted to warmer temperatures, as well as by early planting. These techniques help to reduce—but not to counterbalance completely—the yield reductions simulated under climate change and no adaptation.

42. Table 1 Data without Adaptation Data converted to percentage change from Base cc cc hc hc Crop Irrig neffect 2030 2090 2030 2090 cotton DRYLAND yld 18 96 32 82 cotton IRRIG yld 36 122 56 102 cotton IRRIG wuse -11 107 36 60 corn DRYLAND yld 19 23 17 34 corn IRRIG yld -1 -2 0 7 corn IRRIG wuse -34 -54 -30 -60 soybeans DRYLAND yld 20 30 34 76 soybeans IRRIG yld 16 28 17 34 soybeans IRRIG wuse 0 3 -12 -26 HRSW DRYLAND yld 15 -4 20 30 HRSW IRRIG yld -10 -18 4 6 HRSW IRRIG wuse -28 -22 -17 -21 Table 2 With Adaptation cc cc hc hc Crop Irrig neffect 2030 2090 2030 2090 cotton DRYLAND yld 18 96 32 82 cotton IRRIG yld 36 122 56 102 cotton IRRIG wuse -11 107 36 60 corn DRYLAND yld 20 24 17 34 corn IRRIG yld 1 0 1 9 corn IRRIG wuse -33 -55 -32 -60 soybeans DRYLAND yld 39 64 49 97 soybeans IRRIG yld 23 33 23 40 soybeans IRRIG wuse 18 12 0 -20 HRSW DRYLAND yld 20 14 23 36 HRSW IRRIG yld -1 -6 7 10 HRSW IRRIG wuse -12 -15 -12 -15 Source Data from McCarl, B.A., "Notes on the National and NCAR Agricultural Climate Change Effects Assessment", Background paper for National Climate Change Assessment Group Report, 1999.

43. Structural Modeling

44. Done in conjunction with vulnerability studies • Real issues in models • Expanding opportunity set • Crop and livestock mix • Not putting in attractive alternatives and getting double whammy • Cost benefit of adaptation • Selectively stopping adaptation to estimate its value

45. History of McCarl Climate Change Effects Assessments 1987 – Corn Soy, Wheat no adaptation, no irrigation, no CO2 1992 – Corn, Soy, Wheat, no adaptation, irrigation, no CO2 1995 – Corn Soy, Wheat CO2, irrigation calendaradaptation 1999 – Corn, Soy, Wheat, cotton, sorghum, tomato, potato, CO2, irrigation, calendar adaptation, crop mix shift, livestock, grass, input usage, water available 2001 -- Corn, Soy, Wheat, cotton, sorghum, tomato, potato, CO2, irrigation, calendar adaptation, crop mix shift, livestock, grass, input usage, pest, extreme event, forestry 2010 – above plus 2007 scenarios, risk, crop insurance Cost continually went down now beneficial.

46. Structural adaptation Adaptation in FASOM Crop mix Northward migration AGCRPMIXUP(period,mapcountryreg(countrytouse,agreg),mixtype,crop) $( (not notincropgroup(crop)) and agregsperiod(period,countrytouse,agreg) and sum(matchirri(mixtype,irrigstatus),minmixdat(countrytouse,agreg,irrigstatus,crop)) and sum(proxycrop(crop,crop2)$(not sameas(crop,crop2)),1)=0 and minMixValue(countrytouse,agreg,mixtype,crop) gt 0 and ((sameas(mixtype,"total") and minMixValue(countrytouse,agreg,"total",crop) ge minMixValue(countrytouse,agreg,"irrigated",crop)) or sameas(mixtype,"irrigated")) and yesag gt 0 and cropmixy(period)).. sum((matchirri(mixtype,irrigstatus)) $minmixdat(countrytouse,agreg,irrigstatus,crop), AGCRPMIX(period,countrytouse,agreg,irrigstatus,crop)) - 1.005 * sum(crpmixalt, cropmixdata(countrytouse,mixtype,crop,agreg,crpmixalt) *AGMIXR(period,countrytouse,agreg,mixtype,crpmixalt)) $if not setglobal climate $goto arnd2 *new mixes under climate change - 1.005 * sum(crpmixalt, cropmixdataclimate(mixtype,crop,agreg,crpmixalt) *AGMIXR2(period,countrytouse,agreg,mixtype,crpmixalt) )$climadapt $label arnd2 =l= 0.01 ;

47. 120 100 80 60 Loss in Mil Dollars 40 20 0 C Change Crop Mix Trade Tech Full Climate Change Effects and adaptation Value of Adaptation ($ Million) - Mali Loss = 105 2 6 15 38 36% loss recovered 90 102 98 67 Adaptations Considered Butt, T.A., B.A. McCarl, and A.O. Kergna, "Policies For Reducing Agricultural Sector Vulnerability To Climate Change In Mali", Climate Policy, Volume 5, 583-598, 2006.

48. 80 70 60 50 40 30 20 10 0 Base HADCM CGCM HADCM CGCM Risk of Hunger – With and Without Variety Adaptation Mali Without adaptation 75 With adaptation 69 49 42 Percent of Population 34 HADCM: Hadley Coupled ModelCGCM: Canadian Global Coupled Model

49. Effect of Climate Change on Public Agricultural Research Returns Some gains some losses To restore level of productivity requires invest percent increase of

50. Cost of planned adaptation