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
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Climate Change and Agricultural Trade: How effective is reform as an adaptation measure?
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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 TradeRisks and Responses
22 September 2009
Preview of Results
Climate change alters comparative advantage
Agricultural trade flows change dramatically
Unchecked climate change will result in a 20 percent increase in malnourished children by 2050
Reduced agricultural protection mitigates the negative effects some
Results still considered preliminary. IFPRI Food Policy Review released October 5 at IFPRI
Page 2
Outline
Climate Change Modeling Methodology
Impacts: Crop Supply, Demand, and Trade
Climate Change Adaptation Costs
The Effects of Changes in Protection
Page 3
MODELING METHODOLOGY FOR CLIMATE CHANGE IMPACTS
Integrating Location-specific Biophysical and Socioeconomic Modeling is Critical
Climate change will bring location-specific changes• in precipitation, temperature and variability
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 Provide more realistic modeling of climate change
effects (biophysical and economic) on global/regional agriculture
Page 5
Global Change Model Components
GCM climate scenarios• NCAR (wetter) and CSIRO (drier) using SRES A2
DSSAT crop model• Biophysical crop response to temp and precip
ISPAM • Spatial distribution of crops based on crop calendars,
soil characteristics, climate of 20 most important crops IMPACT2009
• Global food supply demand trade model. Results to 2050 with global hydrology
Climate Change Affects Comparative Advantage, Rice Importing Country
Page 7
Rice
Wheat
dwwr
P
P
R2000
W2000
R2050
W2050
Rice importsWheat exports, 2000
Increases in rice imports and wheat exports, 2050
Climate Change Affects Comparative Advantage, Rice Exporting Country
Page 8
Rice
Wheat
dwwr
P
P
R2000
W2000
R2050
W2050
Rice exportsWheat imports, 2000
Reduction in rice exports and wheat imports, 2050
Key point: Climate change might increase or decrease trade flow. It depends on• Biophysical determinants of relative advantage• Socioeconomic determinants of demand
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
With additional investments in the developed countries, spillover effects to the developing world reduce the need for adaptation investments slightly
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?
Protection in IMPACT defined as PSE and CSE
Two experiments• Double protection – multiply PSE and CSE by 2• Eliminate protection – set PSE and CSE to 0
Page 31
1 1PS PW MI PSE
1 1PD PW MI CSE
2000 Maize Prices, Protection Experiments
Page 32
Argentina Australia Brazil China France India USA -