Rosegrant, Mark. 2023. Economic Impacts of Climate Change in the Philippine Agriculture Sector: Scenarios, Policies, and Impact. PowerPoint presentation given to students of AG 4390/AG 5371: Global Agriculture Leadership Academy. Department of Agriculture, Texas State University, San Marcos, Texas, March 29, 2023.

1. Economic Impacts of Climate Change in the
Philippine Agriculture Sector:
Scenarios, Policies, and Impact
AG 4390/AG 5371:
Global Agriculture Leadership Academy
Mark W. Rosegrant
Research Fellow Emeritus
International Food Policy Research Institute
Texas State University| March 29, 2023

2. Outline
 Rationale and Objectives
 Methodology
 Impact of Climate Change
• Commodity Production and Prices
• Food Security – Childhood Malnutrition and
Hunger
• Economic Welfare in Agriculture
• Economy-wide Impact of Climate Change
 Key Messages
 Achieving Policy Impact

3. Rationale
 Sustaining agricultural production growth to help achieve inclusive
growth and poverty reduction is a key goal for the Philippine
government
 Agricultural growth is a key to broad economic growth
 But agricultural growth has been low, slowing economic growth
and employment creation in the Philippines
 Climate change is a threat to agricultural growth, affecting
productivity and prices
 Need to develop adaptation policies and growth strategies for
agricultural growth

4. Objectives
 Estimate the economic impact of climate change on Philippine
agriculture and, through agriculture, on the economy as a whole
 Examine the impact of climate change on
• food supply (production and yield levels) and food prices
• indicators of food security, including number of malnourished children
and population at-risk-of-hunger welfare measures (consumer and
producer surplus in the agricultural sector)
• economic benefits and cost to the full economy
 Assess the effectiveness of alternative adaptation strategies,
including support for agricultural productivity growth and the rice self-
sufficiency program

5. Rationale
 Rice self-sufficiency through price intervention and trade restriction
has been one of the major policies promoted by the Philippine
government
 The National Food Authority (NFA) is mandated to provide subsidies to
producers and consumers, and to restrict the amount of rice that is
imported
 Extremely costly because the government must buy at high prices and
sell at low ones to create incentives for farmers to plant more rice and
provide cheaper food to consumers (and in fact results in higher prices
for consumers)

6. Rationale
 The rice self-sufficiency program creates a “crowding out” effect
because resources that should be used to fund investment—
including investment in agricultural productivity growth—are
diverted to finance the subsidy
 Trade and price policies are rice-specific, favoring one crop
through price supports and restriction of imports at the expense of
other crops by artificially raising the profitability of the favored crop,
it encourages expansion in production of that crop compared to
other crops and induces greater research investment in the
favored crop.

8. Linked Modeling Approach
Utilized to assess the effects of:
 alternative agricultural policies, technologies, and investments
 macroeconomic policies and institutions
 climate adaptation strategies on agriculture
under a range of climate and socioeconomic futures to assess
appropriate strategies for agriculture under climate change in the
Philippines

9. Linked modeling system for the assessment of agricultural
climate change impacts on the Philippine economy

11. Changes (%) in consumer prices of major agricultural
commodities, 2030 and 2050
 Projected reduction in average per capita
consumption due to climate change in 2050
compared to the no-climate change:
• Cereals = 5%
• Fruits and vegetables = 6%
• Roots and tubers = 5%
• Pulses = 3%
• Meat = 0.4%
 Estimated per capita consumption decline
for cereals:
• Rice = 4%
• Corn = 6%
• Wheat = 5%
% change from baseline
Cereals Meat Pulses Roots and tubers Fruits and vegetables
2050 Average
- MIROC
- IPSL
- HadGEM
- GFDL
2030 Average
- MIROC
- IPSL
- HadGEM
- GFDL

12. Climate Change and Food Security
 Malnourished children
• Baseline scenario
− 2010 = 3 million malnourished children
− 2030 = 2.7 million (projected)
− 2050 = 2.21 million
• With climate change in 2050 - additional 70,000 children (projected,
average across GCMs)
 Increase in number of people at risk of hunger (projected)
• 2030 = 1.4 million (9% increase compared to no-climate change)
• 2050 = 2.5 million (17% increase)

13. Climate Change and Food Security
Indirect cost of Malnutrition
• loss of productivity estimated at more than 10% of lifetime
earnings (World Bank 2006)
• 10% of GDP/person/year = US $704
• No. malnourished/year due to climate change = 1.29 million
• Equivalent cost/year = US $910 million or P 41 billion

15. Climate change impact on growth in GDP by sector
 Climate change - reduces long-term
economic growth, costing Php 26
billion/year
 Higher commodity price gives
producers better incentive to grow
more crops, especially export crops;
leads to higher agricultural GDP
 Downside - higher commodity price
reduces consumption directly; causes
terms of trade loss and lower real
exchange rate, reducing industrial and
service sector output
-0.10 -0.05 0.00 0.05 0.10 0.15
Total gross domestic
product
Real exchange rate
Service
Industry
Agriculture
Yearly change (%)
Productivity
effect
Global trade
effect

16. Climate change impact on real exchange rate and GDP
by sector in the Philippines
Variable
Climate shock (Php billion)
Productivity
Effect
Global Trade
Effect
Total
Effect
Annual absorption -5.7 -20.7 -26.2
Private Consumption -5.0 -16.5 -21.5
Investment -0.7 -5.2 -5.8
Government Consumption 0.0 1.0 1.1
Source: Authors’ calculation from Phil-DCGE simulations results
• Climate change – projected to cost the economy Php 26 billion per year
• Welfare loss - reduction of private consumption and total investment -
mainly influenced by increase of commodity prices, loss in real exchange
rate and lower household income level

17. Adaptation Strategies
 Three types of adaptation strategies introduced that promote
higher domestic rice production in the future
• First strategy: Rice productivity – increased investment in rice research
and development
• Second strategy: Irrigation investment increases
• Third strategy: Agricultural tariff reductions
 Each adaptation strategies are assessed under climate change,
with and without the rice self-sufficiency policy
 Six scenarios: three adaptation strategies, with and without rice
self-sufficiency policy

18. Welfare impact from different adaptation strategies with and
without climate effect, 2010-2050
56.5
42.3
-2.7
127.8
118.2
81.3
-20
0
20
40
60
80
100
120
140
Increase rice
productivity
Increase
irrigated area
Agriculture
tariff
reduction
Increase rice
productivity
Increase
irrigated area
Agriculture
tariff
reduction
NFA subsidy (% change from base in 2050)
No NFA subsidy (% change from base in
2050)
Billion
Php
/
year
Priv. Consumption Investment Gov. Consumption Annual absoption
Total Welfare

20. Key Messages
 Climate change reduces crop productivity growth, increases food
prices, and reduces food security
 Large negative effects on the rest of the economy:
• increased international commodity prices cause terms of trade and real
exchange rate losses
• reducing growth in industrial and service sectors and consumer welfare

21.  Rice Self-sufficiency Policy
• Detrimental effect observed under both climate and no climate change -
suppresses potential economic growth from rice productivity growth
• Economic cost of Php 75 billion per year
• Absorbing much of resources that could have been used to fund
investment and finance other government programs instead of
subsidizing rice
• Induces misallocation of private investment across sectors
• Abolishing policy may hurt vulnerable households, but the gain received
by the middle and upper class is much higher
• Special assistance program or direct transfer to compensate the
vulnerable is effective policy and inexpensive alternative
Key Messages

22.  Investment in increasing rice and other crop productivity growth shows
significant impact in reducing the negative climate effects
 Reduction of expenditures on rice market interventions and transfer of
savings to investment in agricultural research and development and rural
infrastructure - promoting technological change in agriculture that would
generate large economic benefits for the Philippines
 Supporting climate change adaptation policies
• Development of real-time weather information systems to support farmers
decisionmaking
• Improved agricultural extension employing innovative methods such as
information and communication technologies
• Stronger seed industry to facilitate the adoption of new varieties
Key Messages

23.  Way forward to achieve food security under climate change - shift
the focus of policy to productivity and efficiency-enhancing
measures
• R&D to develop technologies appropriate for local conditions
• Rural road network development
• Irrigation and flood control development
 Requires reorienting food security policy toward facilitating rather
than inhibiting trade, competition, and crop diversification to
achieve inclusive access to food while generating long-term
productivity and income growth
Key Messages

24. BEYOND RESEARCH TO
ACHIEVING IMPACTS

25. Impact Pathways
Influence policy development
and implementation arena
• Farmers
• Traders
• Service providers
Public Awareness
• Media
• General public
• Reduced rural poverty
• Improved food security
• Improved nutrition
and health
• More sustainable
management of natural
resources
Provide policy
recommendations
Policy analysts Policymakers,
ministries
Policy changes
Monitoring and
evaluation, impact
assessment Development
community,
stakeholders,
advocates
Extension
services,
NGOs
Implementation
of development
actions
System-Level Outcomes
Research
outputs
Research
capacity
Improved Knowledge
• THEME 1
• THEME 2
• THEME 3
Inform and enrich research,
bolster research capacity
1
2
3

26. Challenges and Responses for Modeling for Policy
Impact
CHALLENGES RESPONSES
Asking the right questions
Find out the needs and intentions of the
policymakers
Modeling design useful to policy- and
decisionmakers
Improve modeling design
• Integration of biophysical-hydrology-
economics
• Multi-scales – local, national, regional
• Consistent upscaling and downscaling
across levels
• Greater spatial disaggregation to address
basin and sub-basin issues
Information for enhanced understanding
• Better description and presentation
• Use of interactive models
Transparency and open access
Encourage transparency through open access for
effective policy outreach

27. How to Achieve Impacts: Beyond Research
BOUNDARY PARTNERS
• Along each impact pathway
- Identify who will take up and use the
research results
- What influence they have
- What they need
• Involve them as early and
consistently as possible
- To make sure that research addresses
issues they see as relevant
• Need to cut across departmental
silos: e.g. Finance, Agriculture,
Energy, Water
DISCOURSE ANALYSIS
• For each pathway, identify key
phrases being used, by whom,
with what values
• What are “poison pills” to be
avoided for farmers, practitioners,
etc.?
• Economics language may not be
the way to convey the messages
COMMUNICATIONS
Work with communications people
to identify
• How to convey the message
• Where
• To whom (audience analysis)
ADVOCACY COALITIONS
Identify coalitions (e.g. environmental NGOs and displaced people vs government and downstream farmers
on dams)
• If model is to be used in helping to make decisions, at least one trusted person in each coalition needs to understand
the model
• Identify those coalitions and involve them in your capacity building. (No good to just train the government)

28. The Expert
The
Insider
The Interested
The General Public

29. Food Policy Report The Insider
Policy Brief
The Interested
Research Report The Expert
Media Release
including
Social Media
The General Public

30. From Research to Impact
 In September 2015, together with the National Economic and
Development Authority (NEDA) organized a Policy Research
Forum in Manila featuring the results of the study.
 Attended by high-level policymakers of the country, including
Chair of the Senate’s Committee in Agriculture
 Office of the Senator obtained the policy notes produced from the
study and used these to assess the impacts of alternative
adaptation measures in agriculture.

31.  In 2016, The Department of Budget and Management (DBM) used
the results of the study in project evaluation exercises that help in
determining the level of budgetary support for the Department of
Agriculture
 The analysis was also utilized to inform the formulation of the
Philippine Development Plan 2017-2022
 The results were used by the Philippine Economic Managers
(NEDA, Department of Finance, DBM, Department of Trade and
Industry) in assessing the rice import quotas and passing the Rice
Tariffication Law
From Research to Impact

32.  Our research supported the removal of the quotas and
replacement by RTL, which was signed into law in 2019
 This project shows that regular communications and strong
linkage with the government are critical in maintaining cooperation
and supporting forward actions, particularly in the implementation
of recommendations and policies
From Research to Impact