World Bank and WTO: Climate Change and Agriculture Trade - Risks and Responses September 22, 2009 Washington, DC

1. 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

2. 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

3. Outline
 Climate Change Modeling Methodology
 Impacts: Crop Supply, Demand, and Trade
 Climate Change Adaptation Costs
 The Effects of Changes in Protection
Page 3

4. MODELING METHODOLOGY FOR
CLIMATE CHANGE IMPACTS

5. 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

6. 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

7. Climate Change Affects Comparative
Advantage, Rice Importing Country
Page 7
Rice
Wheat
d
w
w
r
P
P
R2000
W2000
R2050
W2050
Rice imports
Wheat exports, 2000
Increases in rice
imports and wheat
exports, 2050

8. Climate Change Affects Comparative
Advantage, Rice Exporting Country
Page 8
Rice
Wheat
d
w
w
r
P
P
R2000
W2000
R2050
W2050
Rice exports
Wheat 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

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

10. … could increase much more
Page 10
Source: Figure 10.4 in Meehl, et al. (2007)

11. AVERAGE ANNUAL
PRECIPITATION CHANGES BY
GCM
Watch Sub-Saharan Africa, the Amazon, and South Asia

12. Change in Precipitation, 2000-2050
CSIRO, A2, AR4

13. Change in Precipitation, 2000-2050
NCAR, A2, AR4

14. BIOPHYSICAL PRODUCTION
RESULTS
Climate-change-only effects on yield and area

15. Climate induced percentage change in yield in
2050: Irrigated Rice
NCAR A2

16. Climate induced percentage change in yield in
2050: Rainfed Rice
NCAR A2

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

18. Climate induced percentage change in yield in
2050: Irrigated Wheat
NCAR A2

19. FOOD SUPPLY AND DEMAND
RESULTS
IMPACT2009
Biophysical effects from crop and hydrology models
and
economic effects from global agriculture model

20. Impact on International Food Prices
Page 20
-
50
100
150
200
250
300
350
400
450
Rice Wheat Maize Soybeans
DollarsPerMetricTon
2000 2050 No climate change 2050 CSIRO NoCF 2050 NCAR NoCF
Price increases
without climate
change
Greater price
increases with
climate change

21. Climate Change Plus Economic Impacts on
Rice Production
Page 21
-
50
100
150
200
250
South Asia East Asia and
the Pacific
Europe and
Central Asia
Latin America
and the
Caribbean
Middle East and
North Africa
Sub-Saharan
Africa
MillionMetricTons
2000 2050 no CC 2050 with CC

22. Impacts on Maize Production
Page 22
-
50
100
150
200
250
300
South Asia East Asia and
the Pacific
Europe and
Central Asia
Latin America
and the
Caribbean
Middle East and
North Africa
Sub-Saharan
Africa
MillionMetricTons
2000 2050 No CC 2050 with CC

23. Impacts on Wheat Production
Page 23
-
50
100
150
200
250
300
South Asia East Asia and
the Pacific
Europe and
Central Asia
Latin America
and the
Caribbean
Middle East
and North
Africa
Sub-Saharan
Africa
MillionMetricTons
2000 2050 No CC 2050 with CC

24. Impacts on Cereal Trade Flows
Page 24
CSIRO developing country
imports are about 150
million mt

25. Impact on Per Capita Calorie Availability
Page 25
Per capita calorie availability
increases without climate
change Per capita calorie availability
falls with climate change

26. Impact on Childhood Malnutrition
Page 26
-
10
20
30
40
50
60
70
80
South Asia East Asia and
Pacific
Europe and
Central Asia
Latin America
and
Caribbean
Middle East
and North
Africa
Sub Saharan
Africa
MillionsofChildren
2000 2050 No CC 2050 with CC
Child malnutrition falls
without climate change
except in SSA
Child malnutrition increases
with climate change

27. CLIMATE CHANGE ADAPTATION
COSTS

28. Our Definition of Agricultural Adaptation
 Agricultural investments that reduce child malnutrition
with climate change to the level with no climate
change
 What types of investments considered?
• Agricultural research
• Irrigation expansion and efficiency improvements
• Rural roads
Page 28

29. Adaptation Costs are Large!
 Required additional annual expenditure
• Wetter NCAR scenario = US$7.1 billion
• Drier CSIRO scenario = US$7.3 billion
 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

30. 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

31. 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    

32. 2000 Maize Prices, Protection Experiments
Page 32
-
20
40
60
80
100
120
140
160
180
200
Argentina Australia Brazil China France India USA
PS (US$) PS (US$) complete liberalization
PS (US$) double protection
Compare Brazil liberalization To France
liberalization
Double protection has greater
effect than elimination

33. Results from the Experiments: 2050 Cereal
Trade Flow Changes
Page 33
-200
-150
-100
-50
0
50
100
150
200
South Asia East Asia and
the Pacific
Europe and
Central Asia
Latin America
and the
Caribbean
Middle East
and North
Africa
Sub-Saharan
Africa
Developed
Countries
Developing
Countries
NCAR NCAR-IncLib NCAR-IncPro CSIRO CSIRO-IncLib CSIRO-IncPro
Millionmt

34. Results from the Experiments: 2050 Child
Malnutrition Changes
Page 34
Baseline protection
Increased Protection
No Protection
Baseline protection
Increased Protection
No Protection
Baseline
protection
Increased
Protection
No
Protection
110
115
120
125
130
135
140
Developing Countries
Millionmalnourishedchildren
No Climate Change NCAR
CSIRO

35. Conclusions
 Climate change will have negative impacts on
agricultural production and food security in developing
countries
 Agriculture is critical for
• Employment
• Economic development and
• Food security
 Argues for significant expenditures to reduce the
adverse impacts of climate change
 Reduced agricultural protection (border and domestic)
helps some.
Page 35

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Thank you