Problemas Específicos

Climate change may alter the frequency and intensity of weather events which will likely challenge human and natural systems more than normal variability in weather and climate.

Agriculture is considered one of the most vulnerable industries to climate change. Quantifying the economic impact of climate change on agriculture can help to reduce the environmental damages and maintain the profitability of agricultural systems. The main goal of this study is to estimate the economic impact of change in climate normals on agriculture in the Canadian prairies and to capture the impact of weather conditions on the viability of production systems along with the impact of market price effects by predicting the economic impact of climate change.

The main contribution of this study to the literature is the inclusion of the grain market prices in the Ricardian approach. Assuming fixed market prices within a Ricardian model raises two potential problems: misspecification in the empirical estimation of the model and bias in measuring climate change impacts. These problems were demonstrated and tested empirically.

An Incremental F-test confirmed that market prices for canola and wheat are jointly significant and have an impact on land value. Also, empirical results show that the economic impact of long run climate change on prairie agriculture when including changes in commodity prices can result in significantly larger land values as compared to simulations without these changes in prices.

The empirical results of direct climate impacts with no market price effects also are consistent with the findings of research using a traditional Ricardian model.

The most important finding of this study is that climate change is beneficial for most regions of the Canadian prairies except for some southern regions of Alberta. Comparing the results from direct impacts of climate and price changes on land value with the results from indirect impacts through arae response estimation reveals that direct impacts of climate and price change increase in farmland value, on average, by 31% while the indirect impacts from different scenarios increase simulated land value up to 51%. Moreover, both direct and indirect impacts have projected a similar pattern for moderate, strong and extreme scenarios. However, the results from indirect impacts for strong and extreme drives up land value while for the moderate scenario a temperate increase in farmland value has been projected. The results should be used with caution due to the fact that the model is simulating outside the range of historical climate means and summarizing a very long term effect from past and present information.

The results from area response function for wheat and canola have been utilized to simulate land values for the future climate and price conditions. When changes in the planted area occur (as an adaptation strategy), the forecasted farmland values demonstrate a large increase (greater than 20%) in comparison with the situation that adaptation is not included in the analysis. In fact, area response to climate and price change itself plays a very vital role in the model. In the extreme case, the increase in land value due to change in the planted area is more than 51%, which is the largest increase in land value with respect to other scenarios. The results in this case signify that adaptation to the new climate and price conditions in the future might keep or increase the productivity of prairie farm, which will result in profitability gains.

The results of this study are consistent with the general understanding of the importance of precipitation for agriculture of prairies. Marginal impacts of the evapo-transpiration proxy, rainfall, and July relative humidity indicated direct and positive relationship among agricultural land values and water related climate variables. It represents that agriculture in the Prairies is very vulnerable to the water scarcity and land use and land value strongly depend on the precipitation. Also, rainfall is the most elastic climate variable influencing land value positively in three scenarios. It reveals that a 1% increase in rainfall would cause land value to increase, on average, by more than 6% in all three climate change scenarios. However, under different climate change scenarios, with warmer and drier conditions, there may be less water available for irrigation while demand for irrigation might be increased in the southern Alberta. In this case, climate change will negatively affect the farmland value in this region.

Marginal temperature value for July reveals that increased July temperature reduces land value. In fact, a 1˚C increase in July temperature decreases farmland value by 219 CAD per hectare on average. An explanation for this, at least in the agriculture dominated CSDs, is that more than normal warming condition along with more water evaporation which takes available water out of reach of plants can cause heat stress on crops and reduce the productivity of the production. In the current study, the value of farmland seems to be more sensitive to change in rainfall and July temperature which indicates that these two seasonal weather events have significant impacts on the profitability of prairie agriculture.

The results from base and three climate change scenarios in this study reveal that climate change may not impose a significant economic impact on prairie agriculture if farmers employ appropriate adaptation strategies. The results of this study indicate that, given the assumptions of the Ricardian approach, climate change may provide an opportunity for agricultural producers in

the prairies to gain from future price and environmental change. To achieve this goal, policies to address climate change concerns need to put a greater emphasis on dealing with water deficit and scarcity. Policies that facilitate access to irrigation and crop choices will help farmers to adapt to climate change and take the climate change opportunity.

The results of the current analysis may lead to several policy implications. First of all, as within this study an important component of adaptation is a switch in crop production towards canola, this should be carefully monitored by policy makers to prevent any instability in economic and environmental conditions. Canada is currently an important exporter of wheat. A decrease in wheat area would misplace Canada’s place in international wheat trade. This might have crucial political reflections. Therefore, policy makers should be aware that climate change may induce substantial changes in prairie agriculture. They should be ready for introducing and supporting any adaptation strategy required for adjusting the impacts, minimizing the social costs, and maximizing the social benefits of such changes. For example, if the policy makers are severe to keep Canada’s place in international wheat markets for any price, then they should try to make it more profitable for farmers to cultivate wheat. To aim at this, one adaptation strategy could be introducing new wheat varieties. This discussion needs to be expanded by including the effects of relative price of wheat to canola and relative global demand of wheat and canola, which is out of the scope of this study.

Another important implication for policy development would be to support the development and introduction of new crop varieties by encouraging R&D efforts. Policy makers may introduce an incentive for breeding and genetic engineering practices to work on drought tolerant varieties of currently cultivated crops. Breeding and genetic engineering practices can introduce new varieties of wheat and canola, which are more drought tolerant than current

varieties. Since a major part of crop research, especially in the case of wheat, which in Canada is still public, government may have a key role to a resources towards research and development of drought tolerant varieties. Even in the case of private crop research institutes, government may still be able to encourage them to put more effort on R&D of drought tolerant varieties. Policy makers also may introduce an incentive for farmers to switch from the current varieties to the new varieties or other crops to maintain their income.

According to the climate change forecasts the Canadian prairies are going to be warmer and drier. As such, irrigation may be considered increasingly important to maintain the profitability of prairie agriculture. To ensure adaptation policy may need to focus on encouraging and providing more efficient irrigation methods and equipments for farmers who are currently practicing water-fed cultivation. In addition, policy makers should be aware that in future decades, irrigation might be necessary for those farms that are currently under rain-fed cultivation. Confounding this is the fact that while additional water will be required by crops there may be less surface water available. Therefore, analyzing the benefits and costs of large scale irrigation development and improving the water use efficiency of irrigation technology should be considered by policy makers as well as researchers.