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SEI Climate Economics State of Art 2011

SEI Climate Economics State of Art 2011

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A comprehensive assessment of climate impacts on U.S. agriculture, from the U.S. Climate Change
Science Program, projects the effects on major crops of the next 30 years of climate change – interpreted
as the combination of a 1.2o

C temperature increase and an increase in atmospheric CO2 from 380 to 440
ppm (Hatfield et al. 2008). It concludes that the benefits of CO2 fertilization and the damages from rising
temperatures will roughly offset each other in that time frame, resulting in only small changes in yields.
Specifically, it projects yield gains (percentage changes in parentheses after each crop) in soybeans (+9.9
Midwest, +3.9 South), cotton (+3.5), and peanuts (+1.3); roughly no change in wheat (+0.1); and yield
losses in dry beans (-2.5), maize (-3.0), rice (-5.6), and sorghum (-8.4). It anticipates that the outlook
beyond 30 years will be less favorable, because adverse temperature effects will worsen while CO2
fertilization benefits will diminish. The study also comments on the relative lack of research on climate
impacts on livestock, which accounts for about half the value of U.S. agricultural output. And it notes that
CO2 fertilization appears to promote greater growth in weeds than in cash crops and that the widely used
herbicide glyphosate (Roundup) is less effective against weeds at higher CO2 concentrations. Climate
effects on weeds are not included in the study’s estimates of changes in crop yields (or in most research
on yields).

As an alternative to studies of individual crops, some economists have tried to estimate the aggregate
impacts of climate change on agriculture as a whole. One common approach, hedonic, or “Ricardian,”
analysis takes the value of farmland as an indicator of agricultural productivity and correlates it with
climate variables. The name is inspired by David Ricardo’s argument that the value of agricultural land
depended on its fertility. Here, as with carbon fertilization, the conclusions of studies in the 1990s were
more optimistic than is newer research about the benefits of near-term warming.50

In a worldwide assessment of global warming and agriculture, William Cline projects that by the 2080s, a
business-as-usual climate scenario (A2) would reduce world agricultural output by 16 percent without
carbon fertilization or by 3 percent with carbon fertilization effects (Cline 2007).51

Cline finds that the

losses from climate change will be disproportionately concentrated in developing countries; for the

50

For reviews of earlier studies in this area, see Cline (2007) and Schlenker et al. (2005).

51

Cline’s (2007) results are the average of six A2 scenarios, with a mean climate sensitivity of 3.3o

C.

CLIMATE ECONOMICS: THE STATE OF THE ART

62

United States, he projects an agricultural output loss of 6 percent without carbon fertilization or a gain of
8 percent with carbon fertilization.

Two major studies of U.S. agriculture have reached somewhat different conclusions. Deschênes and
Greenstone (2007) analyze county-level farm profits per acre52

as a function of temperature, precipitation,
and soil quality. Their model assumes quadratic relationships with temperature and precipitation. They
estimate that by the end of the century, climate change will cause a 4 percent increase in agricultural
profits nationwide, with considerable diversity among states; California suffers a 15 percent loss in farm
profits in this model. A subsequent study of California, however, uses a similar model to project climate-
related increases in farm profits for the state, with faster climate change (A2 versus B1) causing larger
profits (Costello, Deschênes, et al. 2009).

Schlenker et al. (2006) analyze farmland values per acre for agricultural counties east of the 100th
meridian.53

They include similar explanatory variables and distinguish between two measures of
temperature: growing season degree days54

in the range of 8o

to 32o

C (a range in which warmth is

beneficial to many crops) and growing season degree days above 34o

C (temperatures that are harmful to
almost all crops). By the end of the century, assuming no change in growing locations, Schlenker et al.
project average decreases in farmland value due to climate change ranging from 27 percent under the B1
climate scenario to 69 percent under the A1FI scenario. All the climate variables are significant, but more
than 90 percent of the losses in every scenario are attributable to the increase in degree days above 34o

C.

A subsequent study of agriculture in California, the most important agricultural area west of the 100th
meridian, found no significant correlation of farmland values and temperature or precipitation but a strong
relationship with irrigation water per acre (Schlenker et al. 2007).

The differences between the studies of U.S. agriculture could reflect simply the differences in
specification; there is no measure of extreme temperatures in the Deschênes and Greenstone (2007)
analysis that corresponds to the all-important variable, degree days above 34o

C, in the Schlenker et al.

study. In addition, the latter research group has circulated a technical critique of the Deschênes and
Greenstone analysis, alleging that there are significant gaps and errors in its data set and analytical
problems in its use of the data (Fisher et al. 2010). According to one of the authors of the critique, it has
been accepted for publication in the American Economic Review, and the reply by Deschênes and
Greenstone acknowledges the errors.55

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