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• Ricardian model is used to

establish the relationships between


climate and agricultural land value
• Spatial analogue approach,use of
models to represent and simulate
farmers’ endogenous response to
climate change. Utilizes the
process-based information
embodied in a biophysical model to
simulate the effects of climate and
CO2. 1
RICARDIAN MODEL
• Used to establish the relationships
between climate and agricultural
land value  relationships,
estimates of the effects on
agriculture of possible climate
change scenarios

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• Based on comparative static estimates
of how equilibrium land rents change
when a one-time instantaneous CC is
introduced  the impact of climatic,
socio-economic, and geophysical
variables on land values and farm
revenues

• It assumes that farmers take climate as
given then decide what to grow, with
what inputs, and in what way, or
decide to convert land to other uses
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• Mendelsohn, Nordhaus, and Shaw
(MNS 1994), predicted a gain to
agriculture from a carbon doubling
scenario of $1–2 billion US per year,
approximately 1% of agricultural
GDP.

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• CC has impacts on aggregate land
values affecting the total amount of
land farmed and the value per
hectare. Land value shifts with
changes in the environmental
variables  measure the impacts
through changes in the present
value of net revenue.

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Some Assumptions
• Land used for a given purpose is best used for that
purpose
• Both product and input markets function perfectly,
• CC is instantaneous and the economy adjusts to
these changes completely,
• Input and output prices are unchanged and firms
adjust their market inputs and outputs to adapt
as the environment changes,
• Other changes likely to occur under climate change,
such as sea level rise, species loss, or any effect
other than increased temperature and
precipitation are not considered,
• Only some climate variability is captured because
variability changes are related to average 6

• Some other assumptions about
adaptation, including changes in
cultivars, planting and harvest
dates, crop mix, and use of
irrigation (Kaiser, 1999).

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• Reinsborough (2003)

• Under the assumptions of
simultaneous change, full
adaptation, and no adjustment
costs, the model estimates an
upper bound on benefits  perfect
adjustment to CC and no costs
other than change in land value 
‘best case’ scenario resulting out of
a given climate change.
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• To estimate the effects of CC on
agriculture  to estimate the
relationships between climate and
agriculture. Regressions with farm
value as the dependent variable,
White’s heteroscedasticity
consistent estimator Reinsborough
(2003)

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• The socio-economic variables to reflect the
potential of the land for alternate uses.

• Migration reflects growing areas, or areas in
decline

• For environmental variables, latitude shows
the northerness of an area, as well as a
proxy for the length of day. Elevation
proxies the diurnal cycle. Solar radiation.
The clay and sand content 0as proxies for
soil quality. These variables are unlikely to
change with CC

• Farmland and farm-revenue weighting
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Spatial Analog Approach

• Represents adaptation as an
endogenous, non-marginal
economic response to climate
change; and it provides the
capability to represent the spatial
variability in bio-physical and
economic conditions that interact
with adaptive responses.

• Antle, Capalbo, Elliot and Paustian11
• Measures of vulnerability depend on
interactions between CC, CO2 level,
adaptation, and economic
conditions.

• Approach is based on the use of a
statistically representative sample
of data of individual decision units,
and coupled with spatially explicit
ecosystem and economic models. 12
• With a statistically representative
sample of data, models can be
simulated to represent the impacts on
economic decision units.

• Results can be used to represent
impacts on the population in
statistical terms  to provide
information about changes in
vulnerability within heterogeneous
populations – information that is not
available from analysis based on
‘representative’ individual farm data
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• Production systems (as adaptation)
– Grass
– Winter, wheat, continuous
– Winter, wheat, fallow
– Spring, wheat, continuous
– Spring, wheat and barley, continuous
– Spring, wheat and barley, fallow

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• Limitation of the econometric-
process approach (and other
disaggregate models): do not
simulate market equilibria. With
disaggregate models, alternative
price equilibria can studied using
sensitivity analysis

• Disaggregate analysis can be linked


to market models, but at the cost of
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FASOM
• Derives projections of agriculture and
forest sector production, prices, and
welfare given a climate change
scenario
• Finds the market equilibrium for each
period in a multiperiod time horizon,
using non linear mathematical
programming methods that maximize
a measure of economic welfare in the
two sectors.
• Constructs an intertemporally optimal
production/consumption pattern and
associated prices for a 100-year 18
projection.
• Adaptation  changes in:
– a) land use choice,
– b) timber management intensity;
– c) hardwood/softwood species mix,
– d) timber growth and harvesting
patterns within and between regions,
– e) rotation ages, and
– f) consumers’ use of wood versus other
products (i.e., substitution of non-wood
product in consumption based on
relative price)
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