Climate Change on Agriculture in 2050: A CGE Approach

Agriculture plays a very critical role in terms of global food security and provides livelihood to over 30 percent of the world population. However, agricultural activities and related firm production processes heavily rely on the prevailing climatic conditions to produce. This study investigates the economic impact of climate change on agriculture in 2050. We employ the multi-sector multi-region computable general equilibrium (CGE) based approach. Using the latest GTAP Version 10 database (whose base year is 2014), we project the global economy to 2050 relative to 2014. The main interests of this study are findings concerning the role of economic players adaptation response to climate change, the potential regional impacts, and the possible changes in production quantities and market prices. Two simulations are implemented: a baseline growth path simulation (scenario) that does not account for climate change effects and a counterfactual policy simulation accounting for the impacts that accrue due to climate change. Simulation results reveal that climate change will make China's GDP grow by -0.21%, Brunei’s by -0.7%, Malaysia’s by -0.06 %, Singapore’s by -0.05%, Korea’s by -0.03%, India’s by -0.1% and rest of the world by -0.2 % relative to RCP 2.6 scenario. All other regions will have positive GDP growth. Welfare in the USA is projected to decline by 25.85 US$ billion, in Canada by 20.85 US$ billion, in Chile by 4.64 US$ billion, in New Zealand by 4.43 US$ billion, and in Japan by 0.66 US$ billion. Furthermore, the trade balance is found to decline in ten regions with the USA’s decreasing by 7.29 US$ billion and that of Korea by 0.30US$ billion. The study concludes that climate change adaptation and mitigation policies should be specific to every stage in the food value chain (FVC) with more emphasis on production and market integration segments.