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The climate challenge for agriculture and the value of climate services: Application to coffee-farming in Peru

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  • Lechthaler, Filippo
  • Vinogradova, Alexandra

Abstract

The use of climate information in economic activities, typically provided by climate services, may serve as a possible adaptation strategy to changing climate conditions. The present paper analyzes the value of climate services which are aimed at improving agricultural productivity through a reduction in weather-associated risks. The first part provides a theoretical foundation for estimating the value of climate services based on a stochastic life-cycle model of a rural household which faces uncertainty with respect to the timing and the size of an adverse weather shock. We subsequently calibrate the model to match the environment of coffee producers in the Cusco region of Peru and provide a range of estimates for the value of climate services for a single average household, the region, and the country as a whole. In the second part of the paper we use empirical data to corroborate the numerical estimates. We assess the value of climate services in the agricultural sector in Cusco based on a choice experiment approach. Data are analyzed using a standard as well as a random parameter logit model allowing for preference heterogeneity. Farmers show a significant willingness-to-pay for enhanced climate services which is particularly related to the service accuracy and geographic resolution. On average, the yearly value of a climate service in the coffee sector is found to be $21 per ha and $8.2 million for Peru as a whole.

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  • Lechthaler, Filippo & Vinogradova, Alexandra, 2017. "The climate challenge for agriculture and the value of climate services: Application to coffee-farming in Peru," European Economic Review, Elsevier, vol. 99(C), pages 5-30.
    • Handle: RePEc:eee:eecrev:v:99:y:2017:i:c:p:5-30
    DOI: 10.1016/j.euroecorev.2017.06.006
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    2. Christophe Gouel, 2020. "The Value of Public Information in Storable Commodity Markets: Application to the Soybean Market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 846-865, May.
    3. Alexandra Brausmann & Moritz Flubacher & Filippo Lechthaler, 2019. "Valuing meteorological services in resource-constrained settings: Application to smallholder farmers in the Peruvian Altiplano," CER-ETH Economics working paper series 19/324, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. Yotsaphat Kittichotsatsawat & Varattaya Jangkrajarng & Korrakot Yaibuathet Tippayawong, 2021. "Enhancing Coffee Supply Chain towards Sustainable Growth with Big Data and Modern Agricultural Technologies," Sustainability, MDPI, vol. 13(8), pages 1-20, April.
    5. Salmai Qari & Tobias Börger & Tim Lohse & Jürgen Meyerhoff, 2023. "The Value of National Defense: Assessing Public Preferences for Defense Policy Options," CESifo Working Paper Series 10872, CESifo.
    6. Sylvain Caurla & Antonello Lobianco, 2020. "Estimating climate service value in forestry : The case of climate information on drought for maritime pine in Southwestern France," Post-Print hal-03639335, HAL.
    7. Sylvain Caurla & Antonello Lobianco, 2020. "Estimating climate service value in forestry : The case of climate information on drought for maritime pine in Southwestern France," Post-Print hal-02617889, HAL.
    8. Cai, Jianhu & Hu, Xiaoqing & Jiang, Feiying & Zhou, Qing & Zhang, Xiaoyang & Xuan, Liyuan, 2019. "Optimal input quantity decisions considering commitment order contracts under yield uncertainty," International Journal of Production Economics, Elsevier, vol. 216(C), pages 398-412.

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    More about this item

    Keywords

    Agriculture; Choice experiment; Coffee farming; Coffee rust; Climate change adaptation; Uncertainty;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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