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A Comparative Study of Risk Management in Agriculture under Climate Change

Author

Listed:
  • Jesús Antón

    (OECD)

  • Shingo Kimura

    (OECD)

  • Jussi Lankoski

    (OECD)

  • Andrea Cattaneo

Abstract

Climate change affects the mean and variability of weather conditions and the frequency of extreme events, which to a great extent determines the variability of production and yields. This paper reviews the scientific literature on the impacts of climate change on yield variance and investigates their implications for the demand of crop insurance and effectiveness of different farm strategies and policy measures using crop farm data in Australia, Canada and Spain. A microeconomic farm level model is calibrated to different types of farms and used to simulate the responses and impacts of four policy measures: ex post disaster payments and three types of crop insurance (individual yields, area-based yield and weather index). The strong uncertainties about climate change are captured in a set of seven scenarios covering different assumptions about the scope of climate change (no change, marginal change, and high occurrence of extreme events), and farmers’ adaptation response (no adaptation, diversification, and structural adaptation). Policy decision making under these uncertainties is analysed using a standard Bayesian probabilistic approach, but also using other criteria that look for robust second best choices (MaxiMin and Satisficing criteria).

Suggested Citation

  • Jesús Antón & Shingo Kimura & Jussi Lankoski & Andrea Cattaneo, 2012. "A Comparative Study of Risk Management in Agriculture under Climate Change," OECD Food, Agriculture and Fisheries Papers 58, OECD Publishing.
    • Handle: RePEc:oec:agraaa:58-en
    DOI: 10.1787/5k94d6fx5bd8-en
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    Citations

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    Cited by:

    1. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2021. "Hedging Effectiveness of Commodity Futures Contracts to Minimize Price Risk: Empirical Evidence from the Italian Field Crop Sector," Risks, MDPI, vol. 9(12), pages 1-14, December.
    2. Chemeris, Anna & Liu, Yong & Ker, Alan P., 2022. "Insurance subsidies, climate change, and innovation: Implications for crop yield resiliency," Food Policy, Elsevier, vol. 108(C).
    3. Ihtisham ul Haq & Dilawar Khan & Hassan Taj & Piratdin Allayarov & Azeem Abbas & Muhammad Khalid & Muhammad Awais, 2021. "Agricultural Exports, Financial Openness and Ecological Footprints: An Empirical Analysis for Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 256-261.
    4. repec:fpr:export:1340 is not listed on IDEAS
    5. Carla Marchant Santiago & Paulina Rodríguez Díaz & Luis Morales-Salinas & Liliana Paz Betancourt & Luis Ortega Fernández, 2021. "Practices and Strategies for Adaptation to Climate Variability in Family Farming. An Analysis of Cases of Rural Communities in the Andes Mountains of Colombia and Chile," Agriculture, MDPI, vol. 11(11), pages 1-22, November.
    6. Lanlan Li & Zhengqiao Liu & Jing-Yi Chen & Yang-Che Wu & Hong Li, 2022. "Enhanced Agriculture Insurance with Climate Forecast," Sustainability, MDPI, vol. 14(17), pages 1-16, August.
    7. Thornton, Philip K. & Lipper, Leslie, 2014. "How does climate change alter agricultural strategies to support food security?:," IFPRI discussion papers 1340, International Food Policy Research Institute (IFPRI).
    8. Kieran M. Findlater & Terre Satterfield & Milind Kandlikar & Simon D. Donner, 2018. "Six languages for a risky climate: how farmers react to weather and climate change," Climatic Change, Springer, vol. 148(4), pages 451-465, June.

    More about this item

    Keywords

    adaptation; climate change; Crop insurance; second best policies; uncertainty;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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