AGRICULTURE & RURAL DEVELOPMENT NOTES 34065 EXPLORING ADAPTATIONTO CLIMATE CHANGE IN AGRICULTURE: THE POTENTIAL OF CROSS-SECTIONAL ANALYSIS ISSUE 1 JULY 2005 BY ROBERT MENDELSOHN AND ARIEL DINAR Scientists are confident of a link between greenhouse gas Two lines of policy interventions are being considered to emissions, the increasing concentration of those gases in the address climate change: (1) mitigation or abatement to reduce atmosphere, and climate change. However, the final impacts the underlying cause of climate change, and (2) adaptation to from climate change are difficult to estimate, since we have no reduce the resulting damages from climate change. Both policy direct experience with new climates. Past climate change has issues are being actively debated at international, national, been small and slow, making the impacts hard to discern. and local forums. Mitigation, by reducing the emissions of Further, technological changes have obscured signals from greenhouse gases into the atmosphere, can reduce concen- historic climate changes. Despite these difficulties, the impact trations, and the resulting severity of climate change. literature has made many strides toward understanding and Adaptation can radically affect the impacts of climate change. quantifying climatic impacts. Farmers, policymakers, and Early researchers assumed that little adaptation would occur researchers know that most crops are highly sensitive to and, consequently, predicted major damages. However, climate.We also know that ecosystems will shift over space in research has shown that people and governments can adapt response to climate change, that energy costs will change, that to climate change. Farmers can change their crops and sea level will rise, and that entire water cycles will change.Yet, varieties. People can switch their energy systems and allocate the potential damages to some and benefits to others that water differently.Landowners can change the way they use land, these changes will cause remain difficult to determine. This for instance, by developing coastal zones differently. note argues that cross sectional evidence provides important Governments can have a role in stimulating adaptation as an insights to policy makers both about the size of the potential important policy response to climate change. If these adapta- impacts from climate change and about adaptation. Of course, tions occur, climate change may lead to much lower damages cross sectional evidence is not the only source of information and even benefits in some circumstances and locations. and policy makers should consider all available results. While the climate's relationship to ecosystems and to agricul- ture is apparent,researchers understand its interaction with rural poverty less clearly. The world notices extreme climate events--such as, hurricanes, floods, and prolonged droughts-- because they have dramatic impacts on the unfortunate people in their paths. For the poor, however, even small climatic changes can present an extreme burden--bringing hunger, disease, and even death. Inadequate information makes monitoring the impact of climate change on poor rural communities difficult. Yet, the preliminary studies of the rural poor suggest that they are clearly vulnerable to changes in climate through its effect on local agricultural productivity. Many of the rural poor live in marginal areas with poor climates for growing food. Given the importance of agriculture to the rural poor, climate is a major existing problem for many of these people. Climate change could seriously exacerbate this problem. Rural poverty is a fundamental concern for the World Bank. Land, water, and forests are essential natural resources that the poor around the world rely on for their livelihoods.The rural poor need to sustain the productivity of these resources, and 1 the World Bank can help by identifying what determines the future health of an economic sector and advise on policies that could mitigate foreseeable problems. The World Bank has undertaken several studies using cross sectional evidence to measure climate impacts, examining farm performance across a broad range of climates. Cross sectional analysis examines how farmers, households, and firms in one location with one climate perform compared to similar actors in another location with a different climate. By seeing how, for example, farm performance changes with climate across many areas, one can estimate the long-run sensitivity of farm performance to climate.The advantage of this approach is that it fully captures how farmers adapt to the climates in which they live. The technique measures the long run net impact of climate change, including the costs and benefits of adaptation, while accounting for other explanatory variables, such as soil types, supporting institutions, infrastructure, agricultural services, etc.The difficulty with this approach is that it requires good data sources that may not always be available, especially in developing countries. This note explains alternative sources of some of the needed data and their application in analysis of climatic change impact and adaptation. the availability of accessible groundwater. Economic factors such as proximity to markets, labor, and technology can also The cross sectional approach examines household behavior be very important. Finally, policy variables--such as trade across a climate (temperature or precipitation) gradient. By restrictions, subsidies, and taxes--may be critical because they observing how behavior changes as climate varies, the analysis might make one region profitable and another marginal. Not can discern long-run adaptations that households are likely to accounting for such variables may yield biased estimates of the make to climate change. One of the challenges of the impact of and adaptation to climate change, and this could approach is to separate climate effects from other phenomena lead to erroneous policy recommendations. that might differ across space.This may be especially important when conducting multinational studies where key policy and In "Cross Sectional Analyses of Climate Change Impacts" that economic variables might vary by country. is reported here, Mendelsohn and his co-authors examine whether using individual farm data presents a promising Challenges of Information Gathering approach for studying climate change. The study found that if the data is scattered across many climate zones, analyzing The first challenge to this approach is finding reliable climate individual data looks highly useful. Even in a country as small as measures across space and time. Climate is long-run weather Sri Lanka, researchers successfully measured the effect of (about 30 years). Although there are excellent weather climate on net revenues per hectare. Findings suggest that it is records in selected locations around the world (from weather more likely to capture farm-specific behavior by analyzing stations), these observations are often made in cities and individual farm data than by using district-level or general airports and are rarely distributed across farm or rural locations. census data.The Sri Lankan study illustrated the importance of Satellite records provide a new opportunity to measure precipitation in addition to temperature, which could indicate climate carefully in remote, rural locations. Many available that what climate change does to the monsoons may be satellite data now cover a period of 20-25 years (see Box 1). more important than the warming itself. A second challenge is to control for other physical, economic, Challenges to Data Collection and policy variables that may also vary across space. For example, it is important to measure how soils vary across the Although a country can collect a wealth of information landscape. Another important factor is access to irrigation through its census, this tool has its limitations. First, census data water, which depends on proximity to rivers and streams, or is not consistent across countries, which limits multinational 2 studies. Second, a census often lacks critical variables or does explain farm performance also explain why some rural not collect data with sufficient geographical detail. Countries regions have higher income per capita than others.The results must often collect additional detailed household and firm data demonstrate the importance of climate to rural livelihood. in order to understand climate impacts and adaptations. By collecting this additional information, researchers and policy- The study reported in this note suggests that mid to high makers can learn how farmers adapt to different climates and latitude countries could well benefit from the warming the outcomes of those coping mechanisms. For example, by expected in the next few decades. That same study also collecting detailed farm information across climate zones, one suggests that warming may have immediate deleterious can learn how climate affects net revenues per hectare. One impacts on developing countries that are mostly in the can also see how farmers have made long-term adjustments subtropical and tropical regions (low latitude countries). to climate change by planting different crops, changing planting Agriculture is a large portion of GDP in many of these and harvest dates, installing irrigation systems, and changing countries, and much of that is labor intensive. This type of livestock practices. agriculture appears to be especially sensitive to warming, due to the low level of technology available and the limited Weather stations provide very accurate measures of local adaptation capacity. Many low latitude countries have a large, weather, but they are not well dispersed across rural areas in low-performing agricultural sector and they are already on the the low latitudes. It is consequently useful to compare weather hot side of global temperatures.These countries are particularly station data against satellite data for studies of rural activities vulnerable to further warming. such as farming.The climate between weather stations must be inferred using sophisticated interpolation methods whereas Policy Implications the surface pattern of satellite climate measures is observed. Although the satellites have difficulty measuring some relevant Research on climate impacts has important policy implications phenomenon such as precipitation, they have substitute because it measures the likely benefits of slowing climate measures such as soil moisture. Analyzing these two sources change. Because reducing greenhouse gases is potentially very of information, the study found that satellite temperature data expensive, it is important to measure the consequences of does a superior job explaining farm performance than weather abatement policies. If analysis indicates that abatement delivers station data but that weather station precipitation data very large benefits, then it is worthwhile to engage in costly outperformed satellite measures of wetness. abatement. However, if analysis indicates that the benefits of slowing warming are small, only more modest abatement There are many ways to measure long-term weather including, efforts are warranted. Of course, with a difficult inter-temporal most obviously, the average over many years. However, another question of great importance is if variations in the weather BOX 1: from year to year also matter. If some regions have steady HOW CAN DEVELOPING COUNTRIES weather every year whereas others are subject to sharp GET AND USE SATELLITE DATA? variations in weather, will this affect how suitable the area is for farming? How critical is the climate variance? If future climate variance increases, will this lead to damages or benefits? The There are several sources of satellite data that can be used to analyze and analysis done to date shows that, depending upon the season, monitor climate. The studies reported in this note relied on U.S. Defense satellites average weather is critical but variance is also important. that fly over the poles in an orbit that sees each place on the earth in early High year-to-year climate variance during the growing season morning and early evening. The satellites provide complete coverage of the earth's surface in a repeated pattern that controls for time of day. A series of these satellites is generally harmful, but during the latent season, it can be have been observing the earth's weather since 1988 using microwaves. These satellites beneficial (e.g., by reducing pest population). can measure temperature and soil moisture consistently for every location across the planet. It is important to know whether climate has an important role National Oceanic Atmospheric Administration-NOAA provides its raw daily satellite in determining rural income. Many studies have revealed that data for free through its Website: http://www.nesdis.noaa.gov/datainfo.html and climate affects agricultural performance. Since agriculture is a www.saa.noaa.gov. primary source of income in rural areas, it follows that climate For a fee, several companies can interpret the raw data and generate more might explain variations in rural income.This was confirmed in valuable indices for local agricultural districts. One such company, Commodity the case of the U.S. and Brazil, where data on rural income Hedgers (www.commodityhedgers.com), provided the climate products used in the was available for analysis.The very same climate variables that Mendelsohn et al. study that is reported in this note. 3 problem such as greenhouse gases, there is a different desired farmers in the low latitudes will be harmed by warming in the strategy at each moment in time. In general, as the stock of near term, governments can provide alternatives, such as greenhouse gases in the atmosphere increases, the damages crops, technologies, management, and other employment associated with emissions are expected to rise. It is important opportunities that are more suitable for a warmer climate. not only to determine what abatement strategy is best at the moment, but also how that strategy should change over time. There may also be serious distributional consequences to warming.Although the agricultural sector in a country may A recent study indicates that damages from climate change well survive warming, marginal regions could become may be the highest for low latitude countries (e.g., infertile. Because rural areas are especially dependent Mendelsohn and Williams 2004). Low latitude countries are on agriculture, local climate impacts could be severe. expected to have higher damages because they are already Policymakers might want to develop strategies to help farmers very hot, they have a greater fraction of their economy in caught in these precarious situations. For example, they might climate sensitive sectors (especially agriculture), and they facilitate the development of alternative livelihoods, creating a have less resources and technology for adaptation. more diversified rural economy that can better withstand Unfortunately, low latitude countries are difficult to study climate change and weather shocks. Alternatively, they might because of the absence of complete information about them. want to encourage out-migration from areas that become One of the major problems facing global warming policy unsuitable for farming. is that the regions most sensitive to climate change may be the most poorly studied. Developing empirically-based The cross sectional studies discussed in this note can help estimates of the impact of climate change in low latitude policymakers prepare policy responses to climate change. regions is consequently a critical issue for policymakers. It is The research can help policy makers carefully match particularly important for the World Bank to take special solutions to each problem. Whether the issue is abatement, note of impacts in low latitude countries because of its adaptation, or the distribution of impacts, thoughtful policies commitment to the rural poor in these regions who may be can make a very large difference to the final outcome. especially vulnerable. Another important policy question concerns adaptation. Very little is known about how private entities (farmers, households, firms) in the low latitudes will adapt to climate change. It is expected that they will adapt in some way because it is in their self-interest; however, it is not clear to what extent poverty, lack of information, and cultural factors may hamper that adaptation. It is also not clear how quickly people can adapt, although one assumes that adaptation on this scale is not instantaneous. Can poor farmers in low latitude countries change as climate changes over decades? Selected Reading Further, there is an important role for governments to play in Kurukulasuriya, Pradeep and Shane Rosenthal (2003), Climate Change and Agriculture, A Review of Impacts and adaptation. Governments can disseminate successful adaptation Adaptations, Environment Department Papers Climate Change Series Paper No. 91, June,Washington DC:World Bank. strategies. Governments can organize adaptations that Mathur, Ajay, Ian Burton and Maarten van Aalst (Eds.) (2004), An Adaptation Mosaic, World Bank Global Climate are "public", that jointly involve many beneficiaries. Change Team, Final Draft, February, Washington DC: World Bank. For example, many governments support research and Ian Burton and Maarten van Aalst, Look Before you Leap-A Risk Management Approach for Incorporating Climate development (R&D) to develop new crops and varieties. Change Adaptation in World Bank Operations. Global Climate Change Team, DRFAT February 2004, Washington These efforts have already shortened rotations and made DC: World Bank. crops suitable for new areas and climates. Although R&D has Mendelsohn, Robert, Ariel Dinar, Alan Basist, Pradeep Kurukulasuriya, Mohammed Ajwad, Felix Kogan, Claude Williams (2004), Cross Sectional Analyses of Climate Change Impacts, Policy Research Working Paper number 3550 not specifically targeted climate change, some R&D advances (http://econ.worldbank.org/view.php?type=5&id=36687). have already helped farmers cope with difficult climates. Mendelsohn, R. and L. Williams. (2004) "Dynamic Forecasts of Market Impacts of Global Warming" Integrated Irrigation projects that bring water to new areas are one Assessment (forthcoming). such example of public adaptation. New varieties of soybeans, for example, have helped Brazilian farmers expand into Robert Mendelsohn is the Edwin Weyerhaeuser Davis Professor, Professor of Economics, and Professor in the School previously unusable regions. Governments could provide a of Management at Yale University. safety net, especially for the poor. For example, if small Ariel Dinar is a Lead Economist in the Agriculture and Rural Development Department at the World Bank. 1818 H Street, NW Washington, DC 20433 USA www.worldbank.org/rural