Agriculture is essentially a man-made adjunct to natural ecosystems and is weather and climate dependent. It is also a significant source of anthropogenic emissions of greenhouse gases, which are coming under increasing scrutiny as countries seek to meet binding mitigation targets. New challenges are emerging in terms of how we interpret the impacts of warming, how farming systems adapt or are adapted to these changes, and how near-term emissions mitigation requirements can take place in ways that are consistent with longer-term adaptation plans. These increasingly urgent challenges coincide with a process of sector reform in many OECD countries, which is focussed on ways to rebalance the economic, social and environmental objectives for the sector. This process offers a window of opportunity for accommodating mitigation and adaptation options within new agri-environmental arrangements. But all these reforms will affect and be affected by a global agricultural trading system, which is increasingly being required to deliver on ancillary policy objectives (e.g. energy and food security, and poverty alleviation), but which itself is vulnerable to climate shocks.

In this report we consider how recent developments in the international literature on climate change inform the three elements of impacts, adaptation and mitigation. The aim is to suggest how policy can be informed by rudimentary considerations of effectiveness and efficiency. We also suggest that there are equity implications from policy responses, but we do not spend time mapping out analytical methods to evaluate these impacts. The analysis presented highlights how our understanding of impacts and the economic appraisal of adaptation and mitigation are complicated by the fundamental biological complexity that distinguishes agriculture from other sectors characterised by fewer firms, and common, relatively well-understood adaptation options and abatement technologies. In comparison, agriculture and land-use are more atomistic, heterogeneous and regionally diverse. These factors prevent generalisation about impact storylines and obviate generic messages about the effectiveness of adaptation and mitigation measures implemented in different systems. This complexity begs a number of relevant research questions that can inform robust economic analysis.

Climate factors constitute some of the main constraints on crop and livestock production and till recently have been assumed as exogenous and unchanging. While farming has a history of responding to changing conditions, whether they are economic, social, political or climate-related, the potential increase in frequency and intensity of extreme climatic events, and other challenges posed by climate change, now gives rise to a need to re-appraise the adaptive capacity of agricultural systems.

While governments throughout the world are assessing the diverse threats posed by climate change, the impacts on agriculture have been identified as potentially the most serious in terms of numbers of people affected and the severity of impacts on those least able to cope. Reflecting this priority, the ultimate objective of the UN Framework Convention on Climate Change (UNFCCC) is to prevent dangerous anthropogenic interference with the climate system. Agriculture is identified within the Convention as particularly vulnerable and particularly critical in terms of global impacts. International action should take place under the Convention "within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner" (UNFCCC, 1992, Article 2, our italics). Hence, maintaining agricultural production is central to the policy objectives of international climate change action. Given the diversity and the likely uneven distribution of impacts of climate change, potential agricultural impacts are also high on the agenda of policy-makers within national governments.

Current scientific evidence points to significant impacts of climate change in the future as well as some observed early signals and impacts of climate changes in the present day. The policy options on climate change at a global scale are to reduce emissions so as to avoid "dangerous anthropogenic interference" and to adapt to impacts as and when they occur. Given that impacts are already occurring, and that expected future impacts have economic costs in the present day (through anticipatory behaviour), adaptation is clearly necessary and inevitable. Projections of the magnitude of changes by the IPCC (IPCC, 2007b) suggest that given past emissions and present commitments to greenhouse gas emissions, global mean temperature are likely to rise by approximately 1.4-5.8°C by 2100. Such changes will have direct impacts on crop yields for example through heat stress, and indirect impacts through associated precipitation changes and through related enhanced atmospheric CO2 (the CO2 fertilization effect). The impacts on social risk and production variability are much more complex. The role of economic incentives in both adaptation to climate impacts, and in emission regulation and minimisation, are therefore critical to this important environmental issue.

This report first describes current knowledge on the impacts of climate change on agriculture and related resources. It then examines knowledge and limits of the knowledge on the mechanisms that translate climate change into potentially serious impacts on food production, water stress, and ultimately food security. This discussion is used to consider the nature and implications of adaptive response options that are either autonomous (private) or planned. The report then considers the question of emissions mitigation across the sector and associated questions raised by the need for agriculture to play a part in mitigation obligations. In the case of both adaptation and mitigation, policy responses need to be informed by effectiveness and efficiency considerations.

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