Economic valuation of climate change-induced biodiversity impacts on agriculture: results from a macro-economic application to the Mediterranean basin

Abstract

It is clear that climate change involves changes in temperature and precipitation and, therefore, directly affects land productivity. However, this is not the only channel for climatic change to affect agro-systems. Biodiversity is also subject to climatic change. The present paper illustrates a unique attempt to economically assess the potential effects of climate change induced impacts of biodiversity on the agricultural sector in terms of changes in land productivity, changes in agricultural output and, ultimately, changes in national GDPs. Economic valuation shows that climate change induced impacts on biodiversity cause significant changes in GDP. However, the intensity of these changes varies across the economies under consideration. Some countries, and respective economies, show to be less resilient than others and, most of the time, the welfare changes involved clearly signal the presence of winners and losers. For example, the majority of non-EU Mediterranean economies are subject to a negative impact in their national GDP due to climate change-induced impacts on biodiversity that will be hampering the negative effect of climatic conditions on agro-ecosystems. These results reiterate the importance of welfare analyses of climate change-caused impacts on biodiversity that focus on the redistributive aspects involved with these impacts.

Keywords:

• autonomous adaptation
• micro-econometric modelling
• computable general equilibrium modelling
• biodiversity indicator
• land productivity
• human welfare

JEL codes:

• C68
• Q15
• Q54
• Q57

Acknowledgements

The authors thank M. Bindi and R. Ferrise, Department of Agronomy and Land Management, University of Florence, for their research work in projecting wheat productivity for Italy under a scenario of climate change, and L. Onofri, Department of Economics, University of Venice, for her input and discussions on micro-econometric modelling. The authors also thank S. Silvestri and E. Lugato for their research assistance and data management and Barbara Racah for the English proof reading of the manuscript. In addition, the authors thank the reviewers for their comments and suggestions on the previous version of this manuscript.

Notes

1. In Fourth IPCC Assessment Report (IPCC, 2007), the storylines are defined as follows: A1F1 describes a future world of very rapid economic growth, global population that peaks in mid-century and declines thereafter, and the rapid introduction of new and more efficient fossil-intensive technologies; B1 is based on similar global population growth path, but with rapid change in economic structures and the introduction of clean and resource efficient technologies; A2 describes a very heterogeneous world with continuously increasing population and slower economic development than other storylines; B2 describes the world with continuously increasing global population, oriented towards environmental protection and social equity.

2. Food includes crops destined for human consumption, such as sugar crops, nuts, cereals, fruits, oils crops, pulses, root and tubers, and vegetables. ‘Non-food’ includes provisioning services non-destined for human consumption such as latex, pharmaceuticals and agro-chemical products. On the other hand, bio-energy includes crops for energy production such as oil crop for biodiesel and cereals for ethanol.

3. The same ratio between grassland and cropland indicator has been used for the economic analysis of the impacts of biodiversity on tourism flows (see Loureiro et al. 2012).

4. Estimation results obtained with Stata.

5. See Wing (2011) for a recent review of CGE models.

6. This regional disaggregation of the world economies was constructed to serve CIRCE project's focus on Mediterranean economies.

7. Since wheat is the most cultivated crop in Europe, it is considered the most representative of net primary production variation and is, therefore, an important crop to be studied in terms of CGE modelling and it is the consequences of changing climatic parameters (such as temperature, and precipitation).

Additional information

Funding

The authors acknowledge the financial support of the European Union Sixth Framework Programme under the project ‘Climate Change and Impact Research: the Mediterranean Environment – CIRCE’, contract no. 036961, and the European Investment Bank, University Research Sponsorship Programme.