CEU Agricultural economics Masters Course

1. EU rural development
Developing country rural development
Jorge Nunez-Ferrer
CEU
Master course Economics
Climate change and
agriculture

2. Subjects
How are they interlinked?
Climate
change
Mitigation
Biofuels
Farm
practices
Adaptation
Insurance
Water
productivity

3. CLIMATE CHANGE
Impacts of climate change

4. Actions to reduce impacts of climate change on the ground:
Autonomous adaptation
Planned Adaptation:
• Anticipatory: Crop change, insurance
• Reactive: Fire brigades, emergency assistance
MITIGATION: Actions to reduce emissions of GHG into the atmosphere
BASICS
Greenhouse gases GHG are increasing the MEAN temperature in the
planet, but the effects locally are different.
There are different GHG: Most important - C02 & methane
The science behind is clear: Was predicted by the US Environmental
Agency already in the 70s! All the rest is lobbying.
However, exact magnitude is unclear. Timeframes are unclear. Local
impacts are uncertain!

5. Global mean temperature likely to exceed 2C

7. BIG GAP – economic to insured losses
Source: Swiss RE, Sigma catastrophe database

9. CLIAMTE CHANGE FOR AGRICULTURE A BIG ISSUE
• FAO’s scenario analysis for year 2050:
• Increase of 74% of global food demand (up to
100% in LDC)
• Per capita arable land will drop of -20%.
• Arable land expansion: 5% producing 12% more
food. Yield increase and higher crop intensity are
expected to contribute to fill respectively 74% and
14% of the gap.
• Irrigated land will increase of 7%, while irrigation
use will be more intense and diffuse northern
countries. “MORE CROP PER DROP”

10. CLIMATE CHANGE IS COSTLY
• Climate change introduces changes at a pace
faster than life of infrastructures, etc.
• Climate change by now is unavoidable – only
magnitude in future is a variable we can
affect: This creates a big problem with time
preferences of action
• In some parts of the world changes are fast
and dramatic, in others much less.
• In creates considerable private and public
costs – including uncertainty costs

11. AGRICULTURE IS STRONGLY AFFECTED
• DROUGHTS
• FLOODS
• SALINISATION
• It affects the farm decision making, insurance
policies, public policy planning
• Creates the need for more efficient and
flexible management of resources
• Some win some lose, but balance for humans
is loss… and seems for existing biodiversity too

12. We are all affected…. But poorer much more
mainly because of…… AGRICULTURE

13. MAIN IMPACTS
• change average temperature in the seasons,
along with an expected rise in temperature
extremes;
• Change in precipitation patterns;
• Change in snow cover;
• Water systems – particularly river flows (flood
and drought risks) and groundwater levels;
• coastal regions – with sea level rise and flood
risks.

14. CLIMATE CHANGE
MITIGATION
Impacts of climate change

15. MITIGATON IN AGRICULTURE
• Waste matter for biogas
• First generation biofuels: Crop for biofuels
• Second generation biofuels: Waste bio matter
and crops for biofuels NOT COMPETING in
land with normal crops

16. Biogas - simple

17. BIG PROBLEM WITH PRESENT BIOFUELS
1. Deforestation to produce biofuels from plant
oils - palmoil
2. Substitution of food crops and land to
biofuels
First potentially increases GHG
Second increases food prices with little impact
on emissions.

18. Famous case: PALMOIL
• Clearing of rainforests for palmoil releases
greenhouse gas emissions (mainly Indonesia-
Malasia – 80% of palmoil) , because of process
and because forest is on peat bogs storing
large amounts of GHG, released by logging.
• Claims that palm-oil tress absorb same as
forests still debatable.
• Transport of oil?
• But in Africa it is positive: env. and social.

19. Emission savings of biofuels?
• Biofuels emit like fossil fuels, but plants grown
absorb CO2, while fossil fuels are 'stored' CO2
released to the atmosphere.
• Biofuel farming has emissions – like normal
farming
• Building refineries – transporting to refineries,
energy used in refineries (some powered by
COAL!) ->causes emissions
• May cause deforestation
• Impact may be negative

20. Corn, ethanol and food prices
• Land and grains originally produced for food
and feeding were diverted to ethanol
production fuelling world food prices
• The impacts on emissions are questionable
• Biofuels fuelled by targets and subsidies in EU
and US –objective often seek to support farm
incomes rather than emissions. Unintended
effects were poorly analysed.

21. Second generation on the way
• Biofuels from cellulose (waste materials from
farming) on the way, as well as others using
non agricultural land

22. Reducing emissions through farm practices….

23. Sources and solutions
• Animal feed composition (reduce methane)
• Manure management (methane emissions) (use of
anaerobic digesters)
• Fertilisers (Nitrous oxide) (Ammonia is being
created from natural gas)
• Land use practices – tillage releases carbon
sequestered in the soil (no till farming practices….
Oh, oh… these are GMOs)
• Use less fossil fuels for machinery etc., more
renewables…

24. CLIMATE CHANGE
ADAPTATION
Impacts of climate change

25. Biggest threat… DROUGHT
• Drought is one of the strongest threats for farmers

26. FARMERS NEED TO ADAPT
• Create insurance schemes
• Increase water efficiency
• Trade water
European farmers subsidy dependant and used to
them while crop insurance schemes are not well
developed. Also possible in developing countries.
There is a need of two level insurance, for
fluctuations and for catastrophes.
For fluctuations – normal insurance, for
catastrophes with public support

27. Water efficiency in agriculture – not like other areas
• Competition between uses of water rising
everywhere – population, industry, cities and
agriculture
• We need more biomass production with less
water – and better water use
• We need more WATER PRODUCTIVITY
• For industry easy: More production for same
water or same production for less water
• For agriculture it is NOT the same

28. Water productivity and agriculture – difficult equation
• The amount of water affects the product – less
water does not get you same product
• Product prices are often weight determined –
water contents makes most of the weight
• Most water efficient production may neither be
the best economic output, nor the most socially
desirable
• Still, a lot of water wasted in the system due to
bad irrigation practices
• … and big network inefficiencies

29. Water productivity solutions
Technical and management solutions to improve water
productivity:
i) better infrastructure planning and management at
the river basin level,
ii) technological innovations in irrigated agriculture
(e.g. surface irrigation, sprinkler irrigation, drip
irrigation),
iii) deficit irrigation technologies (water productivity
max)
iv) reducing runoff, percolation and evaporation,
v) water re-use
vi) changes in cropping patterns, or in crops and
commodities produced.

30. Attention to …. ‘Jevons paradox’
• Evidence suggests that how the resource is
used may turn out to increase (rather than
decrease) the rate of water consumption
• Reason is that water saved is used to expand
plantations!

31. Water trading – solution … and may backfire
• Water trading schemes can bring solutions – two
examples
– Barcelona: Framers trade use of clean water to city’s
treated brown water.
– Madrid: Sell their groundwater in exchange for lower
water use. They do not change farming practice,
groundwater is depleted!

32. COMPLETE TRADING SYSTEMS
• Australia has the most complex systems (Murray-
Darling Basin)
– Very detailed knowledge of water situation needed
– Very complex, very costly
– Requires initial water allocation – politically difficult.
– Independent water trading body required
– Has to guarantee water access to all social groups
• The system is very advanced… even water
mortgages!
• Also Advanced is Chile – there are social issues
– Can benefit more larger - richer farmers

33. PARIS AGREEMENT….????
• 195 nations sign!
• Aim at 1,5 C not 2 C!
• Legally binding procedures
• Flexible INDCs (Intended National Determined
Contributions), but reinforcing with time… (5 years)
cannot go backwards
• All countries need to participte
• Some technical modalities for Marrakesh this year
• Support for developing countries – 100 bn$ a year
• Better ITMOs (internationally Transferrable
Mitigation Outcomes)