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Climate change and Resilience of Agricultural System: an econometric and computational analysis

Periodic Reporting for period 1 - CRAS (Climate change and Resilience of Agricultural System: an econometric and computational analysis)

Reporting period: 2019-08-10 to 2020-08-09

Climate change effects on all the agriculture sectors - crops livestock, fisheries and forestry- is already evident in several regions of the world and it is expected to profoundly affect those sectors in the years and decade ahead. CC effects include higher temperature, change of precipitation pattern, altered seasonal pattern, increased pressure of pests and disease and frequent extreme events (floods and droughts). Expected impacts include increased yields variability and yields reductions, and degradation of ecosystems. In southern European countries agriculture sector has been shown to be particularly vulnerable to climate change impacts, CC is predicted to jeopardize crop production and livestock production, for example cereal yields and horticultural crops are predicted to decline driven by CC.

Priorities of the current and future European Common Agricultural Policy (CAP) are to enhance the climate change resilience of European agriculture, increase climate change adaptation and protect biodiversity. Biodiversity is now a considered part of the EU’s economic growth strategy. The EU Biodiversity Strategy to 2030 “Bring nature back into our lives” aims to restore ecosystems and ecosystem services and to improve biodiversity, the ultimate goal being to increase resilience to future shocks. Although a wide literature analyses the impacts of climate change on agriculture, the link between biodiversity, resilience and climate change damage is still largely underexplored. Agrobiodiversity conservation at the global, regional and farm levels can provide natural adaptation and insurance to farm households as well as resilience to farming communities and sustainability. In particular, agrobiodiversity is increasingly regarded as a key component for the future adaptation of agriculture to a changing climate. Notwithstanding, in the economic literature, and in particular in the areas of climate economics, there is a general lack of attention to the role that agrobiodiversity can play into building greater resilience of production systems. It is suggested that the resilience of agricultural system is increasing in the level of agrobiodiversity. Ecological theory and experiments suggest that diversified agroecological systems have an higher temporal stability of yields, increased pollination and pest control. Also, because facilitation between plants is maximized under environmental stress diversified system might actually have adaptive capacity and therefore higher resilience against shocks. Though recent developments in economics have advanced the research frontier on the relationship between agrobiodiversity and resilience of agricultural systems, it is not yet well understood.

Climate change Resilience of Agriculture System (CRAS) project aims to better understand the contribution of agrobiodiversity to the resilience of agroecosystems and to the mitigation of the impacts of climate change on the agricultural sector. The overall objective of the CRAS project is to assess whether agrobiodiversity alters the impact of climate change on the agricultural sector applying econometric and computational models. The analysis will focus on southern European countries (namely Portugal, Spain, France, Italy and Greece).
Specific objectives of the project are:

• to estimate the contribution of agrobiodiversity to the economic resilience of the agricultural system; these estimates will be projected to evaluate the impact of agrobiodiversity on land revenue under different climate scenarios.
• based on results of the first object, the second specific object (is to include agrobiodiversity into a macroeconomic model to assess economically its role in smoothing climate change impacts on the agricultural sector.
• The third scientific object is to investigate the potential for adaptation policies favoring agrobiodiversity to reduce climate impacts.

To estimating the contribution of agrobiodiversity to the economic resilience of the agricultural system is the first specific objective of the project and it is the goal of the work carried out in the course of the first year, during the outgoing phase taking place at the Yale school of Forestry and Environmental studies (the school was recently renamed Yale school of environment) at the Yale University. The work was performed under the supervision of Prof. Richard Mendelsohn.

The work carried out includes literature review on agrobiodiversity, ecosystem services to agriculture and resilience, with a special focus on climate change impacts and resilience of agricultural systems; survey of the indices of agrobiodiversity and selection of those more suitable to the end of the object; data collection and their elaboration; econometric analysis applying the Ricardian model. The results of the econometric analysis performed using the Ricardian model have shown that both farm level and landscape level agrobiodiversity is significant and positively contributes to farmland value.
Overall, the CRAS project will contribute to increase the knowledge of:

• the empirical relation between agrobiodiversity and the adaptive capacity of the agriculture sector.
• the macro-economic (general equilibrium) implications of agrobiodiversity as a damage smoothing opportunity, assessing its effect in terms of changes in gross damages.
• the benefits of policies for the conservation of agrobiodiversity

The project is expected to:

• increasing of the methodological and core knowledge on climate impacts and adaptation in the agriculture sector.
• advancing the economic assessment of the role of agrobiodiversity in lessening the impacts of climate changes coupling econometric and macroeconomic models.
• improving the empirical foundation of Integrated assessment models for simulating climate change impacts in the presence of adaptation, enhance the modelling and assessments of climate change impacts on agriculture and of the efficacy of adaptation policy of biodiversity conservation.
• exposing the debate on biodiversity conservation and climate change from the research area to the policy arena and non-scientific audience.
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