Climate Change on Agriculture in 2050: A CGE Approach

Purpose Agriculture plays a very critical role in terms of global food security and provides livelihood to over 30 percent of the world population. This study investigates the economic impact of climate change on agriculture in 2050. Design/Methodology/Approach We employ the global, multi-sector computable general equilibrium (CGE) approach. Using the GTAP Version 10 database whose base year is 2014, we project the global economy to 2050 relative to 2014. The main focus is on the role of economic players’ adaptation response to climate change, and the possible changes in production quantities and market prices. We implement a baseline growth path simulation that does not account for climate change effects, and two counter-factual policy simulations, which account for the impacts of climate change. Findings Simulation results reveal that extreme climate change will negatively affect the market prices of agricultural commodities, private household consumption, trade balance, GDP, and welfare for most of the regions in this study. Further, developing economies are found to be affected more by climate change compared to developed nations. Research Implications The study suggests that climate change adaptation and mitigation policies be specific to every stage in the farm value chain (FVC) with more emphasis on production and market integration segments.