The latest IPCC report concluded that the climate is expected to be 1˚C warmer by 2030, regardless of any change in greenhouse gases. Agriculture is the most dependant industry on climate and is expected to be the most impacted. Although it only accounts for 2.4% of global GDP, agriculture has a much larger share in poor countries and is of great importance. Past research has not provided decision makers much guidance on who is expected to gain or lose, since it has focused primarily on linking climate impacts on crop yields and agricultural output in given areas; this is somewhat irrelevant on the macro scale due to the interconnectedness from trade. Hertel et al. 2010 embed disaggregated data on household economic activity within countries in a global trade model to observe how new levels of agricultural productivity from climate change will affect poverty in poor countries. The models ultimately result in a poor predictor of welfare impacts due to the role that international trade plays in the market, mediating the impacts of climate shocks. Price increases in agricultural commodities due to changes in the climate may reduce some households’ income level, but may also have a positive effect on those incomes directly related to the agriculture industry.—Whitney Dawson
Hertel, T.W., et al., The Poverty Implications of Climate-induced Crop Yield Changes by 2030. Global Environ. Change (2010), doi: 10.1016/j.gloenvcha.2010.07.001
Hertel et al. 2010 used the Global Trade Analysis Project (GTAP) global trade model, along with its database and poverty modules. The models have been recently validated by its correct predictions of price impacts from shocks in a previous study. Effects on agriculture production and poverty implications from climate shocks can be seen in the macro economy with use of these models. In the study, households were stratified within countries by their primary source of income. Productivity shocks from climate change were based on six commodities: rice, wheat, coarse grains, oilseeds, cotton, and other crops, and low and high productivity outcome estimates were made. The low productivity estimates assume rapid temperature change and high impacts, where the high productivity estimates represent slower warming and low sensitivity.
Coarse grains, such as maize, are expected to see the largest negative outcome, because they are very sensitive to extreme heat. Wheat and rice yields span zero in any level of productivity, and see gains where climate is currently colder. Commodity price changes estimated from GTAP are small, with the exception of an expected 15% increase in coarse grain prices. On a macro level, the most direct impacts of climate change on agricultural losses are on crops in the Sub-Saharan Africa region, and large losses for the US and China are seen as well. The demand for food throughout the world is mostly inelastic, and the decreases in production produce significant price increases in agricultural commodities. Some losses in productivity may be offset through international trading, such as in New Zealand and Brazil. However, the study points out that climate change causes global trade to shrink, therefore resulting in efficiency loss.
While it may be true that rising world prices for staple agricultural commodities could cause a decrease in real income and an increase in poverty, they could also have a more positive effect on changes in earning. Hertel et al. 2010 also found that although the prices rise by a significant amount, the actual average impact on the cost of living is much more modest. An increase in earnings is seen for households whose incomes rely on agriculture, where households with incomes completely independent of the agricultural industry have a more negative affected earning level. This same idea transfers to expectations in poverty levels as well, with a similar lack of symmetry in results and a large variation in poverty impacts across different countries.
Estimates of climate change impacts did not include the possibility of any adaptations that could reduce negative outcomes, such as introduction of new crop varieties or expanded irrigation infrastructure in a region. There is also limited knowledge about how global poverty will alter over the next few decades. Ultimately, climate change impacts on global poverty requires knowledge on both agricultural shocks, and trade patterns, production, consumption, and poverty in certain countries. The magnitude of poverty changes could be detrimental to some developing countries, where those countries with many agricultural self-employed may adversely see a decrease in poverty.