Economic impacts of climate change on EU agriculture: will the farmers benefit from global climate change?

Abstract

This paper analyses how climate change might impact EU agricultural markets by mid-century, considering a large ensemble of climate change projections from different models, market adjustments and trade feedbacks. Applying consistent climate change driven productivity shocks to a global multi-commodity agricultural market model we show that the negative direct effects from climate change on crop production in the EU could be offset by market and trade adjustments. The simulations reveal that climate change has heterogeneous impacts across regions. EU farming sector, in particular, might actually benefit from climate change as the impacts on agricultural productivity are expected to be more severe in important non-EU production regions such as US, Russia and Ukraine, depending on the crop. Higher producer prices for important crops such as wheat, barley, grain maize, rice and soybeans, lead to an increase in EU production and exports. For instance EU wheat production could increase by 13% and exports by 28%, with 19% higher farm incomes on average than in a business-as-usual situation. Our study has several limitations. In particular, we do not consider CO2 fertilization effects and direct effect from climate change on livestock sector, climate variability and extreme weather effects. Notwithstanding, our findings highlight the heterogeneity of climate change impacts across regions, specifically Northern versus Southern Europe, and the importance of market and trade adjustments as economic adaptation mechanisms to climate change.

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