The economics of technological innovation for adaptation to climate change by broadacre farmers in Western Australia Donkor Addai School of Agricultural and Resource Economics Supervisors: W/Prof. David Pannell Prof. Ross Kingwell Adj./Prof. Michael Ewing Assist/Prof. John Finlayson
Acknowledgements Funding The University of Western Australia Future Farm Industries CRC Ltd Technical Assistance Dr Senthold Asseng, Dr Dean Thomas and Mr Nariv Khimashia (CSIRO)
Climate change Research Problems Unavoidable to some extent due to increase in CO 2 Higher temperatures Low rainfall in WA Impact on agriculture Negative impacts ( yield, cost, pest and diseases) Positive impacts ( photosynthesis, waterlogging/salinity)
Research Problems Agricultural carbon emissions (16%) Fixed carbon price ($23/t CO 2 -e from July 2012) Moving to ETS in 2015-16; compensation for EITE Agricultural sector excluded, but may be included in future Direct and indirect impact on agricultural sector Carbon Farming Initiative
Research Problems Adaptation Need for flexible and resilient agriculture systems Expectations of adaptation Adaptation options Adjust practices, technologies (tillage, stubble retention) Change systems (enterprise mix-rotations, annuals vs. perennials)
Focus of PhD research Impact of climate change on agriculture with and without adaptation Impact of mitigation policy on agriculture with and without adaptation
Climate and carbon dioxide projections 2030 CO 2 Rainfall (%) (ppm) 400 450 500 Temp ( C) 0.50 1.25 2.00 0.50 1.25 2.00 0.50 1.25 2.00 0-5 -10-15 2050 CO 2 Rainfall (%) (ppm) 475 525 575 Temp ( C) 1.00 2.50 4.00 1.00 2.50 4.00 1.00 2.50 4.00 0-10 -20-30
Study Region ~156km from Perth Semi-arid Rainfall: 350-400 mm/year Winter rainfall Winter cropping Farm size: ~2000ha
Modelling Approach Existing model: MIDAS Whole-farm bio-economic linear programming Optimisation (maximises profit) Steady-state
Modelling Approach Revise and debug existing model Use APSIM and GrassGro Use National GHG Accounting Use local sequestration measurements
Assumptions Changes in climate and CO 2 Prices, cost, technology, farm size and labour are unchanged (2012 levels) Changes are difficult to predict (esp. technology) **Changes in price and technology considered in the thesis
Impact of climate and CO 2 with adaptation on base-case optimal farm plan Units Base-case 450ppm/-5%/+1.25 C Net Return $'000/yr 96 109 Farm area in crop % 74 77 Cereal area ha 880 820 (-7%) Grain legume area ha 360 370 (3%) Oil seeds area ha 240 350 (46%) Pasture area ha 520 460 (-12%) Sheep flock dse 3100 2700 (-13%)
2030-% change in profit relative to base case as a result of changes in climate and CO 2 With CO 2 (ppm) 400 450 500 Adaptation Temp ( C) 0.50 1.25 2.00 0.50 1.25 2.00 0.50 1.25 2.00 0 41-5 -11 33 13-5 Rainfall (%) 48-10 11-15 -1 Without Adaptation Rainfall (%) CO 2 (ppm) 400 450 500 Temp ( C) 0.50 1.25 2.00 0.50 1.25 2.00 0.50 1.25 2.00 0-5 -10-15 -26-3 27
2030-% change in profit relative to base case as a result of changes in climate and CO 2 With Adaptation Rainfall (%) CO 2 (ppm) 400 450 500 Temp ( C) 0.50 1.25 2.00 0.50 1.25 2.00 0.50 1.25 2.00 0-5 -10-15 22 12-10 55 41 4 97 77 46 5-11 -27 33 13-5 72 48 25-5 -17-37 22 11-11 54 39 18-11 -26-48 11-1 -21 40 23 6 Without Adaptation Rainfall (%) CO 2 (ppm) 400 450 500 Temp ( C) 0.50 1.25 2.00 0.50 1.25 2.00 0.50 1.25 2.00 0 11-6 -34 41 20-20 75 50 16-5 -2-26 -50 22-3 -26 54 27-2 -10-15 -32-58 12-5 -34 38 18-7 -15-26 -44-66 1-21 -43 26 2-15
2050: % change in profit relative to base case as a result of changes in climate and CO 2 With Adaptation CO 2 (ppm) 475 525 575 Temp ( C) 1.00 2.50 4.00 1.00 2.50 4.00 1.00 2.50 4.00 Rainfall (%) 0-5 -10-15 -6 70 47 18-50 51-7 -67
2050: % change in profit relative to base case as a result of changes in climate and CO 2 With Adaptation Rainfall (%) CO 2 (ppm) 475 525 575 Temp ( C) 1.00 2.50 4.00 1.00 2.50 4.00 1.00 2.50 4.00 0 79 11-29 106 47-9 139 72 15-10 37-6 -65 70 18-50 104 51-24 -20-30 14-29 -89 45-7 -73 78 23-48 -44-91 -134-18 -67-117 12-38 -91 Without Adaptation CO 2 (ppm) 475 525 575 Temp ( C) 1.00 2.50 4.00 1.00 2.50 4.00 1.00 2.50 4.00 Rainfall (%) 0 55-21 -70 76 12-52 105 30-28 -10 18-36 -96 43-13 -83 70 10-58 -20-7 -57-120 20-36 -106 45-15 -85-30 -63-116 -170-40 -95-159 -17-72 -138
Effect of carbon pricing with adaptation on optimal net return 390/0%/0.00 C 450/-5%/1.25 C 525/-20%/2.50 C 525/-20%/2.50 C Base case Low ($ 000/yr) Moderate ($ 000/yr) High ($ 000/yr) Agric. is excluded 23 $/t 96 7-14 -98 40 $/t 96 5-17 -101 60 $/t 96 0-21 -105 Agric. is included 23 $/t 96-16 -32-112 40 $/t 96-28 -41-117 60 $/t 96-9 -19-64
Main messages Adaptation: reduces negative impact or increases positive impact of climate/co 2 changes on farm profit 2030: changes in climate/co 2 slightly positive relative to 2012 2050: highly negative if CO 2 is at the high end of expectations; neutral-positive if CO 2 is at the low end Agriculture included in carbon pricing scheme: negative impact on farm profit unless carbon price is very high
Main messages Adaptation: reduces negative impact or increases positive impact of climate/co 2 changes on farm profit 2030: changes in climate/co 2 slightly positive relative to 2012 2050: highly negative if CO 2 is at the high end of expectations; neutral-positive if CO 2 is at the low end Agriculture included in carbon pricing scheme: negative impact on farm profit unless carbon price is very high