Extreme Weather Events and Crop Price Spikes in a Changing Climate: Illustrative global simulation scenarios | Ipcc Fourth Assessment Report

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Agriculture is highly sensitive to climate variability and weather extremes. Various impact studies have considered the effects of projected long-run trends in temperature, precipitation and CO2 concentrations caused by climate change on global food production and prices. But an area that remains underexplored is the food price impacts that may result from an expected increase in the frequency and intensity of extreme weather events. This study uses a global dynamic multi-region computable general equilibrium (CGE) model to explore the potential food price impacts of a number of extreme weather event scenarios in 2030 for each of the main exporting regions for rice, maize and wheat.
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  OXFAM RESEARCH REPORTS SEPTEMBER 2012 Oxfam Research Reports  are written to share research results, to contribute to public debate and to invite feedback on development and humanitarian policy and practice. They do not necessarily reflect Oxfam policy positions. The views expressed are those of the author and not necessarily those of Oxfam.  www.oxfam.org EXTREME WEATHER EVENTS AND CROP PRICE SPIKES IN A CHANGING CLIMATE Illustrative global simulation scenarios DIRK WILLENBOCKEL INSTITUTE OF DEVELOPMENT STUDIES, UNIVERSITY OF SUSSEX, UK   Agriculture is highly sensitive to climate variability and weather extremes. Various impact studies have considered the effects on global food production and prices of projected long-run trends in temperature, precipitation and CO 2 concentrations caused by climate change. But an area that remains underexplored is the impact on food prices that may result from an expected increase in the frequency and intensity of extreme weather events. This study uses a global dynamic multi-region computable general equilibrium (CGE) model to explore the potential impacts on food prices of a number of extreme weather event scenarios in 2030 for each of the main exporting regions for rice, maize, and wheat.  2 Extreme Weather Events and Crop Price Spikes in a Changing Climate CONTENTS 1 Introduction 4   2 Climate change and extreme weather events: A brief review of the current state of science 6   3 Methodology of the simulation analysis 15   4 The simulation scenarios 17   5 Simulation analysis 22   Appendices 40    Extreme Weather Events and Crop Price Spikes in a Changing Climate 3  ABBREVIATIONS CO 2  Carbon dioxide CGE Computable general equilibrium FAO UN Food and Agriculture Organization  AR4 Fourth Assessment Report of the IPCC GCM General circulation model GDP Gross domestic product GTAP Global Trade Analysis Project ha Hectare hg Hectogram IDS Institute of Development Studies IFPRI International Food Policy Research Institute IPCC Intergovernmental Panel on Climate Change OECD Organization for Economic Co-operation and Development SACU Southern African Customs Union SRES IPCC Special Report on Emission Scenarios SSA Sub-Saharan Africa  4 Extreme Weather Events and Crop Price Spikes in a Changing Climate 1 INTRODUCTION  Agriculture is highly sensitive to climate variability and weather extremes, such as droughts, floods and severe storms. Climate change is set to impact significantly on food and hunger in the future. Various climate change impact studies have considered the effects of projected long-run trends in temperature, precipitation and CO 2  concentrations on crop yields, and a number of studies have explored the prospective consequences of these trends for agricultural production and global food prices. But an area that remains underexplored is the potential impact of climate change on food price volatility, that is, the nature of food price fluctuations around the long-run trends that will result from the predicted increases in extreme weather events in the future. Recent research by the Institute of Development Studies (IDS) published at the launch of Oxfam’s Growing a Better Future ( GROW) campaign suggested a strong upward trend in world market prices of the main traded staple crops over the next 20 years, with a significant portion of the increase caused by climate change (Willenbockel 2011). Research by the International Food Policy Research Institute (IFPRI), the UN Food and Agriculture Organization (FAO) and others (Nelson et al.  2010; Foresight 2011; van der Mensbrugghe et al  . 2011; Hertel, Burke and Dobell 2010) also projects agricultural price increases as a result of climate change and population growth in combination with low agricultural productivity growth. The present study intends to build on the earlier analysis by looking further at the potential impact of climate change on food prices  –  focusing in particular on the impact of extreme weather events on price fluctuations. This is a gap in research that we need to understand, given the potentially devastating impact of sudden food price hikes on access and livelihoods in low-income countries. For people in poverty, the challenge of volatility is not the same as that arising from long-run food price trends. Temporary price spikes are unpredictable over longer horizons, and low-income countries and poor and vulnerable people cannot absorb or adjust to sudden shocks easily. The analytical framework employed in the core of this study is a global dynamic multi-region computable general equilibrium (CGE) model. The model distinguishes 22 geographical regions including the main net-exporters of staple crops and eight sub-Saharan African (SSA) regions. This geographical aggregation structure supports a quantitative assessment of the impact of adverse extreme weather shocks in the crop-exporting regions on prices faced by consumers in the SSA sub-regions that are of particular interest for Oxfam. In a first stage, the model will be used to generate long-run baseline projections for the evolution of production, consumption, trade and prices by region and commodity group up to 2030 using essentially the same assumptions about the key drivers of change  –  population growth, labour force growth, total factor productivity growth in agricultural and non-agricultural sectors  –  as in Willenbockel (2011). The baseline projections take account of climate change impacts on agricultural productivity due to changes in projected means  of temperature and precipitation, but do not take account of potential additional impacts due to extreme weather events. In a second stage, the model is used to simulate the additional impacts of idiosyncratic adverse temporary shocks to crop productivity in each of the main exporting regions for rice, maize and wheat (North  America, Oceania, South America, and, in the case of rice, additionally India and Other East  Asia) on prices, production and consumption in 2030 across the regions distinguished in the model. A further simulation scenario combines the poor-harvest shocks with the simultaneous imposition of taxes on exports of staple crops. Finally, the direct impact of extreme weather events in the sub-Saharan African regions is simulated. The Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) anticipates with ‘high confidence’ that ‘p rojected changes in the frequency and severity of extreme climate events will have more serious consequences for food and forestry production, and food insecurity, than will changes in projected means of temperature and precipitation ’
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