Agricultural responses to climate change and farm-level economic implications | Julian Zeilinger

AFO Institute Seminar held on 22 Feb. 2023 at 15:00 hrs in Guttenberghaus SR 03 - Zoom link:

Presented by Julian Zeilinger, Doctoral candidate at the Institute of Agricultural and Forestry Economics

Agriculture is an economic sector which is very sensitive to climate and highly affected by changing weather conditions. When assessing climate change impacts on agriculture it is thus important to account for the possibility of adaptation. Consequently, it is crucial to understand the various channels through which adaptation of farms arise as well as the general potential to adapt. The aim of this research project is to assess the impact of climate change on agricultural holdings within Austria, the ability of farms to adapt and effective measures to mitigate impacts, in order to appropriately address future consequences and identify strategies for farmers. The methodological approach is based on theoretical economic models, which are estimated with econometric methods. For this purpose, detailed farm-level agricultural data, fine-scaled weather data, location factors and information on participation in agri-environmental programs are combined to construct a unique panel data set of Austrian farms.

A first article, published in the European Review of Agricultural Economics, builds on increasing evidence of potential limitations of adaptation and develops a conceptual framework which allows to relax the assumption of fully adapted farms and empirically analyse climate change adaptation at the farm level. The findings indicate under-adaptation of farms, contradicting the assumption of full adaptation. This is particularly crucial for regions with warmer climates, since the findings reveal for such regions a higher degree of under-adaptation and a significant increase in potential benefits due to additional adjustments.

A second manuscript, which is currently in development, explores the effect of specific adaptation measures on mitigating climate change effects. We investigate farm-level decisions to adopt soil conservation practices and the conditional economic effects in the context of CC with an endogenous switching regression model for panel data. First results suggest a significant effect of meteorological conditions on the adoption of soil conservation practices and less impact of long-term changes in temperature and precipitation on adopters’ farm net revenues.

Overall our preliminary findings suggest a positive average economic effect of soil conservation practices. In summary, the project thus contributes to a better understanding of heterogenous impacts of climate change on farms and the identification of suitable strategies for farmers to mitigate its impacts.