The economics of climate change in agriculture

This paper presents a conceptual frameworkof the impact of climate change onagriculture. It assumes that climatechange will result in a fertilizationeffect and a shift of agro-ecologicalconditions away from the Equator towardsthe Poles. The agro-ecological shift islikely to reduce yield because of reducedacreage and the fertilization effect willincrease yield. The aggregate effectdepends on whichever of the two dominates. The overall effect of climate change may beless significant than its distributionaleffects and the results are consistentwith previous empirical studies. Theimpact of climate change depends on itspace. Faster changes in climate willresult in higher cost. The assessment ofthe cost has to consider that climatechange is a dynamic phenomenon that mayrequire continuous adjustment. Environmental regulation that emphasizesconservation may increase cost ofadjustment and environmental policiesshould emphasize adaptation andflexibility.