The Impact of Climate Change on Agricultural Outcomes of Climate Policy: A Regional Perspective

Abstract

Model estimates of the impact of climate policy on agriculture typically do not account for the fact that it will be implemented in a changing climate. There only a few studies free from this simplification that analyse the subnational level. To address this gap, the study tests the hypothesis that climate has little impact on the outcomes of climate policy, using a scenario approach focused on the Altai, Krasnodar, Krasnoyarsk, and Moscow regions. Climate is represented by the geographical location of natural and agricultural zones, productivity levels, production outcome uncertainty, and rising global prices for agricultural products. Policy is represented by the guaranteed reduction of greenhouse gas emissions. The state of agriculture in each scenario is assessed by using a spatial partial equilibrium model for nine types of agricultural products across Russian regions (the VIAPI model). The model is based on data from the Federal State Statistics Service and the Russian Ministry of Agriculture for all Russian regions from 2015 to 2019. The hypothesis is tested across various indicators in each of the four regions and for Russia as a whole, with most results rejecting it, suggesting that ignoring climate change may result in an inaccurate understanding of the consequences of climate policy. Limiting greenhouse gas emissions in agriculture worsens the situation for both producers and consumers of agricultural products. Climate change, if not accompanied by rising global prices, alleviates this effect. These findings are useful for investors, as they reveal the advantages and risks for agriculture in the given regions, and for regional authorities, as they help prevent potential losses. This study also provides momentum for applied research that explores the causal relationships between regional markets’ responses to the combination of climate and policy factors.