Open Collections

Evaluating the impact of climate change on Canadian Prairie agriculture

University of British Columbia

Climate change is a long-term shift in the average weather conditions that threatens settlements, societies, and industries. Agriculture is one of the most climate-sensitive industries since the production in this sector is highly dependent on various weather factors. The main objective of this study is to evaluate the economic impact of climate change on Canadian Prairie agriculture using the well-known Ricardian model. The Ricardian model is best described as a hedonic regression of farmland value on an assortment of climatic and non-climatic variables. This model is widely used in economic analysis because it captures farmers’ adaptation strategies to climate change. To estimate the parameters of the Ricardian model, three methods are utilized: pooled weighted least squared (WLS), random effects, and spatial random effects. The estimated coefficients are used to predict the impact of three potential climate and price change scenarios on farmland value in the Canadian Prairies. The main contributions of this study relative to existing studies are: the use of updated data, the inclusion of expected prices rather than actual prices in the model, and the utilization of spatial econometrics methods to estimate the model. The estimated marginal impacts of climate demonstrate that an increase in rainfall and winter, spring, and fall temperatures will increase farmland value; the effect is opposite for July temperature. The signs of the marginal impacts of rainfall and July temperature reveal that water availability plays a very important role in crop production on the Canadian Prairies. Overall, climate change is predicted to increase the value of farm land on the Canadian Prairies by an average of 0.9% to 3.87% annually. However, the northern part of Saskatchewan and the north-eastern part of Alberta are forecasted to experience a decrease in farmland value under a medium climate change scenario. The current analysis predicts that farm welfare in the Prairies will increase by about $1.14 - $4.1 billion annually as a result of climate change. This suggests that with proper adaptations, climate change can be beneficial for Prairie agriculture.

Text

2013-10-03

Attribution-NonCommercial-NoDerivatives 4.0 International

http://hdl.handle.net/2429/45198

Agricultural Economics

University of British Columbia

UBCV

http://creativecommons.org/licenses/by-nc-nd/4.0/