Economic Impacts of Climate Change on the Malaysian Rice Production

Transcription

1 Economic Impacts of Climate Change on the Malaysian Rice Production Negin Vaghefi Mad Nasir Shamsudin Ahmad Makmom Abdullah Milad Bagheri Faculty of Environmental Studies Universiti Putra Malaysia Presented at the International Conference on Food Safety and Security under Changing Climate 6 7 December 2010 Penang, Malaysia

2 Global food crisis Well known facts Changes in the food equation.combination of emerging & ongoing forces Demand factors Income growth Population growth Biofuels (energy price) Supply factors Production shocks (emerging Climate Change) High input & transport costs (energy price) Underinvestment in agricultural productivity & technology USD per tonne 1,400 1,200 1, M1 1982M1 1984M1 1986M1 1988M1 1990M1 1992M1 1994M1 Crude Oil Palm Oil Soybean Oil Maize Rice Wheat 1996M1 1998M1 2000M1 2002M1 2004M1 2006M1 2008M1 2

3 Issues o Intertwining climate change and the agricultural economy o Impacts of climate change on the Malaysian rice production o Policy Responds towards low carbon economy 3

4 Climate Change and the Agricultural Economy

5 Agriculture is a significant contributor of GHG emissions. Thus agricultural development effects climate change. Source: Gunasekera (2007), I PCC (2007a), U.S. E PA (2008).

6 Malaysia GHG Emissions Scenario 1994 Sector CO 2 e Energy Industrial Processes 97,852 4,972 Energy Agriculture Land Use Change & Forestry Waste Total Emission Net Total (after subtracting carbon sink) 6,925 (4.8%) 7,639 26, ,314 75,593 Industrial Processes Agriculture Land Use Change & Forestry Waste Source: Malaysian Initial National Communication Agriculture

7 Though agriculture is a significant contributor to GHG emissions, it is most affected by climate change.. Of all economic sectors, climate change has its most significant impacts on agriculture because of its broad geographic dispersion and obvious close dependence on climate and environmental factors.

8 Climate Change and Agriculture Thus agriculture and climate are mutually dependent Agriculture effects climate (A significant GHG emitter and potential carbon sink) Climate change effects agriculture There is a general agreement that the long-term effects on agriculture is negative Negative effects outweigh positive effects

9 Impacts of climate change on the agricultural economy

10 Current and Prospective Impacts Impacts are multi-dimensional Climate Changes Temperature Precipitation Sea Level Rise Health Impacts Weather-related Mortality Infectious Diseases Air Quality-Respiratory Illnesses Agriculture Impacts Crop yields, Livestock performance Input requirements, Irrigation demands Forest Impacts Change in forest composition Shift geographic range of forests Forest Health and Productivity Water Resource Impacts Changes in water supply Water quality Increased competition for water Impacts on Coastal Areas Erosion of beaches Inundate coastal lands Costs to defend coastal communities Species and Natural Areas Shift in ecological zones Loss of habitat and species Spread of invasive species

11 Possible climate change impacts on food production Temp rise (C) 1 C 2 C 3 C 4 C 5 C Source: IPCC (2007) Food Production Modest increase in cereal yields in temperate regions Sharp declines in crop yield in tropical regions (5 10% in Africa) additional millions at risk of hunger (if carbon fertilization is weak). Agricultural yields in higher latitude likely to peak. Agricultural yields decline by 15 35% in Africa, and entire regions out of production Continued increase in ocean acidity seriously disrupting marine ecosystems and possibility fish stocks.

12 Climate change projections and impacts on agriculture Climate Change Projections and Impact on PECC Agriculture, 2080s

13 Impacts of climate change on the Malaysian rice production

14 Rice statistics in Malaysia, Average yield planted area Production (tonne ha -1 ) (ha) (tonne) ,688 1,479, ,076 1,456, ,012 1,465, ,116 1,437, ,355 1,492, ,310 1,565, ,794 1,530, ,112 1,587, ,312 1,460, ,592 1,626,449 Source: Department of Agriculture

15 Study Area The eight granary areas, MADA, KADA, Kerian, Barat laut, Seberang Perok, Ketara and Kemasin, are designed as permanent paddy producing areas, to realize a minimum selfsufficiency level for rice of 65 per cent and this is one of the major strategies to enhance rice production. These granary areas cover 36 percent of the total physical paddy land but constitute 57 percent of the total area planted and produce 74 per cent of the total national rice production.

16 Climate Change in Malaysia An average temperature increase of 0.5 C to 1.5 C is recorded in Peninsular Malaysia and 0.5 C to 1.0 C in East Malaysia (Malaysia Meteorological Department, 2009).

17 Climate Change in Malaysia Max T: positive trend: 1.1 o C / 50-yr Mean T: positive trend: 1.1 o C / 50-yr Min T: positive trend: 1.5 o C / 50-yr Source: Malaysian Meteorological Department, 2009

18 Rice yield simulation ORYZA2000 Model to simulate the potential yields of rice under various scenarios of changed climate, including changes of CO 2 (1.5 times of the current level), and temperature (+2 C above current temperature). MR-219 variety was used. Utilised - experimental data, crop data, soil data and weather data

19 Rice yield simulation function Yield = f (climate, technology, management, soil) o Climate factors include temperature and CO 2 o Technology and management are considered as systematic factors o Soil represents soil conditions

20 Scenario I (baseline): Current temperature (27 C ) and CO 2 (383 ppm) Year Simulated Yield* (kg ha -1 ) Observed yield (kg ha -1 ) Simulated yield (kg ha -1 ) * Simulated yield with best management practices

21 Scenario II: Temperature increase by 2 C (to 29 C) and baseline CO 2 (383 ppm) Year Actual yield (t ha -1 ) Simulated yield (t ha- 1 ) Yield loss (t ha -1 ) Planted area (ha) Production loss (tonne) Economic loss (RM) , , , , , , , , , Average yield would decline = 9.3%

22 Predicted Yield Changes to Different Temperatures and CO 2 Concentration Main Season Off Season CO 2 level +0 o C +1 o C +2 o C +4 o C +0 o C +1 o C +2 o C +4 o C 340 ppm x CO x CO Source: Singh, et al., 1995

23 Scenario III: Temperature increase by 2 C (to 29 C) and CO 2 by 1.5 times (574 ppm) Year Actual yield (t ha -1 ) Simulated yield (t ha -1 ) Yield loss (t ha -1 ) Planted area (ha) Production loss (tonne) Economic loss (RM) , , , , , , , , , , , , , , , , , , => Average yield would decline by 17.7%.

24 Policy Responds.

25 The Economics of Climate Change Climate change is a results of externality associated with GHG emissions it entails costs that are not paid for by those who create the emissions.

26 The Economics of Climate Change But, climate change poses particular challenges for the standard economic theory of externalities. Why? Global in its cause & consequences Impacts are long-term & persistent Uncertainties and risks in the economic impacts are pervasive Serious risks of major, irreversible change with non-marginal economic effects. In the past, the externality theory only deals with local externality. Thus it is easier for the affected parties to set up abatement mechanisms.

27 Key Climate Change Policy Responses Key Climate Change Policy Responses UNFCCC (1992) Kyoto Protocol (1997) Economic Processes(2007) International Collaboration Adaptation Use science, innovation & business risk management to adapt to climate change. But what are the challenges? Policy Responses Mitigation Use science, innovation & market-based instruments to mitigate climate change. But what are the challenges? 27

28 Adaptation options Agronomic perspective improve crop varieties to increase resilience in a changing climate alter timing and location of cropping activities enhance water use efficiency and storage

29 Challenges of Adaptive Capacity for a transforming economy

30 Mitigation options economic perspective Mitigation must be viewed as an investment (cost-benefit analysis). Evidences suggest that the benefits of strong, early action on climate change outweigh the costs. Must promote sound market signals, using Market-based Instruments, to overcome market failures.

31 Mitigation: Challenges of Market Based Instruments There is no such thing as zero pollution. The challenge is to formulate instruments in reducing the Marginal External Cost (MEC), associated with economic activities, in such a way that Marginal Social Cost close to Marginal Private Cost. Price P e Social optimum Supply = Marginal Social Cost = MPC + MEC Supply = Marginal Private Cost (MPC) Private optimum Demand = Marginal Private Benefit = Marginal Social Benefit Q se Q pe Quantity 31

32 Conclusion - For mitigation & adaptation to be effective, must have: Formulate instruments that do not distort agricultural markets in ways that negatively affect production & trade of farm produces domestically & internationally Public support in R&D for farm-level adaptation Climate change effects must be integrated into extension program & economic development planning.

33 Terima Kasih Thank You 33