Micro-Climate Engineering for Climate Change Adaptation in Agriculture

Can farmers adapt to climate change by altering weather conditions on their fields? We define the concept of ``Micro-Climate Engineering'' (MCE), where farmers change the effective temperatures on their crops by means of shading or heating, and document such implementation by California pistachio growers. With rising winter temperatures and declining winter chill portions, pistachio growers in California could face adverse climatic conditions within 20 years. Treating dormant trees with a chemical mix, acting as a shading technology, has shown to increase winter chill count to acceptable levels. Modeling a market with heterogeneous sub-climates, we run simulations to estimate potential gains from MCE in the year 2030 for California pistachio. Our results show an expected yearly welfare gain ranging between $1-4 billion. While positive in total, profits gains are highly heterogeneous given the differences in baseline climates. Market power drives gains up, pointing to a less explored intersection of IO, agriculture, and climate change.