Global Market and Economic Welfare Implications of Changes in Agricultural Yields Due to Climate Change

The economic welfare effects of climate change on global agriculture will be mediated by several complex biophysical and economic processes. For a given emissions scenario, these include: (1) the response of the climate system to anthropogenic forcing, (2) the response of crop yields to climate system and carbon dioxide changes, given baseline improvements in crop yields, (3) the response of agricultural markets to crop yield changes, and (4) the economic welfare implications of such market responses. In this paper, we use information about the first two processes from available climate-crop model comparison studies to analyze implications for the third and fourth processes. Applying the range of crop yield changes in a Global Integrated Assessment Model (GCAM) highlights several important economic relationships. First, we find a consistent relationship between global cropland area and yield change that is approximately orthogonal to the relationship between regional cropland area and yield change. Second, we find that the change in economic welfare, expressed as total surplus change per unit economic output, peaks during the 21st century. Third, we find that, at the global level, changes in yield affect both producer surplus and consumer surplus. Specifically, surplus changes to producers and consumers are always opposite in sign, although which economic actors gain or lose varies with the sign of yield change for any given commodity. Taken together, these results contribute to a growing body of research on climate-induced changes on agriculture by highlighting several economic relationships that are robust to differences in the underlying biophysical responses.