Economic impacts of climate change in Tanzania and consequences for smallholder farming Asbjørn Aaheim, Anton Orlov, Jennifer West CICERO Oslo, May 20, 2014 W h e n to p -d o w n g u y s lo o k d o w n t h e y s e e o n ly s h it The challenge of combining academic traditions W h e n b o tto m -u p g u y s lo o k u p th e y s e e o n ly a s s h o le s Integration of impacts of climate change in the GRACE model Agric Forestry Fish … Energy … Services Sea-level/coastal 0,000 -0,005 -0,010 -0,015 -0,020 0 1 2 3 4 5 6 Extreme events 0,00 Agriculture Forestry Fisheries … Energy (5) … Transport (3) Services Health 0,00 -0,05 -0,10 -0,05 Electricity supply Labour -0,10 -0,15 0 1 2 3 4 5 6 0 1 2 3 4 5 0,00 Income = Expenditures -0,10 Capital -0,15 -0,20 6 -0,30 Nature -0,40 0 0,00 0,00 -0,02 -0,10 -0,20 ROW -0,04 AFR -0,06 -0,08 -0,30 2 3 4 5 6 3 4 5 6 Tourism 0,05 0,10 0,00 0,05 -0,05 0,00 -0,10 -0,05 -0,15 -0,10 1 2 Fisheries 0,02 0,10 0 1 Forestry Agriculture Rate of change Consume Investment 0 1 2 3 4 5 6 -0,10 0 1 2 3 4 5 6 0 1 2 3 4 5 6 Benefits of reduced climate change in Sub-Saharan Africa in 2100 (from RCP8.5 to RCP4.5) By economic sector 400,0 200,0 0,0 -400,0 -600,0 Agriculture – alternative measures -800,0 -1000,0 18,0 -1200,0 16,0 -1400,0 14,0 -1600,0 12,0 Trill USD Trill USD -200,0 10,0 8,0 6,0 4,0 2,0 0,0 Direct impacts Volumes Value added Economic activity in agriculture £ Kr Output = f(labour, real capital, land) € $ Global emissions of CO2 - RCP 8.5 35 30 PgC/year 25 20 15 10 5 0 Change in annual precipitation in RCP8.5. Crop land. MPI-ESM 6,00 80,0 70,0 5,00 60,0 4,00 50,0 Africa 3,00 ROW 2,00 mm °C 2100 2090 2080 2070 2060 2050 2040 2030 2020 2010 2005 2000 Change in mean temperature RCP8.5. Crop land. MPI-ESM 40,0 Africa 30,0 ROW 20,0 10,0 1,00 0,0 0,00 -10,0 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095 Estimated rate of change in productivity of arable land in Tanzania in RCP8.5 0,000 Rate of change -0,050 -0,100 -0,150 -0,200 2005,0 2010,0 2015,0 2020,0 2025,0 2030,0 2035,0 2040,0 2045,0 2050,0 2055,0 2060,0 2065,0 2070,0 2075,0 2080,0 2085,0 2090,0 2095,0 2100,0 -0,250 Impact of climate change on output in Tanzania by sector Impact on GDP of climate change 2,00 3,00 0,00 Tanzania ROW -6,00 Percent -4,00 agr 1,00 frs 0,00 fis -1,00 ser -2,00 ind -3,00 col -4,00 -8,00 ref -5,00 -10,00 elc 2095 2085 2075 2065 2055 2045 2035 2025 2015 2005 2095 2085 2075 2065 2055 2045 2035 2025 2015 -6,00 2005 Percent -2,00 2,00 gas The Tanzanian farmer in National Accounts and in reality On farm Paid work/ search Farm output • Product prices • Wages 6.0 bill USD Food 7.3 bill USD Value of sales 3.3 bill USD Income from other paid work 0.7 bill. USD Other goods 2.7 bill USD 0,000 0,325 0,650 0,975 1,300 1,625 1,950 2,275 2,600 2,925 3,250 3,575 3,900 4,225 4,550 4,875 5,200 5,525 5,850 6,175 6,500 6,825 7,150 7,475 7,800 8,125 8,450 8,775 9,100 9,425 9,750 Frequency Distribution of farms by size in Tanzania Typical Average 0,02 0,018 0,016 0,014 0,012 0,01 0,008 0,006 0,004 0,002 0 Farm size - ha Impacts of 20 percent reduction in productivity of arable land on farm level Critical limit for minimum farm size needed to avoid nutrition contraint increases: Here from 0.9 ha to 1.1 ha; affecting 600 thousand farms Constraints on selection of work place and consumption pattern tightens emerges on larger farms, increasing from 2.9 ha to 3.65 ha, affecting 990 thousand farms Impacts on provision of goods and consumption patterns The average farm: 2 ha 0,6 The typical farm: 1.45 ha 0,6 Other 0,5 0,4 0,5 Output 0,4 Food market 0,3 0,2 0,3 0,2 Other income 0,1 Food farm 0,1 0,0 Provision Consumption Base case Provision Consumption With climate change 0,0 Provision Consumption Base case Provision Consumption With climate change Messages: I. Macroeconomic models provide much more information than the answer to «what happens with GDP?». Utilizing this additional information and the underlying assumptions may turn conclusions to what is costly and what is beneficial II. Macroeconomic models are building on assumptions about individual behaviour. They thereby provide a gateway to how individual and regional differences matter in a national context, and can be used to consistently integrate results from research that address different scales … such as designing national policies to acheive goals for individual groups who find themselves in widely different settings