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Climate change adaptation in agriculture: A general equilibrium analysis of land re-allocation in Nepal

Author

Listed:
  • Sudarshan Chalise
  • Dr Athula Naranpanawa
Abstract
Despite the growing body of literature on the economic impact of climate change, quantification of climate-change adaptation practices is limited. Therefore, this paper investigates the feasibility of crop land re-allocation as an adaptation strategy to minimise the economy-wide costs of climate change on agriculture in Nepal by developing a multi-household Computable General Equilibrium (CGE) model. Nepal makes an interesting case study as it is one of the most vulnerable agricultural economies within South Asia. Top-down CGE models are often used in economy-wide investigations because they enable researchers to evaluate the overall impact of climate change, including income distribution and employment. Operating at the micro-level, individual farmers and households in developing countries make most of the land-use decisions to adapt to the threats of climate change. Therefore, this paper attempts to map these decisions by using a simple model designed specifically for the Nepalese economy that modifies the ORANI-G generic CGE model (Dixon et al, 1982). Specifically, the model modifies the widely assumed “fixed land supply for a given industry” by allowing farmers to supply land to crops that are less affected by climate change subject to any agronomic constraints. Using Constant Elasticity of Transformation (CET) functions to model the allocation of land allows one to recognise the ease of switching from one crop to another based on their agronomic constraints. For the paper, a nested set of CETs with different transformation elasticities is developed and tested. The sensitivity of the CET values is analysed and a framework of beneficial practices in land re-allocation is recommended. The results suggest that, in the long run, farmers in Nepal tend to allocate land to crops that are comparatively less impacted by climate change, such as paddy, thereby minimizing the economy-wide impacts of climate change. Furthermore, re-allocating land from crops that are highly impacted by climate change to those that are not tends to reduce the income disparity among different household groups by significantly moderating the income losses of rural marginal farmers. Therefore, it is suggested that policy makers in Nepal should prioritise schemes such as providing climate-smart paddy varieties (i.e., those that are resistant to heat, drought and floods) to farmers, subsidising fertilizers, improving agronomic practices, and educating farmers to switch from crops that are highly impacted by climate change to those that are not, such as paddy.

Suggested Citation

  • Sudarshan Chalise & Dr Athula Naranpanawa, 2016. "Climate change adaptation in agriculture: A general equilibrium analysis of land re-allocation in Nepal," EcoMod2016 9272, EcoMod.
    • Handle: RePEc:ekd:009007:9272
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    References listed on IDEAS

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    Cited by:

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    2. Chalise, Sudarshan & Naranpanawa, Athula & Bandara, Jayatilleke S. & Sarker, Tapan, 2017. "A general equilibrium assessment of climate change–induced loss of agricultural productivity in Nepal," Economic Modelling, Elsevier, vol. 62(C), pages 43-50.
    3. Yong Liu & Jorge Ruiz-Menjivar & Junbiao Zhang, 2023. "Do soil nutrient management practices improve climate resilience? Empirical evidence from rice farmers in central China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(9), pages 10029-10054, September.
    4. Montaud, Jean-Marc & Pecastaing, Nicolas & Tankari, Mahamadou, 2017. "Potential socio-economic implications of future climate change and variability for Nigerien agriculture: A countrywide dynamic CGE-Microsimulation analysis," Economic Modelling, Elsevier, vol. 63(C), pages 128-142.
    5. Amsalu Woldie Yalew & Georg Hirte & Hermann Lotze-Campen & Stefan Tscharaktschiew, 2019. "The Synergies and Trade-Offs of Planned Adaptation in Agriculture: a General Equilibrium Analysis for Ethiopia," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 213-233, October.
    6. Tang, Kai & Hailu, Atakelty, 2020. "Smallholder farms’ adaptation to the impacts of climate change: Evidence from China’s Loess Plateau," Land Use Policy, Elsevier, vol. 91(C).
    7. Huey-Lin Lee & Yu-Pin Lin & Joy R. Petway, 2018. "Global Agricultural Trade Pattern in A Warming World: Regional Realities," Sustainability, MDPI, vol. 10(8), pages 1-21, August.
    8. Budhathoki, Nanda Kaji & Lassa, Jonatan A. & Pun, Sirish & Zander, Kerstin K., 2019. "Farmers’ interest and willingness-to-pay for index-based crop insurance in the lowlands of Nepal," Land Use Policy, Elsevier, vol. 85(C), pages 1-10.
    9. Abeysekara, Walimuni Chamindri Sewanka Mendis & Siriwardana, Mahinda & Meng, Samuel, 2023. "Economic consequences of climate change impacts on the agricultural sector of South Asia: A case study of Sri Lanka," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 435-450.
    10. Teodoro Semeraro & Aurelia Scarano & Angelo Leggieri & Antonio Calisi & Monica De Caroli, 2023. "Impact of Climate Change on Agroecosystems and Potential Adaptation Strategies," Land, MDPI, vol. 12(6), pages 1-21, May.

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    Keywords

    Nepal; General equilibrium modeling (CGE); Forecasting; nowcasting;
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