Economic impacts of climate-related changes to California agriculture

Abstract

California agriculture is driven by the interactions between technology, resources, and market demands. Future production is a balance between the rates of change in these variables and environmental factors including climate change. With tight statewide water supplies and agriculture being an important part of the California economy, quantifying the economic consequences of changes in these variables is important for addressing related policy questions. We estimate the economic effects of climate change on California crop farming by year 2050 using the Statewide Agricultural Production Model (SWAP). With climate warming, crop yields are expected to decline, production costs to increase, and water supplies to fall. These negative effects may be partially offset by higher crop prices and technological improvements. Results indicate that gross agricultural revenues across all regions are reduced under climate change, as is water usage. However, given the climate-induced reductions in water supply and crop yields, reductions in revenue are proportionally less due to shifting crop demands, technological change, and a shift to higher value less water intensive crops. Given the long time horizon required in this study, the results should not be considered a projection or forecast, but as a probable outcome of the interaction of several uncertain driving forces.