INTEGRATION OF GENERAL AND PARTIAL EQUILIBRIUM AGRICULTURAL LAND-USE TRANSFORMATION FOR THE ANALYSIS OF CLIMATE CHANGE IN THE MEDITERRANEAN

Abstract

This study presents an internal modification of a dynamic computable general equilibrium model, ICES, employing inputs from a partial equilibrium model for the agricultural sector, VALUE. The aim is to quantify and analyze the medium-term socio-economic consequences of projected climate change. The methodology is innovative as it combines state-of-the-art knowledge from economic and biophysical sources and is demonstrated in application to two Mediterrenean countries: Israel and Italy. The information from the VALUE model was incorporated into the ICES economic model to improve the agricultural production structure. The new land allocation method takes into account the variation of substitutability across different types of land use. It captures agronomic features included in the VALUE model. This modification gives a better representation of heterogeneous information of land productivity to the economic framework. Climate impacts and policy evaluation with ICES are reinforced due to the more refined system of land allocation. This exercise is original in its ability to base the analysis on empirically estimated parameters rather than on assumptions, as in other studies of this kind. Notably, we suggest diverse land Constant Elasticity of Transformation (CET) frontiers for two main ecological regions in the Mediterranean basin for a more accurate representation of agronomic characteristics. Using the modified ICES model we evaluate climate change impact on agricultural production in the Mediterranean region.