Abstract
Using a computable general equilibrium framework, this paper uses Sri Lanka and Bangladesh as case studies in examining the associated macroeconomic and sectoral impacts under two different climate change scenarios. Our results indicate that a nation’s welfare deteriorates due to technical efficiency losses from climate change. Neither unilateral nor regional trade liberalization as a mitigating option improves welfare in these countries. For Sri Lanka, global full trade liberalization of all commodities is the optimum policy with some welfare gains. For Bangladesh on the other hand, regional partial agricultural trade liberalization is the optimum option with the least welfare deterioration. These results show that under climate change, countries within South Asia should respond differently to climate-induced crop productivity changes and no one optimum policy fits all.
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