The Economic Impact of Climate Change on Cash Crop Farms in Québec and Ontario

Abstract

This chapter examines the economic impact of alternative climate change scenarios on representative cash crop farms in Quebec and Ontario. Mixed Integer Dynamic Linear Programming models were used to determine the annual optimal land and labour allocations over a 30 year time horizon. In the modeling process, five climate scenarios were modeled, along with different combinations of CO2 enhancement and water limitation. Parameters, such as crop prices, costs of production, and crop yields, were simulated and projected into the future using various methods, such as Monte Carlo simulation, Crystal Ball Predictor and the Decision Support System for Agro-Technology Transfer cropping system model. Rotation and diversification constraints, as well as participation in public risk management programs were also incorporated into the optimization procedures. The results indicate that the economic impact of climate change varied by climate scenario, climate condition and region. Climate condition, i.e. CO2 enhancement and water limitation, had a larger impact on net farm income than the climate scenarios. Technology development, in terms of crop variety improvement as well as the public insurance programs in terms of individual crop insurance, income stabilization insurance and AgriInvest, are adaptation strategies that can contribute to reducing the economic vulnerability to climate change.