economic analysis of adaptation strategies to …economic analysis of adaptation adaptation:...
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ECONOMIC ANALYSIS OF ADAPTATION STRATEGIES TO CLIMATE CHANGE: A COST BENEFIT ANALYSISBy
Relebohile Letele
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Outline
� Introduction
� Methodology
� Analysis and results
� Conclusion
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Climate change: Agriculture as a victim…
� Food production is very sensitive to weather and climate change.
� Raise in temperature affects production.
� Changes in rainfall
� Extreme events
� Increased soil erosion
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Climate change adaptation
� Negative implication for GDP
� Weak government
� Weak markets
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Economic analysis of adaptation
� Adaptation: adjustment of a common practice to moderate the impacts of climate change.
� Efficient adaptations
� Getting local conditions and timing is crucial
� Uncertainties of climate change: influence adaptation costs and benefits
� Economic valuation of alternative adaptation measures entails a CBA
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Statement of the problem cont’
� Consensus on central estimate of adaptation costs has not yet emerged
� Global level: World Bank (2009), de Bruin et.al (2009), Hope (2009), Carraro et.al (2009) and UNEP (2007)
� National Level: ADB (2009), Sei (2009) and Galido (2009)
� Studies only provide speculative numbers.
� Few studies of CBA of adaptation measures at local level
� Many knowledge gaps in assessment of cost of adaptation to Cc in the agricultural sector
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Objectives
� Quantify the costs and benefits of implementing adaptation strategies
� To compare the costs and benefits for different adaptation options in crop production
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Justification
� Lesotho does not have influence on mitigation policies
� Only pursue adaptation policies
� Select worthwhile policies
� This entails a thorough CBA
� Inform policy on optimal adaptation options
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Methodology-Area
� Area: Maphutseng in Mohales’ Hoek district
� Located in summer rainfall (average rainfall-714mm), max temp(22.7), min (8.4).
� Composed of smallholder farmers
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Data I
� UCT: Climate data and crop simulation data
� Growing Nations- Conservation Agriculture
� Food and Agriculture organisation (FAO): Cost of farmers supported
� Sample of 350 farmers
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Crop yield simulation
� Modelling of various scenarios using DSSAT crop model driven by projections of climate, downscaled from 9 GCM models
� DSSAT has a flexible management interface which allows for the assessment of various management strategies
� Adaptation strategies: fertilizer use and change in planting date
� Management strategies were simulated in combinations as EP with RF; EP with CF; LP with RF; LP with CF
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Main methods of economic analysis
� NPV: Discounted net benefit
� If NPV is greater than zero, benefits exceeds the costs
� The higher the NPV, the greater the financial argument for initiating the adaptation strategy
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Main methods of economic analysis cont’
� BCR: Ratio of discounted benefits relative to its costs expressed in monetary terms
� Summarize the overall value for money
� The higher the BCR, the higher the investment
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Main methods of economic analysis cont’
� IRR: Interest rate at which NPV of costs of an investment equals the net benefits of an investment
� The higher the IRR, the more desirable it is to undertake the project or invest in the adaptation strategy.
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Analysis and Results
� The impact of climate change on maize was assessed through simulation of changes in maize yield production between a baseline period (1961-2000) and a future period (2046-2065)
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Baseline mean yield (kg/ha)
EP with RF LP with RF EP with CF LP with CF
Mean 1094.5 1592 1199 1232
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Climate scenarios between baseline and future scenarios
� Different GCM were used to assess mean maize yield between baseline and future scenarios
� CSIRO- Pessimistic climate change scenario
� GISS- Optimistic climate change scenario
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Mean maize yield between baseline and future scenarios
EP with RF LP with RF EP with CF LP with CF
Average 1114 2082 1428 1788
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The impact of climate change on the adaptation strategies
EP with RF LP with RF EP with CF LP with CF
15093 16307 2862 3226
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NPV, BCR and IRR for farmers who are adapting
EP with RF LP with RF
NPV 8929.57 11913.91
BCR 5.26 6
IRR 9000 12000
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NPV, BCR and IRR for farmers who are not adapting
EP with CF LP with CF
NPV 0 0
BCR 1 1
IRR 2862 3226
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Conclusions and Recommendations
� LP with RF should be adapted
� Encourage Conservation agriculture
� Combination is better than isolation
� Adaptation is, therefore, more effective when it is composed by a portfolio of actions rather than one single action
� Extension services are, again, very important in determining the implementation of adaptation strategies
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Conclusions and Recommendations
� Provide education on choosing the best combination
of strategies that can deliver the highest revenues.
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� THANK YOU