Economics and a Changing Climate

Economic Impacts of Climate Change

The effects of climate change are felt throughout the entire agricultural value-chain, from individual farmers, ranchers and foresters to , , as well as and markets for food and fiber. Economists have studied the effects of climate change on agriculture and forestry in the U.S. extensively (e.g., Antle, 2008; Martinich et al., 2017; Müller et al., 2015; Walthall et al., 2013). Economic effects vary widely by and specific agricultural sectors, such as , , , , and . Despite the extensive research already done on the economic impacts of weather variability, extreme events, and climate change, it may still be challenging for farmers, ranchers, and foresters to find cost estimates for their specific sector and location. This highlights the importance of communicating and collaborating with your trusted local partners—such as University Extension, USDA Service Centers, and USDA Climate Hubs—who can help track down relevant economic studies. 

Benefits and Costs of Adaptation & Mitigation

Economists have also extensively studied the benefits and costs of specific adaptation and mitigation practices, such as: expanding the use of , improving through or , developing more , installing for livestock, enrolling agricultural lands in and  efforts, installing on livestock operations, or through restored wetlands. For more information about the costs and benefits of other climate adaptation or mitigation practices, .

Economic Value of Weather & Climate Information

Farmers, ranchers, and foresters are continually adapting to changing conditions in their decision environment, but face increasingly rapid climatic change. Adaptation comes with a risk, however, of maladaptation if the uncertainty surrounding future climatic conditions is too large (Leclère et al., 2014).  

Uncertainty about future climate conditions makes it more difficult for farmers, ranchers, and foresters to optimally prepare for and adapt to associated changes (Adams & Peck, 2008). Imagine, for example, trying to prepare your irrigated crop farm for a water shortage when you are uncertain of when it will occur, how severe it will be, or how long it will persist. It may be tempting to make management plans based on the worst-case scenario. However, the opportunity cost of this “safety-first” approach could be high if the worst-case does not occur.

Improvements in seasonal weather forecasts and climate projections can reduce economic losses associated with weather variability, extreme events, and climate change. For example, improvements in the ability to detect water shortages farther in advance, and to forecast their location, intensity, and duration more accurately would help agricultural producers prepare more effectively and thus reduce negative impacts. For many years, economists have studied the value of improved short-term weather and long-term climate forecasts for a variety of farming, ranching, and forestry systems throughout the U.S. Summaries of this work are available from Dell et al. (2014), Mase and Prokopy (2014), and Meza et al. (2008). Crop-specific examples of the value of improved weather forecasts can be found .

For easy access to the most reliable and cutting-edge weather and climate forecasts, check out the on the website. If you live in the Rocky Mountain region or High Plains, a similar one-stop-shop for all of your weather, climate, and water forecast needs is available . Questions about how to interpret these forecasts? Contact your nearest USDA Climate Hub for assistance!       

For more in-depth economic analysis see the

Scientific References

Adams, R.M., D.E. Peck. 2008. Choices 23(1): 12-14.

Antle, J.M. 2008. Climate Change and Agriculture: Economic Impacts. Choices 23(1): 9-11.

Dell, M., B.F. Jones, B.A. Olken. 2014. What Do We Learn from the Weather? The New Climate-Economy Literature. Journal of Economic Literature, 52(3): 740-98.

Leclère, D., P. Havlík, S. Fuss, E. Schmid, A. Mosnier, B. Walsh, H. Valin, M. Herrero, N. Khabarov, M. Obersteiner. 2014. Climate change induced transformations of agricultural systems: insights from a global model Environmental Research Letters, 9(12): 124018.

Martinich, J., A. Crimmins, R.H. Beach, A. Thomson, J. McFarland. 2017. Focus on agriculture and forestry benefits of reducing climate change impacts. Environmental Research Letters(6): 060301.

Mase, A.S., L.S. Prokopy, 2014:  Weather, Climate, and Society, 6, 47–61.

Meza, F.J., J.W. Hansen, D. Osgood. 2008. . Journal of Applied Meteorology and Climatology, 47: 1269-1286.

Müller, C., J. Elliott, J. Chryssanthacopoulos, D. Deryng, C. Folberth, T.A.M. Pugh, E. Schmid. 2015. Implications of climate mitigation for future agricultural production. Environmental Research Letters, 10(12): 125004.

Walthall, C.L., C.J. Anderson, L.H. Baumgard, E. Takle, L. Wright-Morton, et al. 2013. . USDA Technical Bulletin 1935. Washington, DC. 186 pages.