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GTAP Resource #3852

"Implications of climate volatility for agricultural commodity markets under alternative economic and energy futures "
by Diffenbaugh, Noath, Thomas Hertel, Martin scherer and Monika Verma

Recent price spikes have generated tremendous interest in the potential for increased volatility in agricultural commodity markets, and raised concern that climate change could increase food insecurity by reducing grains yields in the coming decades. However, commodity price volatility is also influenced by other factors, including government policies and developments in the energy markets, which may either exacerbate or buffer the effects of climate change. This paper shows that US corn price volatility is more sensitive to climate change than to economic growth or policy influences when adaptation and stockholding are ignored. This sensitivity is driven primarily by increases in the occurrence of severe hot conditions in the primary corn growing region of the US. It is also found that, on average, the US biofuels mandate increases the impact of climate change on corn price volatility by a factor of 1.5, with projected economic growth partially moderating the price sensitivity. The results thus highlight the critical importance of interactions between energy policy choices and ongoing changes in climate.

21st century changes in temperature and precipitation are generated from a set of high-resolution climate model experiments. The response of corn yields to climatic conditions is then estimated using a statistical model, which we calculate at the county level from the climate model ensemble and then aggregate to the national scale using county-shares of total US corn production.

The commodity market impacts of yield volatility are then simulated using the GTAP-BIO-AEZ model. The CGE model allows us to project the future bio-economy under alternative oil price projections and also examine the impacts of biofuel mandates under the different future economies. Three sets of CGE model simulations are carried out to test the interacting effects of climate change, economic growth, oil price changes, and the biofuels mandate on corn price volatility:

1) the ...

Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland; Nature Climate Change
Date: 2012
Created: Hertel, T. (4/28/2012)
Updated: Hertel, T. (4/28/2012)
Visits: 1,971
- Renewable energy
- North America

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