In a new report*, Professors Douglas Southgate and Brent Sohngen, both of

Ohio State University, analyse the likely impacts of climate change on

agriculture and forestry. They argue that these two sectors can adapt to

global warming, provided that food, timber, inputs, and resources are

exchanged in free markets.  But if governments interfere with market

forces, adaptation will be impeded and commodity supplies will suffer in

response to climate change.

“With the prospect of higher temperatures and less precipitation in some

geographical locations because of global warming, governments must refrain

from regulating or otherwise meddling with prices and commerce. This means

eliminating agricultural protectionism, subsidies to water users (and

others), and regulations which inhibit the use of technology,” said

Professor Douglas Southgate.

“Successful adaptation to global warming is most likely to happen where

goods, services, inputs, and resources are allocated in markets that are

free and competitive. This means unencumbered agricultural trade at the

international level,” added Southgate.

In the context of growing water scarcity worldwide, Southgate and Sohngen

argue that political mismanagement of water resources must be addressed as

a matter of urgency. “Already excessive, the waste and misallocation

created when water is supplied too cheaply to farmers will grow worse as

the planet warms,” they say.

The authors say that water must be subject to market forces rather than

the misallocation currently created by governments:

“Efficient pricing of water – which occurs if that resource is bought and

sold freely as opposed to being distributed by governments at subsidized

prices – is essential at the national level. In the context of global

warming, farmers in dry regions have little reason to adopt conservation

measures if governments subsidize their use of water.”

The report challenges the idea that less developed regions will suffer

disproportionately because of global warming:

“As temperatures rise, wood products obtained from warm settings will

increase, not decrease, and it is likely that the portion of global timber

supplies coming from the low latitudes will increase as the portion

harvested in temperate settings declines,” say Southgate and Sohngen.

–

* “Weathering Global Warming in Agriculture and Forestry: It can be done

with free markets” By Douglas Southgate and Brent Sohngen in the Civil

Society Report on Climate Change,

http://www.csccc.info/reports/report_24.pdf

POLICY RECOMMENDATIONS

The Civil Society Report on Climate Change recommends various policies if

governments are concerned about the implications of climate change on

agriculture and forestry:

1. Remove all subsidies, price-distorting taxes, and regulations from

agriculture, forestry and related sectors. Such policies hinder the

ability of individual actors to adjust to changing circumstances, and thus

stifle the benefits that free competition yields in terms of managing

scarce resources.

2. Enable private ownership, exchange and management of land and water,

without bureaucratic intervention.

3. Privatize government-owned land and water. The combination of (2) and

(3) would enable effective and efficient pricing of water and other scarce

resources, meaning that people and entrepreneurs have an incentive to use

those resources more efficiently.

4. Governments should not unduly restrict the deployment of new

technologies, for instance, genetically modified crops and trees. Such

technologies offer real potential for humanity to use its resources more

efficiently, enabling us to adapt more effectively.

*The Civil Society Report on Climate Change (ISBN 1-905041-15-2, 100 pp.)

published December 2007 by the Civil Society Coalition on Climate Change

(www.csccc.info).

http://www.csccc.info/reports/report_20.pdf

Download PDF

By Douglas Southgate and Brent Sohngen, Ohio State University

Executive Summary

During the 20th Century, atmospheric concentrations of CO2 and other greenhouse gasses (GHGs) rose appreciably. There is some evidence that this caused limited warming of the planet, with worldwide temperatures about 0.6°C higher in 2000 than in 1900. Since GHG concentrations will increase this century, some additional warming of the planet seems likely.
Specific climatic impacts that will result as atmospheric concentrations of GHGs continue to change are difficult to predict. But given specific assumptions about the future course of global warming,1 economic consequences can be examined. Two sectors in which these consequences have been scrutinized are agriculture and commercial forestry.
In general, the costs of environmental change hinge on how people choose to adapt. In the agricultural and forestry sectors, successful accommodation of global warming will not require central planning by governments. To the contrary, adaptation is best accomplished by relying on the sort of decision-making that happens routinely in competitive and unregulated markets – decision-making that is decentralized and individualistic, yet coordinated because everyone faces the same prices for scarce resources.
Thanks largely to the adaptations that producers and consumers will make in the marketplace, global prices of farm products will not be greatly affected if average temperatures rise by 1.0°C to 4.0°C during the 21st Century, as the Intergovernmental Panel on Climate Change (IPCC) is currently forecasting. With prices staying about the same, the main economic consequence of global warming in the farm economy will be to raise or lower the values of agricultural land. Since the 1990s, economists have investigated this consequence in the United States. Some of this research suggests that the aggregate impact of global warming on land values will be negative. However, the expected magnitude is not all that great.
In the face of higher temperatures as well as less precipitation in some settings because of global warming, efficient adjustment is impeded when governments meddle with market forces. This is true of agricultural protectionism. It is also true of distortions in the pricing of water. In particular, farmers in dry regions have little reason to adopt conservation measures if governments subsidize their use of water.
On the whole, higher temperatures will promote tree growth, certainly in places which continue to receive adequate precipitation. Risks of fire will increase as well, although probably not enough to affect timber supplies. Moreover, expected trends in the forestry sector contradict a widely-held belief about the impacts of global warming, which is that developing regions close to the equator will suffer more than affluent settings in temperate latitudes. To be specific, higher temperatures are apt to accelerate a geographic shift that is already underway. As ever larger portions of the global timber supply are obtained from sub-tropical plantations, where trees are grown and harvested in cycles lasting just 10 to 20 years, the share of timber harvested from temperate and boreal forests will decrease.
In the forestry sector no less than in agriculture, efficient adaptation to global warming requires that protectionism be avoided. With or without global warming, the sector’s development depends on strong property rights, in developing countries as well as in affluent nations.

Douglas Southgate specializes in the study of environmental problems in developing countries and has been a faculty member in the Department of Agricultural, Environmental, and Development Economics at Ohio State University (USA) since 1980. Southgate has written numerous chapters and journal articles on public policies contributing to tropical deforestation, the economics of watershed management and related topics. Southgate is also the author of four books, including The World Food Economy (Blackwell Publishing, 2006). Southgate has consulted in 15 African, Caribbean, and Latin American nations.

Brent Sohngen is an environmental and resource economist, and has been a faculty member in the Department of Agricultural, Environmental, and Development Economics at Ohio State University (USA) since 1996. Sohngen has written numerous articles and book chapters on the economics of climate change, forestry markets, and tradable pollution permits. In addition Sohngen has participated as an author on the Intergovernmental Panel on Climate Change. Sohngen is currently developing models to assess the implications of climate change on global demands for agricultural and forestry.