Conclusions

Climate change is an increasingly significant global challenge and its negative impacts have been already felt in some regions of the world. This paper uses a global CGE model to assess the long term economic effects of climate change. The results suggest that the aggregate impacts of agricultural damages caused by climate change on the global economy are moderate. However, the impacts are not evenly distributed across the world. Developing countries would bear disproportionately large losses arising from climate change. Some significant adjustments in global agricultural production and trade, and consequently the distribution of income, may be accompanied by the changes of climate.

Southeast Asia is an important agricultural producer and consumer and plays a major role in the world market via several agricultural products. With the anticipated decline in agriculture share of GDP, the aggregate output losses from climate change-related agricultural productivity reduction would be modest for most Southeast Asian countries. However, import dependence on crop products would rise for Southeast Asia in the coming decades. This increasing exposure to world agricultural markets would make Southeast Asian economies suffer more welfare losses through the deterioration of terms of trade. This effect is especially significant for Malaysia and Singapore.

It is important to mention that there are great uncertainties in both the scientific projections and technical, social, and economic prospects. Therefore the results presented in this paper are only illustrative. Their purpose is to provide insights on the direction and order of magnitude of the potential medium- and long-term impacts, and reveal some key potential driving forces in determining these impacts. They do not represent forecasts for the future.

One major uncertainty is the technological progress in agriculture. Agricultural productivity growth has been, and will remain to be, the most important line of defense for global food security. However, in the past two decades, productivity gains from the Green Revolution have shown signs of being exhausted. If the rising demand of agricultural products, driven by population and income growth, runs a close race with technological progress in the future, the impacts of agricultural damage arising from climate change could be substantial (Zilberman et al. 2004; Cline 2007). This is especially pronounced in Southeast Asia, where productivity growth in the crop sector has been negative since 1980. Reversing this trend of declining agricultural productivity would be an important component for a Southeast Asian strategy to cope with the potential risks from the expected changes in climate.

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