Introduction

Recent scientific research has concluded that the increased atmospheric concentration of greenhouse gases will have significant impacts on the Earth's climate in the coming decades. Assuming no emission control policies, the Intergovernmental Panel of Climate Change (IPCC) predicted that average global surface temperatures will increase by 2.8ºC on average during this century, with best-guess increases ranging from 1.8 and 4.0ºC (IPCC 2007a). Global warming would alter natural climate and environmental systems in many ways, leading to an increased frequency of extreme weather events, rising sea levels, a reversal of ocean currents, and changes in precipitation patterns. These changes could impact social-economic activities, with serious implications for the well being of humans long into the future.

Agriculture is one of the most vulnerable sectors to the anticipated climate change. Despite the technological advances in the second half of 20th century, including the Green Revolution, weather and climate are still key factors in determining agricultural productivity in most areas of the world. The predicted changes in temperatures and rainfall patterns, as well as their associated impacts on water availability, pests, disease, and extreme weather events are all likely to affect substantially the potential of agricultural production. Literature on the economics of climate change suggests that although global crop production may be boosted slightly by global warming in the short term (before 2030), it will ultimately turn negative over the longer term (Bruinsma 2003; IPCC 2007b). Moreover, the impact of climate change on agricultural production is unlikely to be evenly distributed across regions. Low latitude and developing countries are expected to suffer more from the agricultural effects of global warming, reflecting their disadvantaged geographic location, greater agricultural share in their economies, and limited ability to adapt to climate change. In contrast, crop production in high latitude regions will generally benefit from climate change. In a recent global comprehensive estimate for over 100 countries, Cline (2007) predicted that global agricultural productivity would fall by 15.9% in the 2080s if global warming continues unabated, with developing countries experiencing a disproportionately larger decline of 19.7%.

Agriculture plays an important role in Southeast Asia, contributing to more than 10% of gross domestic product (GDP) in most regional economies, and providing jobs for over one third of the working population in the region. As is the case in other developing regions of the world, nearly three fourths of the poor in Southeast Asia reside in rural areas, and a large majority of them are dependent on agriculture. Consequently, agricultural development has important implications for the reduction of poverty in Southeast Asia. Moreover, the increased exposure of Southeast Asia's agriculture sector to international trade means that any climate change-related shocks in international markets for agricultural products will be easily transmitted to the region through trade channels.

This paper used a dynamic computable general equilibrium (CGE) model of the global economy to investigate the potential impacts of climate change on agriculture and the world economy, with a special focus on Southeast Asia. The CGE model is an economy-wide model that elucidates interactions among industries, consumers and governments across the global economy. The detailed region and sector disaggregation of the model makes it possible to capture the spillover effects of sector- or country-specific shocks. Climate changes impact an economy directly through the effects on that economy's agricultural outputs and indirectly through changes in the agricultural production of other countries. We established this distinction by comparing the scenario of agricultural productivity shrinkage in Southeast Asia to the scenario of agricultural productivity shrinkage in the rest of the world. The role of productivity growth in adapting to the climate change was also examined.

Section 2 of this paper discusses the relationship between climate change and agricultural production by reviewing the existing literature in which various modeling approaches have been employed to estimate the impacts of climate change on agricultural productivity. We then describe the specifications of the CGE model used in this study in Section 3. Section 4 assesses the impacts of climate change-induced global agricultural productivity decline on agricultural production, trade and macro-economy. The final section offers conclusions.

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