WPS4600 Policy ReseaRch WoRking PaPeR 4600 Differential Adaptation Strategies to Climate Change in African Cropland by Agro-Ecological Zones Niggol Seo Robert Mendelsohn Pradeep Kurukulasuriya Ariel Dinar Rashid Hassan The World Bank Development Research Group Sustainable Rural and Urban Development Team April 2008 Policy ReseaRch WoRking PaPeR 4600 Abstract This paper quantifies how African farmers have adapted fruits and vegetables would increase Africa-wide with the their crop and irrigation decisions to their farm's current very hot and dry climate scenario, except in the lowland agro-ecological zone. The results indicate that farmers semi-arid agro-ecological zone. Millet would increase carefully consider the climate and other conditions of overall under the mild and wet scenario, but decline their farm when making these choices. These results are substantially in the lowland dry savannah and lowland then used to forecast how farmers might change their semi-arid agro-ecological zones. Maize would be chosen irrigation and crop choice decisions if climate changes. less often across all the agro-ecological zones under The model predicts African farmers would adopt both climate scenarios. Wheat would decrease across irrigation more often under a very hot and dry climate Africa. The authors recommend that care must be taken scenario but less often with a mild and wet scenario. to match adaptations to local conditions because the However, farms in the deserts, lowland humid forest, optimal adaptation would depend on the agro-ecological or mid elevation humid forest would reduce irrigation zone and the climate scenario. even in the very hot and dry climate scenario. Area under This paper--a product of the Sustainable Rural and Urban DevelopmentTeam, Development Research Group--is part of a larger effort in the department to mainstream research on climate change. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at Niggol.seo@yale.edu, Robert.mendelsohn@ yale.edu, Adinar@worldbank.org, Rashid.hassan@up.ac.za, and Pradeep.kurukulasuriya@undp.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team DIFFERENTIALADAPTATION STRATEGIES TO CLIMATE CHANGE IN AFRICAN CROPLAND BYAGRO-ECOLOGICAL ZONES1 Niggol Seo2, Robert Mendelsohn3, Pradeep Kurukulasuriya4, Ariel Dinar5, and Rashid Hassan6 1This paper is one of the product of a study "Measuring the Impact of and Adaptation to Climate Change Using Agroecological Zones in Africa" funded by the KCP Trust Fund and conducted in DECRG at the World Bank.. 2School of Forestry and Environmental Studies, Yale University and consultant to the World Bank; 230 Prospect St. (Room 203), New Haven, CT 06511, USA, and a Consultant to the World Bank,; email- Niggol.seo@yale.edu 3School of Forestry and Environmental Studies, Yale University and consultant to the World Bank; 230 Prospect St. (Room 207), New Haven, CT 06511, USA, and a Consultant to the World Bank,; email- Robert.Mendelsohn@yale.edu 4Energy and Environment Group, Bureau of Development Policy, United Nations Development Programme, New York; phone 212-217 2512; email: pradeep.kurukulasuriya@undp.org 5Development Research Group, World Bank, 1818 H St. NW, Washington DC 20433; phone 202-473-0434; email adinar@worldbank.org. 6Department of Agricultural Economics, University of Pretoria, and Center for Environmental Economics for Africa; email Rashid.hassan@up.ac.za. 1. Introduction Awareness of global warming has increased rapidly among scientists, policy makers, and the general public over the past decade (Nordhaus 1992, 2007, IPCC 1996, 2001, 2007). There is an increasing consensus that greenhouse gases should be curbed by international cooperation. However, the very high cost of completely eliminating greenhouse gas emissions suggests that mitigation policy should only slow climate change, not completely halt it at least in the near term (Nordhaus 1992, 2007). Consequently, even with an efficient international mitigation policy, global warming is likely to continue for several decades if not the rest of the century. Communities around the world should consequently be prepared to adapt to climate change. This is especially urgent for farmers who so clearly depend on the climate for their livelihood. Adaptation is especially urgent for low latitude developing country farmers who are expected to bear the brunt of climate change impacts (Mendelsohn et al., 2006). Agriculture in developing countries is one of the most vulnerable sectors of the global economy to climate change (Rosenzweig and Parry 1994, Kurukulasuriya et al 2006; Seo and Mendelsohn 2008c). Farmers will be especially hard hit if they do not adjust at all to new climates (Mendelsohn et al. 1994, Rosenzweig and Hillel 1998; Reilly et al. 1996). Recent empirical studies indicate that farmers have already adapted to the existing climates that they face by choosing crops or livestock or irrigation (Kurukulasuriya and Mendelsohn 2007, 2008; Nhemachena and Hassan 2007; Seo and Mendelsohn 2008a, 2008b) ideal for their current climate. Farmers currently choose their crops or livestock or some mix of them to match their climate. It therefore follows that farmers are likely to select new crops and livestock as climate changes, at least in the long run. By studying adaptation, researchers can help farmers and policy makers identify efficient adaptations, adaptations that will maximize future income in new climate conditions. Existing adaptation studies suggest that farmers should take different adaptation measures depending on their initial climate conditions. For example, a farmer in a wet location would choose vegetables more often than a farmer in a dry location would do. Farmers may also choose not to irrigate given that sufficient rainfall is available to support cultivation. However, these studies focused on the possibility of farmers to adapt to climate change but did not provide differential adaptation strategies specific to a certain zone. This information is crucial to the 2 farmers and policy makers who are interested in making adjustments in anticipation of future climate changes because continental scale adaptation measures would be misleading due to a wide variety of agro-economic conditions across the continent. The purpose of this paper is to provide differential adaptation measures suitable for each location across the landscape. We make use of the Food and Agriculture Organization's (FAO) typology of Agro-Ecological Zones (AEZs) of Africa. Specifically, we focus on the choice of crops and irrigation in African cropland by 16 AEZs. The results of this analysis are then extrapolated from the sample of farms explored in this study to all of Africa using the AEZ classification of farms. We begin by analyzing the choice of crops and irrigation as a function of climate and other control variables using a sample of over 9000 farmers from 11 countries in Africa who grow crops. We then use the FAO classification of African cropland into 16 AEZs to examine AEZ specific adaptation strategies. We use these zone specific adaptation strategies to see how adaptations would be applied across Africa. The next section develops a simple theoretical model of crop and irrigation choice. We use a logit to explain irrigation choice and a multinomial logit to examine crop choice. In the following section, we describe the data used in this paper which is based on GEF/World Bank project in Africa and the FAO classification of Agro-Ecological Zones. In the rest of the paper, we present empirical results and simulation results of the impacts of climate change on these decisions based on two climate models. We conclude the paper with a summary of key results and a discussion of relevant policy insights. 2. Economic Theory Farmers are observed to make many management decisions on their farms. We assume that they make these choices to maximize profit. Through generations of learning by doing, most farmers know what choices work best on their farms. With changing conditions, of course, farmers must determine how to adapt, how to change these choices. Farmers are commonly observed adjusting to changes in government policy, market prices, availability of new varieties, and changes in access as these changes occur. This paper does not address the short term problems farmers face keeping up with rapidly changing conditions. Rather, we focus on long-term adaptations that farmers make after they have had time to learn about the new conditions and adjust to them. 3 In this paper, we focus on two important decisions by crop farmers: whether to irrigate or not, and which crops to grow. Let the profit associated with irrigation in a specific AEZ (w) be written in the following form: =Vj(Zw)+ where j= 0or1,w =1,...,W. (1) jw jw where Z is a vector of exogenous characteristics of the farm and characteristics of the farmer. The subscript j=1 refers to irrigated farms and j=0 to rainfed farms. The subscript w refers to the AEZs. The farmer will choose to have irrigation if: 1 >0 * * (2) Assuming that the cumulative distribution of the error term is a logistic function, the choice of whether or not to establish irrigation system can be estimated with a standard logit model. Modeling the choice of crops is slightly more involved technically since the choice set includes more than two alternatives. Additionally, some farmers can choose a combination of different crops whereas other farmers select only one crop. To include all combinations of crops as a discrete choice is not feasible since African farmers report more than 50 individual crops. In this study, we examine all the combination of crops that appear in significantly large numbers of farms in the sample (Seo and Mendelsohn 2008a, Kurukulasuriya and Mendelsohn 2007). The majority of farms have a single crop or a combination of two crops in our sample. Let the profit from raising a specific crop or a combination of crops for a farm in AEZ w be written in the following form: njw =V (Znjw)+njw wheren =1,..., N, j=1,...,Jand w =1,...,W. (3) where Z is a vector of all the independent variables that are appropriate for the explanation of farm profits. For example, Z could include climate, soils, water availability, access variables, electricity provision, household size, education of the farmer, and crop prices. The subscript n refers to the n-th farm in the sample, j refers to a crop or a combination of crops, and w refers to Agro-Ecological Zones at which the farm is located. Note that the farmer chooses crop j, but he does not choose AEZ w. The profit function in equation 3 is composed of two components: the observable component V and an error term . The error term is not known to the researcher but may be known to the farmers. The error term is known up to its cumulative distribution. 4 The decision of a farmer who is located in AEZ w is to choose one crop from the many alternative crops that is most profitable to him given the external conditions, which can be written succinctly as follows: argmax{ *n1w,*n2w,...,*nJw} (4) j Suppressing subscript n and w for convenience of the discussion for the moment, the farmer will choose crop j over all other crops if: >k fork j. [orif k -