Assessing Market Stability under Climate-Induced Production Shocks: Agricultural Trade and Storage as Adaptation Mechanisms

Esther Boere

No 312578, 2019: Trading for Good - Agricultural Trade in the Context of Climate Change Adaptation and Mitigation... Symposium, June 23-25, 2019, Seville, Spain from International Agricultural Trade Research Consortium

Abstract: Climate change and extreme weather events lead to short‐term variability and shocks to agricultural supply, impacting the entire food system and posing threats to food security. Furthermore, instability in the food system may disturb other systems such as energy and water. Studies into the interdependent demand and supply relationships in these systems require a framework that can take stock of both the climate‐induced deviations between expected and observed prices and yields, the impacts on the food commodity market, as well as different adaptation mechanisms that may serve as market stabilization policies, such as storage and different trade‐liberalization mechanisms. This study develops a non‐stationary model for market stabilization policy design, called GLOBIOM‐X. GLOBIOM-X aims to analyze the impact of climate‐induced yield shocks on market stability and how market instability can be contained through the adaptation mechanisms of stockholding and trade liberalization. The model is based on the bio‐economic land use model GLOBIOM. GLOBIOM‐X runs in annual time steps and can address agricultural land use from the producers’ perspective based on expected prices. Stockholding is incorporated in the model by allowing producers to temporarily stock their products and consumers to take‐up products from storage facilities. For the assessment of the effectiveness of trade policies and stockholding options in reducing price spikes and improving food availability, shortfalls in production based on realistic weather events have been quantified. Three types of storage scenarios; baseline‐level storage, unlimited storage and storage including intervention prices and a trade reduction and complete trade liberalization scenario are implemented in order to assess their impact on market stability. Results are assessed in terms of their environmental impacts, equality and profitability. Thereby, this paper helps to give insight to what extent different types of policy measures reduce the negative impacts that yield shocks due to extreme events have on the environment, equitability amongst consumer systems and competitiveness. Both storage and trade liberalization help reduce the increase in greenhouse gas emissions, storage facilities may lead to a more equitable food system on the consumer side, whereas trade liberalization leads to more competitiveness in the EU agri-food business.

Keywords: Environmental Economics and Policy; Food Security and Poverty; International Relations/Trade (search for similar items in EconPapers)
Date: 2019-06
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iat19e:312578

DOI: 10.22004/ag.econ.312578

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