Summary CLIMATE, WATER, AND CARBON: THREE ESSAYS IN ENVIRONMENTAL AND DEVELOPMENT ECONOMICS

CHAPTER 1: A WELFARE ANALYSIS OF THE IMPACT OF CLIMATE CHANGE ON MT. KILIMANJARO 1.1. INTRODUCTION Over the past 90 years, more than 80% of Mt. Kilimanjaro glaciers have melted (Thompson et al., 2002; Kaser et al., 2004). Theses melting glaciers are simultaneously occurring with serious precipitation variations in lower altitude. Although rainfall volume is not generally deficient, rainfall distribution within each year is a major threat to the heavily rain-dependent subsistent agricultural system of Mt. Kilimanjaro. These precipitation anomalies are so alarming that some scientists have suggested that the short rainy season may soon disappear (Aggrawal et al., 2003). One of the questions that policy makers are yet to answer is the following: “What could be the impact of these climatic changes on welfare on Mt. Kilimanjaro?” Due to its volcanic soil, Mt. Kilimanjaro constitutes a major bread-basket for more than one million people living in both the Kilimanjaro region and the surrounding regions of Tanzania. A slight alteration of its ability to produce agriculture commodities can have a number of serious impacts on households‟ well-being. Therefore, proper economic analysis is indispensable for motivating adequate policy recommendations to facilitate Mt. Kilimanjaro‟s agriculture escape (or benefit) from the negative (or positive) effects of climate change. Agricultural production on Mt. Kilimanjaro provides a unique setting to analyze the impact of climate change on welfare for two main reasons. First, the variation of precipitation and temperature across altitudes provides a setting for natural experiments to effectively estimate farm revenues‟ responses to climate conditions projected to occur in East Africa. Second, the prevalence of homogeneous farmers with similar cultures, agricultural systems, and market influence shall limit the potential bias from unobservables given the relatively small geographical area that constitutes Mt. Kilimanjaro. The present chapter uses a revenue function approach to estimate the impact of climate change on welfare on Mt. Kilimanjaro . Although revenue is not necessarily equal to welfare, we believe that change in revenue is a good proxy for change in welfare assuming cost to remain constant. The short rainy season is projected to suffer the most from climate change in East Africa (Aggrawal et al., 2003). For this reason, this study focuses on measuring the impacts of short rainy season precipitation variance on agricultural revenue. This approach is important because the increased variation of the short rainy season is the main cause of food insecurity, and the short rainy season provides food and income that fills a critical gap between annual long rainy season harvests (Devereux et al., 2008). Farmers in the region practice intercropping. Therefore, the study develops a multivariate model that assumes interrelationships between crops. Specifically, the study seeks to estimate the impact of climate change on maize, banana, and coffee revenues. Maize, banana, and coffee are chosen because they were, respectively, cultivated by 57%, 90%, and 40% of the sampled population used in this study during the short rainy season of 2008. Further, the spatial distribution of plots within and between villages affects not only exogenous variables, but also the error term structure. Neglecting this spatial correlation may lead to inconsistent and inefficient estimates which may result in flawed policy recommendations (Anselin, 1988). To account for spatial correlation, the present study develops a multivariate spatial approach to capture both the error correlation of crop revenues and their spatial autocorrelation. 1.2. CLIMATE CHANGE AND FOOD SECURITY IN AFRICA Some of the most profound and direct impacts of climate change over the next few decades in Africa will be on agriculture and food security, a more concrete measurement of welfare. Kurukulasuriya et al. (2006) predict that revenues from agricultural activities practiced in dry lands and livestock sales will suffer the most from climate change in Africa. Parry et al. (1999) predict that by 2080, between 55 and 70 million extra Africans will be at risk of hunger due to climate change. This study argues that decrease in expected crop yields are likely to be caused by a shortening of the growing season and decrease in soil water retention capabilities due to a high rate of evapotranspiration. Nelson et al. (2009) find that in developing countries, climate change will cause yield declines for the most important crops. They conclude that the decline in calorie availability will increase child malnutrition by 20 percent relative to a world with no climate change by 2050. Eastern Africa‟s agriculture may no longer benefit from its bimodal annual rainy seasons (Aggrawal et al., 2003). The risks of climate change are threatening the disappearance of the short rainy season and increasing the prevalence of hunger seasons (seasonal food insecurities) each year. Hunger seasons take place during the last few months before the harvest when the household runs out of its food supply from the previous harvest (Devereux et al., 2008). This season usually occurs in places where there is only one growing season per year or where the second growing season has become highly volatile. Hunger seasons are also common in areas where farmers have no access to irrigation, practice subsistent farming, and cultivate marginal and degraded lands. These setbacks unfortunately lock the next generation in a vicious cycle of poverty because the land deterioration problem will only get worse and worse each year. Farmers in countries such as Niger and Malawi, as well as those in low input agriculture in developing countries, face recurring risks of hunger seasons. Consequently, they tend to prefer planting crops that store better while yielding less, or having lower selling value. Faced with hunger seasons, households are also tempted to prematurely harvest their crops in order to assure the survival of their malnourished and/or dying children. In terms of farm revenues, farmers find themselves tempted to sell their harvest quicker to keep the cash that will be used to diversify their diet and purchase food as needed. Unfortunately, lower harvest prices may not permit them to gain enough to cover their agricultural costs. Saving crop sales profits is also very difficult because households may have to repay debts incurred during the hunger season to pay medical bills, to purchase food, or to secure agricultural inputs. Further, according to the World Food Programme: Because of the extreme and covariant nature of the risks they face, and in the absence of risk-management instruments such as crop insurance, risk-averse smallholder farmers naturally seek to minimize their exposure [...] by opting for lower-value (lower-risk) and therefore lower-return crops, using little or no fertilizer and overdiversifying their income sources. These risk-management choices also keep farmers from taking advantage of profitable opportunities; they are a fundamental cause of continued poverty. (2005, 7):