Economic impacts of a low carbon economy on global agriculture: the bumpy road to Paris

Limiting climate change below a 2°C temperature rise this century will require substantial reductions of greenhouse gas emissions and the transition to a climate-friendly, low carbon economy, which may also impact the agricultural sector. In this paper, one of the main partial equilibrium agro-economic models used to prepare global medium-term agricultural market projections (Aglink-Cosimo), was enabled to transmit and measure the impact of a less carbon-intensive economy on agricultural markets. In an integrated economic modelling framework we first apply a carbon tax in a general equilibrium market model to quantify the macroeconomic impacts of moving into a global low carbon economy. We also quantify the potential adoption of GHG emission mitigation technologies for a given carbon price. This information is used in the Aglink-Cosimo model to assess the impacts on agricultural markets of different global non CO2 carbon tax scenarios compatible with the 2.0°C target prescribed in the Paris Agreement. Results for 2030 show a reduction in global non-CO2 GHG emissions from agriculture by 10, 16 and 19% in a 50, 100 and 150 USD/t CO2eq global carbon tax scenario respectively (Least Developed Countries excluded). Only between 0.6% and 1.3% of the global reduction is caused by indirect macroeconomic effects (i.e. changes in gross domestic product and prices for energy, fertilizer and pesticides), but at the country level these macroeconomic effects can cause up to 5.8% of the reduction in agricultural emissions. The results found in this paper suggest that lower emissions are related to significant impacts on agricultural production and underline the importance of integrating GHG emission developments and impacts of related policies into agricultural market projections.

JRC.D.4 - Economics of Agriculture