The importance of climate and policy uncertainty in Norwegian agriculture

Abstract

The paper addresses future climate and policy uncertainty for agricultural production and food security in Norway. The two crop simulation models, CSM-CERES-Wheat and, the LINGRA model, were used to determine the impact of climate change on grain yield of spring wheat, and harvest security and biomass yield of timothy, an important forage grass in Northern Europe, respectively. Harvestable yield distributions from the crop models were fed into a stochastic version of the economic sector model Jordmod. Distributions of the rates of agricultural subsidies rates were assessed based on past policy changes and prospective reforms. The model was used to assess the effects of both climate and policy uncertainty on agricultural production, land use, and national food security. Jordmod is comprised of a supply module in which stochastic profits for more than 300 regional farms are maximized and a deterministic market module which maximizes social welfare in the agricultural sector. Socio-economic scenarios were developed around the level of ambition of Norwegian agricultural policy makers. The model results were contrasted with the deterministic results based on average yield and payment rates. The innovation of this paper lays in assessing the combined effects of future climate and policy uncertainty for the agricultural sector in Norway. It also highlights the potential errors made by neglecting these types of uncertainty in economic modelling.