Impacts of Climate Change on Agriculture

Chapter 8
Impacts of Climate Change on

Agriculture and Natural
Environment: The Need for
Collective Global Action
Raza Ullah and Farhana Gul* and Syed Asif Ali Naqvi
Abstract
Climate change poses serious threats to agricultural sector of many developed and
developing countries. The changes in temperature and rainfall patterns may lead to
sizeable losses in agricultural production which in turn may lead to food insecurity
of masses in many countries. Climate change is also expected to affect the supply of
natural resources including water, forests, ecological resources, land use
management, biodiversity, pest, diseases and exotic organisms and costal and marine
environments. These wide spread impacts of climate change urge for a timely and
collective response on global scale. The concern over climate change has been
reflected in number of climate change agreements. Most significant in this regard are
the establishment of United Nations Framework Convention on Climate Change, the
Kyoto Protocol and the Paris Agreement.
*
Raza Ullah
Department of Agricultural and Applied Economic, The University of Agriculture, Peshawar, Pakistan.
For Correspondance: raza_khalil@yahoo.com
Farhana Gul
Department of Agriculture, University of Swabi, Swabi, Pakistan.
Syed Asif Ali Naqvi

Department of Economics, Government College University, Faisalabad, Pakistan.
Managing editors: Iqrar Ahmad Khan and Muhammad Farooq

Editors: Muhammad Ashfaq and Sultan Ai Adil
University of Agriculture, Faisalabad, Pakistan.
153
154 R. Ullah and F. Gul
Keywords: Climate Change; Natural Resource Valuation; Climatic Risks; Kyoto

Protocols; Paris Agreement
8.1 Introduction
The issues related to climate change and its potential impacts on human lives are
echoing strongly around the globe. The potential impacts of climate change on
agricultural production is of interest for researchers and policy makers as it may
threaten the food security of masses depending directly or indirectly on this sector of
the economy. This chapter is aimed at highlighting the concept of climate change,
climatic risks and related issues on agricultural sector of Pakistan. The chapter starts
with background of climate change, science and economics of climate change, and
proceeds to the climatic risks and uncertainties and their impacts in agriculture. The
market and non-market valuation techniques of natural resources and environment
are provided in the third section while the climate change agreements are listed in
the final section of this chapter.
8.2 Climate Change

There are various definitions of climate change describing the alteration in the
climatic conditions over time. The Intergovernmental Panel on Climate Change
(IPCC), for example, defined climate change as a change in the state of the climate
that can be identified (e.g. using statistical tests) by changes in the mean and/or the
variability of its properties and that persists for an extended period, typically decades
or longer. Similarly, according to the United Nations Framework Convention on
Climate Change (UNFCCC), climate change is change of climate that is attributed
directly or indirectly to human activity that alters the composition of the global
atmosphere and that is in addition to natural climate variability observed over
comparable time periods.
Climate is a statistical description of weather conditions and variability in both
average and extreme weather events. In simple words, climate change represents
variability in average weather pattern over a longer period. Leading cause of climate
change are the emissions of greenhouse gases which play a significant role in
determining climate. Change in weather variables such as temperature and rainfall is
natural however the daily and monthly changes in these indicators do not exemplify
climate change. The climate change is usually estimated for period long enough
(usually 30 years or more) to observe complete array of weather events.
Based on variation in local rainfall patterns or seasonal temperature, climate can be
defined for a specific area or region. The average surface temperature can be used to
define climate for the entire earth as well. Global changes in average temperature are
mainly caused by variations in heat output from the sun, variation in earths orbit
around the sun, changes in the amount of ice on earth, changes in cloudiness and
concentration of greenhouse gas in the atmosphere.
8. Impacts of Climate Change on Agriculture and Natural Environment 155
8.3 Causes of Climate Change

The main causes for climate change can be categorized into two broad categories.
These are i) natural causes of climate change and ii) human causes of climate change.
8.3.1 Natural Causes of Climate Change

The natural causes include eruptions of volcanoes, ocean current and variation orbital
and solar variation of earth.
8.3.2 Eruptions of Volcanoes

The eruption of volcanoes emits sizable amount of Sulphur dioxide (SO2), dust, water
vapour and ash into the atmosphere. These eruptions increase planetary reflectivity
causing atmospheric cooling thus influencing climatic patterns for years. Volcanoes
produce tiny particles called aerosols which have cooling effect by reflecting solar
energy back into the space. During the volcanoes eruption greenhouse gas, carbon
dioxide are also produced however the impact of these gases are insignificant as than
emissions created by humans.
8.3.3 Ocean Currents

Oceans are the key components of the climate system. Huge amount of heat is moved
by the ocean currents across the globe. Ocean current patterns are driven by the winds
pushing horizontally against the sea surface. El Nio, a phenomenon which occur
every 2 to 6 years are produced by the interaction between the ocean and atmosphere.
Changes in the ocean currents affect the movement of CO2 in and out of the
atmosphere and therefore play significant role in determining CO 2 concentration in
the atmosphere.
8.3.4 Changes in Earth Orbital

Each year, the earth completes one orbit around the sun. The earth forms 23.5 angle
to the perpendicular plane of its orbital path. There can be little but significant
variations in the seasons over tens of thousands of years arising from the changes in
the angle of earth around the sun. Bigger angle leads to warmer summers and cooler
winters while smaller angles leads to colder summers and milder winters.
8.3.5 Variations in Solar Energy

The Solar energy is the main source of Earths climate system. From an everyday
point of view, though sun energy appears to be constant but small changes can cause
climate changes. Some scientists expect that increase in the output of solar energy in
the first half of the 20th century causes warming. Variations in energy output from
sun would cause the climate to change as the sun is the main source of energy.
Scientific evidences suggest that solar variations had played key role in climate
change in the past. The Little Ice Age between 1650 and 1850 was also believed to
be triggered by a decrease in solar activity.
8.3.6 Human Causes

Burning of fossil fuels, agriculture and land conversion for forestry are some
examples of human activities which can also cause climate change. All these
activities can have both cooling and warming effects on climate by influencing the
amount of incoming and outgoing energies. Carbon dioxide is the major outcome of
fossil fuel combustion. Since industrial revolution the overall effect of human
activities has been a warming effect, driven primarily by CO 2 outflow and boosted
by emissions of other greenhouse gases.
8.4 Climate Change Impacts

Climate change has long term impacts. The scientific evidence is unequivocal. This
trend cannot be explained alone by natural variability. Human activities have
significantly threatened the earth. The impacts of warming can be observed from
rising sea levels to melting snow and ice and from more drought to extreme rainfall.
There is already obvious effect of climate change on freshwater supplies, ecosystems
and human health around the globe. A more severe and potential impacts of the
changing climate can be sidestepped by significant reduction in the volume of heat-
trapping gases emitted into the atmosphere mainly by human activities. The potential
impacts of climate change on various key areas (as described in C2ES 2011) are
discussed in the following sub-sections.
8.4.1 Effects on Agriculture

The direct exposure of agriculture sector to natural environment make this sector the
most vulnerable to climate change. Agricultural productivity is subjected to range
of climatic factors from variable rainfall patterns to increased temperature, from
changes in sowing and harvesting time to water availability and from
evapotranspiration to land suitability. All these factors can alter yield losses and
cause significant reduction in agricultural productivity (Kaiser and Drennen 1993).
The changing climatic parameters have a long-term impact on agricultural
productivity however some regions in the temperate zones are likely to benefit from
such changes while others, in the tropical and sub-tropical regions are expected to
face harsh consequences. The 4th IPCC report stated that by 2050 there could be a
decline in the yield of cereals up to 30% coupled with decline in gross per capita
availability of water from 1820 m3 in 2001 to 1140 m3 in 2050 in South Asia.
8.4.2 Effects on Weather

i. More Extreme Weather
The recent common trend of extreme weather events is suspected to
continue in the coming time as well. The significant impact of the extreme
weather conditions will have serious implications for human societies and
natural world.
ii. Stronger Hurricanes

Scientific evidences have assured that the hurricanes are becoming stronger.
The studies also conclude that due to the warming of water the hurricanes
are expected to become even more powerful and intense as the heat in ocean
surface water can fuel its strength.
iii. Hotter and Wetter Extremes
It is evident that the hike in extreme temperatures are more than average
temperatures. There is a considerable increase in the number of hot days
and nights compared to cold days and nights. With the current trend of
global warming increase in the prevalence of heat waves and high
temperature extremes are more likely.
8.4.3 Effects on Water

The current trend of climate change is expected to affect the quantity, quality and
availability of fresh water and may lead to more frequent natural disasters including
floods, droughts and heavy precipitations. Though the impacts are expected to be
different in various regions, it is generally believed that the dry regions will become
drier and wet regions will become wetter.
i. Increase in Floods and Droughts
There is an expected alteration in the incidence of heavy rains due to climate
change. Frequent heavy rains, in some regions, are likely to raise the
occurrence of flooding while some of the Semi-arid regions will face
challenges of water shortage due to the expected decline in water resources.
Similarly, there is expected increase in the drought affected areas. The
warmer atmosphere will hold more water which in turn will increase the gap
between rainfall events and the rainfall amount in an individual event.
Consequently, areas currently receiving more rainfall may also face more
frequent and longer droughts.
ii. Change in Quantity and Quality of Water
There will be a significant impact on water availability of millions of people
particularly those depending on water from seasonal melting of mountain
ice and snow. Global warming can considerably effect water flows in a
number of ways. i) Melting of glaciers and snowpack, ii) increasing the
frequency of precipitation and iii) changing the timing of snowmelt. The
short-term consequences of melting of mountain ice and snow can be seen
in the form of flooding while in the long-run, the loss of these water reserves
will considerably lower water availability for human, agriculture and energy
production.
iii. Sea Level Rise
The rise in the sea level, due to melting of glaciers and expansion of warmer
sea water, will threaten coastal communities, wetlands and coral reefs. A
rise of about 6cm in the average sea level was observed during the 20 th
century and based on scientific evidences it is predicted that the sea level
may rise to 59 cm during 21st century.
iv. Melting of Arctic Sea Ice
Global warming reduces the summer thickness of sea ice to about 50% of
what it was in 1950. This melting ice may affect the water circulation of
ocean and speed up warming of Arctic water.
8.4.4 Effects on Human Health

There are numerous impacts of on human health. Alteration in the quality of drinking
water due to climate change is the most momentous direct effect on human health.
Other direct impacts of climate change on human health include heat waves, floods
and storms. The frequent heat waves are expected to increase the number of deaths.
Rise in air pollution will lead to a rise in asthma and other respiratory illnesses and
more frequent and severe water and food related diseases. There are also some
indirect ways in which climate change is predicted to effect human health. These
include increase in smog and ozone in the cities which will cause spreading infectious
diseases and reduce the quality and availability of food and water.
8.4.5 Threats to Ecosystems

Ecosystems around the world are under severe threat from climate change and related
hazards. Climate change is affecting flora and fauna everywhere in the world. Some
ecosystems and coral reefs, particularly those which are sensitive to high temperature
and ocean acidity are at risk as both temperature and ocean acidity are rising due to
rising levels of CO2 in the atmosphere. The tropical rainforests are also under risk as
they are sensitive to changes in climatic parameters including precipitation and
temperature.
Climate change affects ecosystems causing them to shift toward the poles and to
higher altitudes. A more severe threat is faced by the organisms, such as polar bears
and other mountainous species, already living at the poles and high altitudes. Distinct
species responds to climate change in diverse ways and at different rates. Rising
temperature increases risk to species; According to contemporary research an
increase in temperature by 2F will increase the risk of extinction for up to 30% of
species.
8.4.6 Depletion of Glaciers, Ice Sheets and Snow Packs

Climate change will lead to considerable reduction in the land based snow and
ice cover. This water flow will raise the average sea level. Mountain glaciers at
all latitudes, from the Himalayas in Central Asia to the Andes in tropical South
America to the Rockies and Sierras in the western United States, are in retreat.
The global warming is expected to significantly reduce mountain glaciers by mid-
century.
8.5 The Science of Climate Change

The Earths climate is changing rapidly. Over the last century, average surface
temperature of earth has been increased and several other related changes have been
witnessed. There is a growing body of evidences suggesting that leading causes of
such changes are emissions of greenhouse gas from human activities. If the emissions
rate of the greenhouse gas continued with the same pace, global temperature is
expected to significantly raise over the coming century and beyond.
These statements are supported by the following evidences:
i. Green House Effect: Greenhouse effect plays major role in climate change.
It is believed that greenhouse gases like water vapor, CO2, methane, nitrous
oxide and some industrial effluents such as chlorofluorocarbons (CFCs) act
like an insulator and raise the temperature of the Earths surface.
Resultantly, the Earths surface gets warmer than it would otherwise be.
These gases, once released into the environment, remain there for a very
long time i.e. CO2 once released into the atmosphere remains for hundreds
to thousands of years. Water vapour is a significant greenhouse gas however
it differs in a sense that it is not affected directly by human activities. Rather
climate itself controls its concentration in the atmosphere. Water vapour
therefore act as an amplifier for other factors causing climate change.
ii. Past Records: Earths history show great variation in climate. Measurement
records from the last century shows that there is considerable rise in the
average surface temperature of the earth coupled risings levels of
greenhouse gases resulting from human activities. These environmental
changes are directing other environmental variations. Even though climatic
parameters vary from year to year and from decade to decade, there is an
overall upward trend observed in the average temperature over the last
century.
iii. Climate Models: Based on the climate models coupled with the past
knowledge on climatic parameters, global warming will continue until and
unless emissions of greenhouse gases are condensed and its amount in the
atmosphere is stabilized. The estimates from the climate models suggest that
there will be an increase of 2C to 7C in the average global temperature by
2100. Though some of the regions are expected to benefit from such
changes, the overall impacts are likely to adversely affect the world under
the current structure of the global society.
8.6 The Economics of Climate Change

Understanding climate change economics is essential in addressing the challenging
issues related to climate change and improving climate policy deliberations. There is
a key role of economic analysis in policies and regulations on climate change.
However, there is a major challenge faced by the researchers regarding the
knowledge gaps and identification, assessment and communicating the implications
of economic uncertainties. Climate change is likely to impact the necessities of life,

including access to safe drinking water, food production, health and environment,
around the globe. Because of global warming hundreds of millions could suffer
starvation, water deficiency and coastal floods.
The main focus of climate change economics has traditionally been on modeling the
impacts of rising emissions, technological options, estimating social cost of carbon
and exploring tax, market and other economic structures. However, the most
contemporary and pressing needs include international collective action to seek
solution for the rising level of greenhouse gas emissions and therefore there is a need
to focus on assessment of policy positions of individual countries coupled with an
analysis of how to create environment for a stronger collective global action.
The formal economic models estimate suggest that the cost of inaction could result
in losing at least 5% of the global GDP each year from now and forever. The impact
can be even worse (around 20% of the global GDP) if a range of risks and impacts
are considered. Contrary, the cost of action (reducing emissions of greenhouse gas
to an acceptable limit where the worst impacts of climate change can be avoided) can
be limited to only one% of global GDP every year. There are also rick scientific
evidences suggesting that emissions resulting from economic activities, such as
burning fossil fuels for energy, are leading causes of changing the earths climate.
Therefore, understanding climate change economics is crucial to guide effective
international response to this challenge.
Climate change impacts are expected to be felt in three crucial areas:
Agriculture sector is expose to nature and therefore the impacts of climate
change are expected to be felt more in this sector. Declines in food
production will lead to wide spread starvation and induced population shifts.
Farmers adaptations to climate change can potentially solve the problem
and can increase food production even under global warming.
With climate change and global warming, the species extinction rates are
projected ranging from 10 to 55% per century.
With changing climate there is expected increase in the frequency and
duration of sudden catastrophic risks. Moreover, global warming may lead
to melting of Greenland ice sheets which could raise ocean levels 22 to 23
feet.
Economics of climate change is mainly aimed at assessment and
management of the risks associated with climate change, designing national
and international measures to reduce emissions of greenhouse gas and to
mitigate the potential impacts that can no longer be avoided. Economic tools
can be used in designing cost effective climate change tackling policies
which enable societies capabilities for increasing well-being faster in the
long run than without it. Like other environmental issues, climate change
also comprised of externalities i.e. greenhouse gases emission harms others
at no cost to the agent responsible for emission. Under the assumptions of
certainty, single government and perfect competition, the standard theory of

externalities uses one of the following;
i. Taxation of the emitter equivalent to marginal social cost (Pigou)
ii. The allocation of property rights with trading (Coase) and
iii. Direct regulation
There are, however, several limitations that can hinder the effective implementation
of these regulations these include weak representation of the agents most effected
(future generations), major uncertainties, a global scale, long-term horizons and
significant interfaces with other market failures. Thus, a more complex and much
deeper economic policy problem persists despite the provision of initial useful
insights from the standard theory. These problems include inter-temporal global joint
action under major uncertainty and associated market failures.
These concerns shape the structure of the climate change economics and require the
subject to cover a wider range of issues including growth and development,
institutions, industry, public finance, innovation and technological change,
demography and migration, information and uncertainty, the international economy
and environmental and public economics. For effective action against environmental
problems the international community must unearth a collective global way forward
and develop clear long-term global treaties where markets and entrepreneurs can
function effectively. Such treaties will require discovering structures for incentives
to foster economic social and political perspectives in making more effective and
stronger collaboration.
8.7 Risk and Uncertainties: Concepts and Definitions

There is no generally accepted definition of risk. Some authors consider risk and
uncertainty as synonymous terms, while others treat risk because of uncertainty.
Knight (1921) first tried to distinguish risk from uncertainty. He stated uncertainty
as an environment where possible outcomes and their respective probabilities of
occurrence are not known. While in a risky environment, both the likely outcomes
and the probabilities of occurrence are known.
Hardaker et al. (1997) defined risk as imperfect knowledge where the probabilities
of the possible outcomes are known, and uncertainty exists when these probabilities
are not known. According to Singh (2010) uncertainty refers to an even the
outcome of which may be one of the many probable outcomes and therefore is
uncertain. Though it is difficult to measure the uncertain outcomes, however, a
certain probability may be attached to represent a outcome.
8.7.1 Risk and Uncertainties in Agriculture

Uncertainty and risk are typical features of agricultural production, which can
significantly lower production levels causing losses to a great extant and affect the
production decisions at farm level (Ullah 2014). Agricultural risks rise mainly due to
the climate variability and change, the complexity of biological processes, the
seasonality of production, the geographical separation of production region and end

users of agricultural commodities, frequent natural disasters, the yield and prices
uncertainty of agricultural products, markets imperfection and limited extent of
financial services to alleviate risk including credit and insurance (Jain and Parshad
2007). These factors not only imperil farmers livelihood and incomes but also
threaten the sustainability of the agriculture sector and its potential to eradicate the
problem of widespread poverty of the farmers and others dependent on agriculture
sector. The concern about risk in agriculture should be left not only to farmers but
also to the whole society, as the risk averse nature of farmers may result in
misallocation of resources that reduce overall welfare.
8.7.2 Sources of Risks in Agriculture

There are two broad categories of risks in agriculture (Huirne et al. 2000) and
Hardaker et al. 2004). These are i) business risks which includes production or
technical risks, market of price risks, technological risks, institutional and legal risks
and human or personal risks and the ii) financial risks. These sources of risks are
discussed in detail as follow;
8.7.3 Business Risk

Business risk is the combined effect of production/technical risk, market/price risk,
technological risk, legal and social risk and human/personal risk. The firm faces these
risks independent of the way in which it is financed.
i. Production or Technical risk is associated with weather (rainfall,
temperature, hail), plant and animal diseases, fire, wind and theft.
Production risk is described in terms of variability in yield. Production or
technical risk mainly arises from the variable nature of the climatic
parameters and uncertainty in crop performance or livestock.
ii. Market or Price risk originate from falling output and/or rising input prices
after a production decision has been taken. Generally, farmers, almost all
over the world, are subjected to unpredictable competitive input and output
markets; therefore, market or price risk is often significant and may rise over
time. Besides the variability in input output prices, uncertainty regarding the
availability of inputs is also a critical source of market risks.
iii. Technological risks refer to changes in machinery, biological and chemical
technologies. The farmers cannot predict these changes. Obsolescence in
machinery is the cost of depreciation that may be incurred due to the
introduction of new machines that make the old machines relatively more
costly to use. Technological enhancement in transportation, processing and
other non-farm activities can also influence farm incomes.
iv. Institutional and Legal risks encompass all government programs related
to price and income, and other tax, trade, credit and environmental policies.
These programs and policies have effect on the operating environment of
the farm activities. It also involves other factors such as contracts about
purchases and land leases, and political instability due to internal and/or
external factors.
v. Human or Personal risk is related to death, illness or injury of the farm
owner/operator and/or the farmers labor force. Human or personal risk can
be caused by major life crises such as farm owners death, or the separation
of individuals who co-own the farm enterprise such as diverse of a husband
and wife, prolonged illness of one of the principals, and carelessness in
handling livestock or using machinery, causing injury.
8.7.4 Financial risk

Financial risks include increasing costs of capital, exchange rate oscillation, deficient
liquidity and potential loss of equity. Besides the risks of leverage, there are financial
risks in using credit including the unexpected rises in markup rates on credit amount,
the unexpected call for loan repayment by the lender, and the unavailability of funds
when required. Financial risk multiplies the business risk from the equity holder's
perspective via the effect of leverage; a higher proportion of debt capital to total
capital means higher multiplicative factor applied to business risk.
8.7.5 Climate Risks and Agricultural Sector

Among the major risks farmers face is the production risk which is the risk associated
with production losses (Ullah et al. 2015). The key production risks include adverse
weather condition, pests and diseases infestation, and the interface of technology and
other farm and management characteristics, genetics, efficiency of machines, and
input quality. Weather is generally considered as the dominant source of risk among
the various sources of production risks in agriculture. Farmers have little to do against
the natural calamities such as flood, drought, cyclone and storm surges, hails storm,
etc. and they are mostly uncertain. Time itself plays key role in the production of
farm products as long production intervals are shaped by the biological processes
triggering crop production and animals growth. This fact can also heighten the
impacts of those uncontrollable factors.
Owing to the external factors including weather and pests and diseases, agricultural
producers, unlike most other entrepreneurs, are unable to foresee the certain output
amount from the production process. The adverse events can have struck farms
during harvesting and collecting phases resulting in sizeable losses. Production risk
is likely to increase due to climate change and globalization. A higher incidence of
extreme weather events is expected. Globalization is also likely to drive an increased
frequency of pest or disease outbreaks. The limited social safety nets and
infrastructure for reducing and mitigating risks in most of the developing countries
make them the most vulnerable to climate change and climate variability. Moreover,
the marginalized farmers, those engaged in unskilled labor and have very limited
access to capital are the most vulnerable population to climate variability and change
as the catastrophes resulting from adverse weather events can result in trapping the
poor into chronic poverty.
8.8 Climatic Risks in Pakistan

Pakistan is vulnerable to disaster risks which challenge the sustained economic
growth of the country. The natural hazards such as avalanches, earthquakes,
cyclones/storms, floods, droughts, epidemics, glacial lake outbursts, landslides, pest
attacks, river erosion and tsunami possess serious threats to the process of overall
economic development. The October 2005 earthquake caused a loss of $ 5.2 billion
which was more than 20% of the national budget (about $ 25 billion) during 2006-
07 and was much larger than the amount allocated for the development of social
sector. Similarly, the estimated economic value from the 14 major floods since 1947
till 2007 stood at $ 6 billion (NDMA, 2007). Drought is another climatic catastrophe
adversely affecting agriculture sector and allied activities. In 2001 the drought
reduced economic growth rate to 2.6% compared to the average growth rate of over
6% (SIDA 2010). This natural calamity occurs mainly in Balochistan province,
Southern parts of Punjab province and D.I. Khan in Khyber Pakhtunkhwa province.
Pakistan also faced two successive years of massive floods in 2010 and 2011 which
caused heavy losses. The July 2010 floods displaced over 20 million people all over
Pakistan, which are much higher than the 2004 Indian Ocean tsunami, the 2005
Kashmir earthquake and the 2010 Haiti earthquake combined. The floods submerge
around one fifth of the country total land area, destroyed 1.9 million houses and
caused over 2000 deaths. The total economic loss of the floods has been estimated at
$43 billion. In September 2011, the devastating floods hit southern and northern parts
of Sindh and Balochistan provinces affecting 23 districts in Sindh and 11 in
Balochistan. Public and private assets suffer heavy losses during the catastrophe,
affected 9.6 million people, damaging around 1 million houses, causing 520 deaths
and 1180 injured. The total economic value of losses stood at $ 3730 million while
the minimum reconstruction cost was estimated at $ 2747 million (GoP 2012).
8.9 Climate Induced Disasters and Agriculture Sector

of Pakistan
The agriculture sector is the backbone and a principal component of economy of
Pakistan. It currently contributes 20.9% to GDP. Agriculture engage 43.5% of the
countrys labor force and provide livelihoods for 60% of the rural population.
Agriculture sector of Pakistan has a crucial role to play in generating economic
growth, eradicating food insecurity, reducing poverty and fostering the process of
transformation towards industrialization. The two successive years of massive floods
in 2010 and 2011 in Pakistan considerably affected this important sector of the
economy.
In July 2010, the monsoon floods severely affect all sub-sectors of agriculture.
Agricultural crops, livestock, fisheries and forestry along with primary infrastructure.
The natural calamity occurs just before the harvesting of major crops i.e. maize, rice,
cotton, sugarcane and vegetables. The estimated overall production losses of paddy,
sugar cane and cotton were reported to be 13.3 million metric tons. Standing crops
on more than 2 million hectares of land were lost or damaged and over 1.2 million
head of livestock (excluding poultry) were perished in the catastrophe (Ullah et al.
2016). Again in 2011 the massive flood struck and severely affected Sindh and
Balochistan provinces. The impact was significant on peoples lives in both
provinces, particularly for those whose livelihoods were related to agriculture sector.
Standing crops on about 0.84 million hectares were destroyed in the flood. Similarly,
heavy losses in livestock sub-sector were also reported. The number of livestock
heads perished in the calamity were reported to be 115,500 while approximately 5
million surviving animals were directly affected. The total economic cost of floods
was estimated at $ 1,840.3 million (Ibid 2016).
8.10 Responses to Climate Risks

8.10.1 Provision of Information
Better decisions in a risky world are hard to make in an information vacuum. The
crucial role of information evolves from a need for more efficient management
strategies as agriculture copes with growing instability and change. Information on
improved varieties of crops and livestock, fertilizer application rates, production
techniques, procedures for getting credit, land acquisition procedures, price trends,
and weather forecasts may enable farmers to better anticipate climate risks and adopt
sophisticated risk management tools to mitigate its potential impacts at farm. Proper
information can help farmer to measure, evaluate and enhance the performance of
farm business and hence reduces uncertainty at all stages of production. The more
appropriate the information a farmer has the better he can decide on his business
strategy.
Climate information can improve prevention and preparedness, but it must be readily
available and understandable to those who need it. The increased instability of
markets, more complex technologies for production and the greater need for financial
planning and control have increased farmers demand for information in recent years.
Although it is true that information is vital for decision-making, the demand for it
depends on the cost of acquiring and the benefits of using the information. When
farmers have alternatives to choose among many information sources, they select
those sources that yield the highest marginal benefit. Since several types of
enterprises face different types of risk, the demand for information also differs from
enterprise to enterprise.
8.10.2 Crop Insurance

Crop insurance is a tool for safeguarding agricultural producers against business loss
resulting from practically all-natural elements beyond their control i.e. natural fire,
harsh weather events, devastating floods, pests and diseases infestation etc. Crop
insurance is one alternative to cope with risks associated with yield loss resultantly
reducing farmers income loss. Weather based crop insurance is another risk
transferring technique that aim at mitigating production risks of insured farmers
against probability of financial losses resulting from negative shocks of climatic
parameters. Crop insurance insures the producer against a reduction in crop yields
while weather insurance uses weather parameters as proxy for crop yield to
compensate growers for crop losses. A specific form of weather insurance is rainfall
insurance which compensate farmers in the event of heavy rainfalls. In both weather
insurance and crop insurance, agricultural producers pass risk in yield to another
party for a premium however these two differ in the sense that weather insurance is
not yield insurance while crop insurance is.
Agriculture is vulnerable and subjected to volatility of nature. The impact of natural
disasters is significant particularly on small farmers. Farmers bear the loss of their
crop and face debt defaults. Hence, there is a stronger need to protect the interests
and investments of farmers by crop insurance. Crop insurance is used by farmers,
ranchers and others to protect themselves from losses arising mainly due to natural
disasters including hail, droughts, floods and pest and diseases attacks (SBP 2008).
Crop insurance is also helpful in promoting the adoption of modern production
practices and techniques in agriculture particularly by small holders. Crop Loan
Insurance Scheme (CLIS) in Pakistan is an example of this.
In July 2006, the State Bank of Pakistan (SBP) formed a task force to develop a
feasible Crop Loan Insurance Scheme with the help of all stakeholders to mitigate
the risk of losses to agricultural borrowers resulting from natural disasters and
catastrophes. Based on the report of task force the SBP decided to launch crop
insurance scheme from Rabi season (mid-October) 2008. The scheme was first
launched by The Bank of Punjab (BoP) and two insurance companies of the national
level (The United Insurance Company of Pakistan Ltd. and East West Insurance
Company Ltd.). The scheme compensates farmers with 1-50 acres of land in the
event of natural catastrophe. The farmers are paid 50 to 70% of the crop value and
their entire loans are covered. In 2009, Zari Taraqiati Bank Ltd. (ZTBL) and National
Bank of Pakistan (NBP) jointly launched Crop Loan Insurance Scheme (CLIS) which
cover five major crops (wheat, rice, sugarcane, maize and cotton). Presently, the crop
insurance scheme has been launched by almost all commercial banks which provide
agricultural loans (Ullah 2014).
8.10.3 Provision of Agricultural Credit

Credit is a critical input fueling the process of commercializing rural economy
(Abedullah et al. 2009). Credit may provide opportunity to farmer to earn more farm
income and improve their standard of living, to adopt more efficient technology and
to allocate resources more efficiently in order to reduce poverty and enhance food
security.
Limited or no access to credit sources has traditionally been counted as the main
hindrance to technological diffusion and development. The prevalence of risks at
farm level coupled with the lack of collateral severely restrict credit access for
agricultural borrowers. These constraints along with risk aversion and limited access
to information sources are the main reasons explaining the failure of technology
diffusion. The provision of complete and frictionless financial markets would ease
the concern of households regarding the protection of household consumption and
hence credit would flow to activities with higher marginal returns.
However, markets for insurance and credit are usually incomplete or absent in
developing countries, which make it difficult to separate production and consumption
decisions. Besides government intervention to assist farmers in managing
agricultural risk, agricultural insurance is still relatively underdeveloped in Pakistan
and majority of the farmers are stick to the use of traditional ways of managing
agriculture risk. These traditional climatic risk management tools are summarized as
follow;
8.10.4 Informal Tools to Manage Climate Risks

There are various types of informal risk management tools available for the farmers
which are used to reduce the risk such as Avoiding Risk, Preventing Risk, Sharing
Risk, Transferring Risk, Spreading Risk and Taking Risk (Singh 2010). The selection
of any type of tool depends on individual farm situation and risk-bearing willingness
and ability of the farmer. An understanding of these tools can help growers to reduce
risks and increase profitability. The chances of occurrence of a negative shock and/or
the hostile outcomes of the adverse event can be minimize using these strategies.
However, there is always some cost (even if not explicit) associated with using these
strategies to cope with the climatic risks i.e. part of the potential gains is generally
given up in order to avoid possible losses. It is generally hypothesized that farmers
would like to avoid major losses but would also try to gain from favorable events.
The intentions are to efficiently cope with instability in farm outputs due to climatic
variability without compromising much on the potential gains.
There are various traditional climate risk coping tools that farmers can adopt to
mitigate climate risks at farm level. These tools are groups under production
responses, marketing responses and financial responses in the following sub-
sections.
i. Production Responses to Climate Risk
There are various production responses that can be made by farmers to cope with
yield variability. Production responses such as diversification, choosing risk
reducing inputs, etc., have traditionally been significant in risk management.
However, with farm becoming larger, more specialized and more capital
intensive, these risk coping strategies have declined in relative importance
(Hardaker et al. 1997). Besides these risk management strategies adoption of
advanced cropping techniques and sharing risk with others e.g., crop sharing,
and informal pooling are also widely used risk coping instruments (Townsend
2005 and World Bank 2005). The following are some of the possible production
responses to risk in agriculture:
a. Selecting less risky inputs and technology: Farmers often select the
technical inputs and the system of production to reduce risk. Farm owners
might invest in excess machinery capacity to offset unfavorable weather,
similarly, some livestock producers maintain feed reserves to offset drought
(Sonka and Patrick 1984). But the added cost of machinery, carrying feed
reserves, and feed deterioration must be compared with the possible loss
due to risk. Practices like antibiotics in livestock feed, insecticides in crop
production and other chemicals may be regularly used, though not always
required.
b. Enterprise and/or geographical diversification: Diversification is a tactic
long used by farmers to cope with price or weather stimulated production
variability. Diversifying farm activities are regarded as farmers rationale
choice to create value from various functions of farming either through
markets (e.g., agri-tourism or organic agriculture) or through participation
to policy programs (Finocchio and Esposti 2008). Producers can diversify
by engaging in many different activities in one time period, engaging in the
same activity in many different physical environments or locations, or
engaging in the same activity over many consecutive periods of time.
Growing several varieties of a crop may reduce possible losses from
weather, insects and diseases. Dispersion of cropland over a wide
geographic area is another form of diversification. This strategy helps
minimize losses associated with highly localized, severe storms and other
hazardous events.
ii. Marketing Responses to Risk
Marketing responses are mostly used to cope with the uncertainties arising from
fluctuating input/output prices and market failures. However, some of the
marketing responses are also useful in combating the climatic risks. The main
aim of using these risk coping tools is to transfer risk to others by bearing some
cost (risk management cost). These include;
a. Option Trading: Under option trading the buyer have the right, but not the
obligation, to buy or sell an underlying asset at a particular price on or before
a certain date.
b. Forward Contracting: A form of non-standardized contract where two
agents or parties can buy or sell an asset at a specified future time and at an
agreed upon price which make forward contracting a form of derivative
instrument. Farmers use forward contracting to transfer the risk of climatic
factors to the contractor. However, a proportion of potential gains/benefit in
this transaction is lost by the farmers by agreeing on a lower price which can
be referred to as the cost of risk management. The contractor gains from the
risk involve in the production process.
iii. Financial Responses to Risk
Financial responses to risk normally affect the firm's solvency (debt/equity ratio)
or liquidity positions. The most important financial responses of farmers to risk
consist of the following.
a. Assets Accumulation: It may be very useful for farmers to retain liquid
assets, which can be converted to other uses simply without incurring
additional time and cost. Farmers generally hold cash and some liquid assets
(e.g. grain, forage, livestock ready for slaughter) that can be converted to
cash without impairing the ongoing operation.
b. Credit Reserves: A credit reserve is the difference between the total loan
amount available to the farmer and amount actually used. Holding credit
reserves is a mean of avoiding the losses from liquidating useful tools to
meet current cash obligations and reacquiring those tools after hostile
situation is over. However, the costs of maintaining and borrowing from
credit reserves must be considered (Barry et al. 1981) as in most cases the
opportunity cost in terms of return on foregone investment are higher
compared to direct cost of holding credit reserves.
8.11 Market and Non-Market Valuation Techniques

8.11.1 The Need for Environmental Resources Valuation
Climate change along with rise in the human population put huge pressure on almost
all natural resources, making these resources increasingly scarce or certainly more
expensive to source. This consequently results in extinction of species and threaten
the environmental ecosystems by invasive species, urban spread, and increased
natural resources demand. The consequences of climate change also involve shifting
of weather patterns and large variations in climate that put crops and animals under
severe pressure. Hurricanes and major floods are expected to happen more often,
increase in the number and intensity of storms causes major damages to land
resources and economy. Moreover, droughts lasting longer can cause major crop loss
and have a direct effect on the economy.
These are serious challenges for natural resource managers, considering the fact that
water resources, forest lands, ecological resources, air quality, biodiversity, pests,
diseases and exotic organisms, sustainable land use and management, coastal and
marine environments and bushfires are expected to be significantly affected by
climate change and ultimately effecting food and energy supplies. The growing
populations need clean water, food to eat and energy to power their lifestyles.
Therefore, managing natural resources is essential for the welfare of our communities
and the world at large. For effective policy formulation, the ever-growing body of
knowledge on changing climatic conditions and the resultant impacts on natural
resources and related ecosystems, human communities and land use and values
should be periodically synthesized. There is also a need to better understand the effect
of adaptation to and policy for addressing climate change on landscapes, ecosystems,
ecosystem services, and local economies.
Understanding these effects may be difficult unless the value(s) associated with
environmental resources are captured and digitized. This section highlights various
(market and non-market) techniques in valuing the environmental resources.
8.11.2 Environmental Values

In simple words, value is the relative worth of a good or service when expressed in
monetary terms. People value the environment and natural resources in a variety of
ways. Classification of these different types of values is helpful in avoiding
overlooking or double counting a value. The total economic value of environment
and natural resources comprised of use values and non-use values. The use value
comprised of direct use value, indirect use value and option value while non-use
value comprised of altruism/bequest value and existence value. The use values and
non-use values are summarized in Table 8.1.
Table 8.1 Economic Taxonomy for Environmental Resource Valuation

Total Economic Value
Use values Non-use Values
Direct Use Indirect Use Option Value Altruism/Bequest Existence Value
Value
Outputs Directly Functional Future Direct Use and Non-use Value from
Consumable Benefits and Indirect value of Knowledge of
Values Environmental Continued
Legacy Existence
Food Flood control Biodiversity Habitats Habitats
Biomass Strom Conserved Prevention of Species
Recreation Protection habitats irreversible Genetic
Health Nutrient cycles change ecosystem
Increased Carbon
living comfort sequestration
Source: Jantzen (2006)
Direct use values comprise of consumptive uses, i.e. for crops, livestock and
fisheries, and non-consumptive uses, i.e. recreation. Indirect use values comprise of
all the values associated with the services provided by the ecosystems and species
i.e. pollination, pest control and water cycling etc. On the other hand, option values
are the values representing individual willingness to pay for the sustainability of an
asset/resource. These values are placed on individual even if the individual is not
actually using it. The uncertainty about future supply of the resource and potential
future demand make them pay for maintaining the asset/resource. Altruism value is
a form of non-use value also known as passive-use value that are derived from the
satisfaction of realizing other peoples access to natures benefits. Bequest value is
like Altruism value however, it relates to the access of future generations to natures
benefits. Existence value is associated with the satisfaction derived from knowing
the existence of a species or ecosystem. Apart from the concern of some of the natural
resource analysts over the relevance of some aspects of non-use values to community
welfare, there is a consensus that the non-use values are legitimate element of the
total economic value of the environment and natural resources.
8.11.3 Valuation Techniques for Natural Resources and

Environment
Government policies aiming at generating environmental benefits usually impose
costs on the community for instance, the investment in improving environment (such
as cleaner river) require resources that could have been utilized for other purposes
(such as for health or education). Likewise, allowing people to use natural resources
and environmental assets (such as logging of forest) could hassle the habitat of
threatened species, however, it provide economic benefits (such as timber) to the
loggers. Computing these trade-offs is challenging mainly due to the fact that benefits
derived from the environmental assets are difficult to value particularly those which
are not reflected in market prices also known as non-market values. Valuation of the
environmental outcomes in such situation may help in making trade-offs in a more
careful way. Dollar values are sometimes used, not to monetize nature but to help
determine whether holding more of one good is better than having more of some
other good particularly in a state where a choice must be made.
There are two broad categories of natural resources and environment valuation.
These are i) market-based valuation and ii) non-market valuation. These are
discussed in detail as follow;
8.11.4 Market-based Valuation

The value of a natural resource can be articulated in monetary terms based on its
value as a factor of production. The production function approach is used to assess
changes in production level and/or quality due to a change in environmental quality.
The monetary value of the changes in production levels can then be used to represent
the value of the environment or natural resources. The directly noticeable market
prices and output levels make this technique more attractive.
Limited environmental, ecological and production information can hinder
application of production function techniques as these models largely depends on the
quality of the baseline production function and on accurate measures of
environmental change. More importantly, the production function approach only
account for the natural resources that are used in production processes. The
production function method usually fails in capturing the total economic value of
natural resource to the society when the environmental resources are not traded in
the markets.
8.11.5 Nonmarket Valuation of Environment and Natural

Resource
Nonmarket environmental values provide estimates of the benefits people attach to
the environment or uses of natural resources that do not involve market transactions
and therefore lack prices. For example, the benefits received from fishing for
subsistence rather than commercial purposes. While nonmarket values are commonly
expressed in monetary terms, this is not always practical or appropriate. Many
environmental values should be characterized in other ways, for example by
conducting interviews with community members/resource users. For the estimation
of such values, various non-market valuation techniques have been developed over
the last few decades. Some of these methods are discussed in details under the
following sub-sections.
i. Revealed preference methods
Revealed preference methods use observations of purchasing decisions and
other behavior to estimate non-market values. These methods comprised of
travel cost and hedonic pricing (Baker and Ruting 2014).
a. The travel cost method examines data on visitor travel patterns to a

particular recreation site (considering expenses incurred and time spent) to
estimate the value visitors place on that experience.
b. The hedonic pricing method looks for price differences among otherwise
similar goods that differ in a particular environmental attribute. For
example, the difference in sale price for otherwise similar homes in the same
general location but with very different views (a parking lot versus an
undeveloped mountain meadow) provides an indirect way to estimate the
value placed on views of mountain meadows.
The revealed preference method is widely known for producing valid non-
market estimates. However, these methods are surrounded by some limitations
and cannot be used to estimate non-use values as the methods rely on values
leaving a behavioral trace. Moreover, the main focus of the methods is on what
has happened, and therefore limit their usefulness for valuing future potential
changes.
ii. Stated Preference Methods
Stated preference are survey-based methods which normally assign values by
making people choose between policy options in which improved environmental
outcomes are related with higher costs. These methods are used to estimate all
type of values; however, the validity of such estimates remains debatable. These
are survey-based methods which normally assign values by making people
choose between policy options in which improved environmental outcomes are
related with higher costs. The stated preference methods are used to measure
both use and non-use environmental values. The Stated Preference Methods
primarily comprised of contingent valuation and choice experiments (Baker and
Ruting 2014).
a. Contingent valuation uses surveys to identify the dollar value individuals
would hypothetically be willing to pay to preserve some environmental
benefit.
b. Choice experiments also use surveys to elicit willingness to pay, but here
the choices are made among sets of multiple attributes. For example, a
questionnaire on forest management might describe alternative
management prescriptions with different options for the spacing of roads,
treatment of dead and dying trees, and techniques of riparian protection, as
well as the hypothetical payment the respondent would make to value each
alternative.
Stated preference methods such as contingent valuation are widely used in
environmental economics, but remain controversial, particularly when applied
to quantifying non-use values. In order to produce meaningful results,
practitioners need to get many elements right. One of the most important element
which need to be adjusted is that survey participant should be dealt is a way so
they feel that their responses could impact the outcomes that they care about.
The hypothetical nature of the stated preference methods remain debatable
however, there is now wider consensus that these methods can be designed to
appear consequential rather than purely hypothetical.
8.11.6 Choosing the Appropriate Valuation Method

Select an approach to quantifying nonmarket economic values that is appropriate for
the type of information needed, well recognized in economic theory and is cost-
effective. Below are some of the points that should be bear in mind while selecting
an approach to quantify non-market economic values of natural resources and
environment.
i. Emphasize the analysis of use values rather than non-use values,
whenever feasible: In the terminology of environmental economics, use
values represent benefit comes from direct experience or activities i.e.
climbing a spectacular peak. Non-use values, on the other hand, represent
psychological benefit or utility derived by an individual from the existence
of some environmental condition that may never be directly experienced i.e.
the reintroduction of wolves to the Rockies or an unspoiled Grand Canyon.
Use values have a behavioral dimension: people do things that reflect the
values they place on certain environmental goods, qualities, or experiences.
This is far less true of non-use values. The estimation of non-use values has
a recognized place in the environmental economics literature, but for
purposes of estimating the benefits of proposed resource management
actions, focus on use values whenever possible.
ii. Both revealed and stated preference methods can be useful, but revealed
preference methods are often simpler to implement and less contestable:
Revealed preference methods derive economic value from an individuals
behavior. Stated preference methods use an individuals stated willingness
to pay for an environmental use or willingness to accept the loss of a use,
to calculate value. In some cases, stated preference approaches can more
precisely target the nonmarket values of interest than can revealed
preference approaches. The decisions to be made, the values to be estimated,
and the ease of obtaining the data will determine which approachand
which specific techniqueto use.
iii. Consider applying estimates of nonmarket values from existing studies:
Unlike conventional economic data on prices, income, and employment,
which are routinely compiled by the federal government, nonmarket
valuation studies are produced on a case-by-case basis. This can be a
lengthy and expensive process. A faster, cheaper way to obtain nonmarket
values is to apply a figure representative of the nonmarket values
documented for comparable sites and activities. This approach, termed
benefit transfer, is most practical for estimating values associated with
recreational activities, which have been studied extensively. Unfortunately,
unless the environment and use for which nonmarket values are available
are truly similar to those for which values are needed, benefit transfer can
be very inaccurate (Rosenberger and Loomis 2001).
8.12 Climate Change Agreements

Climate change being a global challenge requires a global solution. The emission
reduction action by one country will be of little help in slowing down global warming
without proper measures adopted in other countries as well. An effective emission
reduction strategy therefore requires commitments and action by all the major
emitting countries. International coordination to overcome this crucial issue is
however exceptionally difficult to achieve. Major reason being the uneven
distribution of economic and social impacts of climate change across the globe. Some
countries located in the temperate zone are likely to be benefited from climate change
while other countries in the tropics will suffer losses.
Global response to climate change initiated during the first World Climate
Conference in 1979 where the concerns arising from the increase carbon dioxide in
the atmosphere were highlighted. A resolution, proposed by Malta, was passed by
the UN General Assembly in 1988 with the main aim of protecting climate for present
and future generations. The establishment of the Intergovernmental Panel on Climate
Change (IPCC) in 1988 is another major step towards the global action in protecting
the natural environment particularly against the climate change. The first IPCC
assessment report in 1990 pointed climate change as a real concern and also
established that human activities are potential contributor to the issue.
8.12.1 United Nations Framework Convention on Climate

Change
The United Nations Framework Convention on Climate Change (UNFCCC) was
established in June 1992 with the main objective of stabilizing atmospheric
concentration of greenhouse gas (GHG) at the level that evades serious
anthropogenic climate change. The UNFCCC sets out central principles to facilitate
global response. Main principles include that countries should consistently act with
their responsibility for solving the issue of climate change. It was urged that the
developed countries should take the lead in emission reduction as the industrialized
countries are historically the main contributors to greenhouse gasses emission. The
UNFCCC puts a commitment to act on all countries. For developing countries,
however, this commitment is associated with the assistance from developed nations.
Developed countries consented to revert greenhouse gas emission to the level of 1990
by 2000 however this goal was missed by most countries. At present, 191 parties
including the United States have ratified the UNFCCC.
To negotiate unresolved issues, establish or amend rules and procedures and to
review progress, meetings of the parties to the UNFCCC, known as Conferences of
the Parties (COPs), are held annually. 22 such meetings have been held since the
inaugural meeting in Berlin, Germany during 28 March - 7 April, 1995. These are
listed as follow;
Table 8.2 UNFCCC Conference of the Parties (COPs) Meetings since 1995
COP # Venue Date
COP22 Marrakech, Morocco 7th to 18th November 2016

COP21 Paris 30th November to 12th December 2015
COP20 Lima, Peru 1st to 12th December 2014
COP19 Warsaw Poland 11th to 23rd November 2013
COP18 Doha, Qatar 26th November to 7th December 2012
COP17 Durban, South Africa 28th November to 9th December 2011
COP16 Cancn, Mexico 29th November to 10th December 2010
COP15 Copenhagen, Denmark 7th to 18th December 2009
COP14 Poznan, Poland 1st to 12th December 2008
COP13 Bali, Indonesia 3rd to 15th December 2007
COP12 Nairobi, Kenya 6th to 17th November 2006
COP11 Montreal, Canada 28th November to 10th December 2005
COP10 Buenos Aires 6th to 17th December 2004
COP09 Milan, Italy 1st to 12th December 2003
COP08 New Delhi, India 23rd October to 1st November 2002
COP07 Marrakech, Morocco 29th October to 9th November 2001
COP6 bis Bonn, Germany 16th to 27th July 2001
COP06 The Hague, Netherlands 13th to 24th November 2000
COP05 Bonn, Germany 25th October to 5th November 1999
COP04 Buenos Aires, Argentina 2nd to 13th November 1998
COP03 Kyoto, Japan 1st to 11th December 1997
COP02 Geneva 8th to 19th July 1996
COP01 Berlin, Germany 28th March to 7th April 1995
8.12.2 Kyoto Protocol

The Kyoto Protocol, ratified by 192 parties of the UNFCCC, is the first momentous
global effort in reducing greenhouse gas emissions. The protocol made the emissions
targets binding legal commitments for the developed countries that ratified it. The
Protocol was adopted on 11th December 1997 in the third COPs meeting of the
UNFCCC and entered into force on 16th February 2005.
In the first commitment period of the Protocol, 37 highly industrialized nations and
countries under the process of transition to a market economy, have legal obligatory
emission reduction and limitation commitments. Under the Kyoto Protocol the
participating industrialized countries are assigned emission limits for 2008-2012.
The emission limits are subjected to alteration if the industrialized nation buy or sell
emission allowances from other industrialized countries. The industrialized countries
can also enlarge the emission limits by investing in projects aiming at reducing
emissions particularly in developing countries. Three cooperative implementation
mechanisms involving tradable allowances are allowed under the Kyoto Protocol.
These are i) Emission Trading, ii) Joint Implementation, and iii) the Clean
Development Mechanism (CDM).
Emissions Trading (ET): Under this cap-and-trade policy, industrialized countries
and economies in transition (countries listed in Annex B of the Kyoto Protocol) are
allowed to trade assigned amounts. The national quotas (assigned amount) is
established by the Kyoto Protocol.
Joint Implementation (JI): Under JI, countries in Annex B can invest in projects to
reduce net emissions in another Annex B country and receive emissions reduction
credit. Joint Implementation is a project-based program designed to explore new
prospects, in countries listed in Annex B, those are yet to become fully eligible to
engage in the Emissions Trading mentioned above.
Clean Development Mechanism (CDM): Under CDM countries listed in Annex B
can invest in projects aiming at emissions reduction in non-Annex B countries
particularly in developing countries to earn certified emissions reductions (CERs)
which can be used to meet the obligations of assigned amount. Though the US has
not signed the Protocol, yet some of the American states are using these trading
facilities to meet the goals.
The Kyoto protocol has been surrounded by some critiques including the overly stern
emissions reduction targets and the lack of long run vision for action. The legally
binding emissions limits, a central attribute of the protocol is criticized as such limits
are not self-imposing. The protocols project-based mechanisms for promoting
emissions reduction in developing world are also highly bureaucratic and
cumbersome. Another major criticism on the protocol is the lack of imposition of
mandatory emissions limits for developing nations. The developing nations
collectively are likely to meet developed nations in greenhouse gas emission by 2035.
8.12.3 The Paris Agreement

In combating climate change and to support collective actions and investments
towards a low carbon, buoyant and sustainable future, a historic agreement (known
as the Paris agreement) was approved by 195 nations on 12 December 2015 in the
COP 21 of the UNFCCC held in Paris, France. The main aim of this universal
agreement is to limit the global temperature rise under 2 0C and to put efforts to
further cut down temperature rise to 1.5 0C above the level of pre-industry ear.
Additionally, the Paris Agreement is aimed at strengthening the ability in dealing
with climate change impacts.
Under the Paris Agreement, counties will submit Nationally Determined
Contribution (NDCs) every five years to increase their ambition in the long run.
Moreover, countries will continue to involve in the process of mitigation
opportunities as well as put additional emphasis on adaptation prospects. Countries
are also urged to work in defining clear roadmap on increase climate finance to USD
100 billion by 2020.
The Paris Agreement establishes a global aim to considerably reinforce climate
change adaptation through support and global cooperation.
The efforts of the developing nations in building their own clean and climate resilient
futures will be supported by industrialized countries and other voluntary
contributions from other countries. Under the new agreement, sufficient support is
ensured for the development of global cooperation on climate-safe technologies and
capacity building in addressing climate change particularly in the developing world.
8.13 Conclusion
Climate change and related hazards possess serious threats to every sector of the
economy. Agricultural sector in particular, is extremely vulnerable to changes in
climatic parameters as agricultural activities are largely exposed to and depend upon
the natural environment. These hazards cause yield losses of agricultural products
and threaten the food security of masses depending upon farm sector. Climate change
is also expected to affect other natural resources including water resources, forest
lands, ecological resources, air quality sustainable land use and management,
biodiversity, pests, diseases and exotic organisms and coastal and marine
environments. Therefore, there is a stronger need to understand climate change
impacts, its mitigation measures and significance of adoption and adaptation. To
better understand the impact of climate change on natural resources, there is a need
to establish ways to quantify environmental resources. The two common valuation
techniques are market and non-market valuation of natural resources. Farmers adopt
formal and informal (traditional) tools to mitigate, share, transfer and/or take climatic
risks at farm level. The global concern over climate change has been reflected in
number of climate change agreements. Most significant in this regard are the
establishment of United Nations Framework Convention on Climate Change, the
Kyoto Protocol and the Paris Agreement.
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Impacts of Climate Change on Agriculture

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Impacts of Climate Change on Agriculture

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Chapter 8

Impacts of Climate Change on

Syed Asif Ali Naqvi

Managing editors: Iqrar Ahmad Khan and Muhammad Farooq

Keywords: Climate Change; Natural Resource Valuation; Climatic Risks; Kyoto

8.2 Climate Change

8.3 Causes of Climate Change

8.3.1 Natural Causes of Climate Change

8.3.2 Eruptions of Volcanoes

8.3.3 Ocean Currents

8.3.4 Changes in Earth Orbital

8.3.5 Variations in Solar Energy

8.3.6 Human Causes

8.4 Climate Change Impacts

8.4.1 Effects on Agriculture

8.4.2 Effects on Weather

ii. Stronger Hurricanes

8.4.3 Effects on Water

8.4.4 Effects on Human Health

8.4.5 Threats to Ecosystems

8.4.6 Depletion of Glaciers, Ice Sheets and Snow Packs

8.5 The Science of Climate Change

8.6 The Economics of Climate Change

of economic uncertainties. Climate change is likely to impact the necessities of life,

certainty, single government and perfect competition, the standard theory of

8.7 Risk and Uncertainties: Concepts and Definitions

8.7.1 Risk and Uncertainties in Agriculture

seasonality of production, the geographical separation of production region and end

8.7.2 Sources of Risks in Agriculture

8.7.3 Business Risk

8.7.4 Financial risk

8.7.5 Climate Risks and Agricultural Sector

8.8 Climatic Risks in Pakistan

8.9 Climate Induced Disasters and Agriculture Sector

8.10 Responses to Climate Risks

8.10.2 Crop Insurance

8.10.3 Provision of Agricultural Credit

8.10.4 Informal Tools to Manage Climate Risks

8.11 Market and Non-Market Valuation Techniques

8.11.2 Environmental Values

Table 8.1 Economic Taxonomy for Environmental Resource Valuation

8.11.3 Valuation Techniques for Natural Resources and

8.11.4 Market-based Valuation

8.11.5 Nonmarket Valuation of Environment and Natural

a. The travel cost method examines data on visitor travel patterns to a

8.11.6 Choosing the Appropriate Valuation Method

8.12 Climate Change Agreements

8.12.1 United Nations Framework Convention on Climate

COP22 Marrakech, Morocco 7th to 18th November 2016

8.12.2 Kyoto Protocol

8.12.3 The Paris Agreement

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