Part of the modeled gains in consumer surplus are enjoyed elsewhere, as the majority of pistachio output is currently exported. However, export demand is usually considered more elastic than domestic demand, making the share of local consumer surplus gains disproportionate to the share of local consumption. At a share of 1/3 of total consumption, let us assume that Californians still enjoy half of the consumer surplus gains from MCE . Adjusting Table 4.1, the total welfare gains in California are strictly negative when the demand is unrealistically inelastic, εD = −0.5, and strictly positive for more realistic demand assumptions . The scope of consumer surplus gains brings us to the potential gains from public investment in R&D for MCE solutions. With social returns from investments largely exceeding private ones, this type of research is a good candidate for prioritizing in public research fund allocation . The case for public research is made stronger by the fact that there seems to be little private incentive to invest in MCE, at least in this case. I see MCE technologies mostly as an adaptation of existing ones to solve a climate problem. Therefore, innovations in the field would be hard to make proprietary by the innovator. Moreover,growing pot innovators are likely to come from the industry: a large growing firm would have the resources and access to enough pistachio acreage to run experiments and develop new MCE solutions. But if this firm sees that a world with MCE is worse, why invest in innovation?
Adding market power to the equation makes an even stronger potential case for public R&D: the total welfare gains are higher, and the incentives for innovation could be even lower. What might be the implications of MCE technologies in a broader sense? One could imagine, with further agronomic research, other MCE technologies applied to other fruit and nut crops, and even for annuals such as corn or soybeans. Of course, these are less profitable than pistachios, but they face similar challenges, and MCE solutions are not necessarily very expensive. Other implications could be with the distribution of climate change damage incidence. Technologies might only be available to growers in countries better off financially, further exacerbating international income disparities. An interesting potential for MCE technologies could be in accelerating the transition of agricultural practices closer to the poles, sometimes referred to as the “crop migration” . For example, MCE solutions for frost could accelerate the expansion of viticulture to higher latitudes. The simulation based valuation methodology in this chapter has its caveats. Modeling supply and demand as linear is obviously a simplification. The assumptions on growth and distribution of acreage are based on past growth patterns, and might not reflect unexpected future changes in market conditions. The future chill predictions are in line with other predictions by climatologists, yet might fail to materialize. Nevertheless, by choosing various scenarios, basing the parameter ranges in the literature, and choosing conservatively when possible, I believe to have gotten a reasonable range for the potential gains from MCE in California pistachios. They are in the low billions for a crop of secondary importance to California agriculture. I believe this shows a great potential of MCE technologies for climate change adaptation in general.Weather is a key input for agricultural production.
A vast economic literature is dedicated to the role of weather information in grower decision making, market outcomes, and commodity futures. On one hand, better information about the weather can help growers optimize their use of other inputs, increasing efficiency in production and avoiding costs related with uncertainty. On the other hand, some economic models can show—under some assumptions—that more precise weather information might not be welfare increasing, as ex-ante uncertainty about the weather can lead to extra investment in other inputs. That is, when growers have better forecast of adverse weather, output would be further reduced from its level under uncertainty . There is also some concern about weather forecasts acting as signals for collusion among growers, but simple price mechanisms can technically reduce output and welfare with better weather prediction even in a competitive market . Notwithstanding these warnings by economists, the economic gains from weather information are usually deemed positive, even if their magnitude is sometimes contested . Much of the seminal economic literature on the value of weather information was written between the 1960’s and the 1990’s, when significant improvements in forecasting was achieved with the advance of computing power and complex meteorology models . This literature is based on the agricultural practices and available data of that time. While literature about the value of weather information seems to have plateaued in the 2000’s, perhaps as forecasting technologies matured and stabilized, the surge of precision agriculture could re-ignite interest in this topic. Heterogeneity within fields and precise growing strategies, based on exact measurement of weather variables , is increasingly the subject of research and technological application . Uncertainty regarding real-time weather on micro scales poses conceptually similar questions to those dealt with by the weather forecast literature in the past.
At the same time, new discussions on the value of weather information and the government’s role in providing it have been revived with advances in remote sensing and satellite technology . The technical and scientific capabilities required to gather and analyze weather data, as well as the non-rival nature of weather information as a product, meant that much of the development of weather services has been done by governments. Johnson and Holt point out that this led to a significant economic literature, assessing the potential gains from better weather information given the public expenditures. Their survey of the relevant literature mostly includes econometric studies, where the output gains from improved forecasting are estimated and the economic gains from providing them are then calculated per hectare. Other methodologies include survey based valuation, paired with economic data and modeling. Anaman and Lellyett assess the gains from a weather information system for cotton growers in Australia, finding the benefit-cost ratio of the system at 12.6 . Klockow, McPherson, and Sutter conduct a survey based study of the value of the Mesonet network in Oklahoma. Less than 4% of Oklahoma’s cropland is irrigated, and the modest value they find for Mesonet information mostly comes from risk management. Interestingly, there are few such examples of an economic study about a specific weather information system in the published literature,square pot as opposed to numerous studies on the value of information for growers. Johnson and Holt do mention, for example, that weather forecast services in Sweden and New Zealand have gone through “extensive privatization”, but do not cite any articles analyzing these decisions. The first part of this dissertation is an analysis of economic gains from the California Irrigation Management Information System , a network of weather stations and data center run by the California Department of Water Resources. For over 30 years, this system has been used by growers, consultants, and other users in California agriculture. This chapter presents the preliminary findings from a thorough report on the value of CIMIS, showing substantial gains not only in agriculture but also in landscape management, regulation, research, and industry. Climate change poses a major challenge for agriculture, as predicted shifts in temperature and precipitation patterns around the world affect agricultural productivity . Early studies on climate change in agriculture first focused on the impacts of changing mean temperatures, and more recent empirical literature emphasizes the importance of temperature variance and extreme heat on yields, especially during the growing season . For example, Schlenker and Roberts show sharp drops in the yields of corn, soybean, and cotton, when exposed to degree days above 28–300C. Similar findings have been replicated in various crops and locations around the world. Climate scientists affirm that heat waves will increase in frequency and duration as the process of climate change advances . Researching yield responses to high temperatures, especially when the relationship seems non-linear orthreshold like, is therefore essential for prediction of climate change effects on agriculture. This can only be done with adequate weather information. Chapter 3 presents an analysis of the yield response of pistachios to hot winters.
This is also a temperature distribution tail problem, at least when looking at temperatures between November and March. Daytime temperatures in California winters have been rising in the past 20 years, and are predicted to rise further in the future. This can have detrimental implications for pistachios, a major California crop, but estimating the yield response function has been a challenge so far. I use CIMIS data and innovative techniques to recover this relationship and predict the potential threat of climate change to California pistachios. It turns out that Pistachios, a billion dollar crop in California, could be threatened by warming winter within the next 20 years. While the scope and magnitude of our current climate crisis might be unprecedented in human history, this is not the first time that humans are facing climatic challenges in agriculture. Olmstead and Rhode show how, through the 19th and 20th centuries in North America, wheat growers managed “…to push wheat cultivation repeatedly into environments once thought too arid, too variable, and too harsh to farm”. The transition was made possible mostly by the development of new varieties. Plant breeding toward that end required information on the climate both in the progenitor native areas and the areas where the eventual new varieties would be planted . Adaptation to climate can be on the physical dimension as well. Specific interventions can be designed to change the physical environment surrounding plants. The most obvious intervention is building irrigation systems, to compensate for lack of adequate rainfall and soil moisture. But examples of adaptation to temperature by physical means exist as well. This type of intervention is common for a left tail effect: frost. To avoid it, only a slight increase in temperature is required, and growers know how to do that. Some examples for dealing with frost are hundreds of years old. The Tiwanaku civilization formed a system of raised fields on the shores of lake Titikaka in the 7–12 centuries C.E. Fields in select locations were raised with extra soil, up to a few feet above the ground level. Water from nearby springs was diverted and run through canals dug in these raised fields. This provided not only moisture for the plants, but also converted the top soil level into a large heat storage unit. On frost nights, which are common in this high area, the heat stored in the soil kept the near-surface temperatures on raised fields higher than the normal air temperatures, preventing plants from freezing . Without modern weather instruments, the Tiwanaku realized that slight differences in ambient temperatures can have crucial consequences, and planned their fields according to their understanding of the climate. This system yielded far better than regular dry farming practiced before in this area, and supported a larger population than the one residing on the lake shores in the 1990’s. Eventually, as climate became drier, the water level of lake Titikaka dropped and the springs dried up, resulting in the collapse of the Tiwanaku culture . Despite its eventual failure, this technology was successful in abating frost damage for centuries, maintaining a population of hundreds of thousands and showing the power of human intervention on the field level to tackle a temperature distribution tail challenge. In Europe, traditional methods of dealing with frosts in vineyards include lighting small fires or “frost candles”. A more modern approach uses big fans, circulating the cold air in the inverted layer with the warmer air on top of it. Farmers have been using “air disturbance technology” in the US since the 1950’s . Wind generators are used around the world to protect wine grapes, fruits, and even tea from spring frosts. In some cases, a similar effect can be achieved with sprinklers . Interestingly, little economic literature has focused on air disturbance technologies. Stewart, Katz, and Murphy assess the value of weather information in the Yakima Valley of central Washington, in the context of frost prediction and air disturbance technologies. This descriptive study was published in the Bulletin of the American Meteorological Society.