Risk management strategies to cope with climate change in grassland production: an illustrative case study for the Swiss plateau

Abstract

In this paper, we assess climate change impacts on an intensively managed grassland system at the Swiss Plateau using the process-based grassland model PROGRASS. Taking the CO 2 fertilization into account, we find increasing yield levels (in the range of 10-24%) and sharp increases in production risks for an illustrative climate change scenario that suggests a marked increase in temperature and decrease in summer rainfall. Climate change-induced increases in the coefficients of variation of grassland yields are in the range of 21 and 50%. This finding underpins that additional risk management strategies are needed to cope with climate-change impacts on grassland production. The outputs from the grassland model are evaluated economically using certainty equivalents, i.e., accounting for mean quasi rents and production risks. To identify potential risk management strategies under current and future climatic conditions, we consider adjustments of production intensity and farm-level yield insurance. The impact of climate change on production intensities is found to be ambiguous: farmers' will increase intensity under unconstrained production conditions, but will decrease production intensity in the presence of a cross-compliance scheme. Our results also show that the considered insurance scheme is a powerful tool to manage climate risks in grassland production under current and future conditions because it can reduce the coefficients of variation of quasi rents by up to 50%. However, we find that direct payments tend to reduce farmers' incentives to use such insurance scheme.

Climate Change, Weather Insurance Design and Hedging Effectiveness

“…Future work should more systematically investigate how sensitive the derived weather indices are to uncertainties in climate 54 Torriani et al (2007b), Klein et al (2011). 55 Torriani et al (2007b), Finger and Schmid (2008), Finger and Calanca (2011). 56 Klein et al (2011).…”

Modeling the sensitivity of outdoor recreation activities to climate change

“…The weather generator was conditioned using daily weather observations for 1980 to 2009 3 . Further details on the application of the weather generator are described in Finger et al (2010) and Finger & Calanca (2011). These 100 sets of daily weather data are then combined with the regression coefficients to predict the number of daily lido entries, which are used to calculate averages and standard deviations of entries at annual and monthly levels.…”

“…the BASE scenario) covers the period 1980 to 2009 (Finger & Calanca 2011). Again, 100 sets of daily weather data are derived for each climate scenario and are used to predict lido entries on a daily basis.…”

Where is the risk? Price, yield and cost risk in Swiss crop production

“…This insurance is available at the farm-or crop specific level (see e.g. Calanca, 2011, andLehmann, 2012, for details). In a current pilot phase, multipleperil insurance is now available to certain cantons (federal states of Switzerland).…”