Climate changes and new productive dynamics in the global wine sector

From Firenze University Press Journal: Bio-based and Applied Economics

Emilia Lamonaca, University of Foggia

Fabio Gaetano Santeramo, University of Foggia

Antonio Seccia, University of Foggia

In both academic research and policymaking agenda there is growing awareness that climate change and the agri-food sector are closely related, and that those links deserve investigation and understanding to analyse the evolution of global agriculture, and to anticipate future challenges such as climate change adaption and mitigation (Falco et al., 2019; Santeramo et al., 2021).

Agriculture, on which human welfare depends, is severely affected by climate change. Some adverse effects, already observed, are likely to intensify in the future, contributing to declines in agricultural production in many regions of the world, fluctuations in world market prices, growing levels of food insecurity (Reilly and Hohmann, 1993; Meressa and Navrud, 2020). Adaptation potential and adaptation capability to climate change may exacerbate differences between regions. In a globalised world, the macro-level impacts of climate change are driven by comparative advantage between regions (Bozzola et al., 2021).

If impacts of climate change on productivity differ between regions, then adjustments through production patterns may dampen the adverse effects of climate change (Costinot et al., 2016; Gouel and Laborde, 2021). Although the agricultural sector is identified as the most sensitive and vulnerable sector to climate change (e.g., Deschenes and Greenstone, 2007), the effects of climate change on the wine sector and on different producing regions (i.e., Old World Producers, New World Producers) is still an open question. How do pro-ductivity levels react to changes in climate?

Do climate change impacts on production patterns differ between Old World Producers and New World Producers?As suggested by Mozell and Thach (2014), the narrow climatic zones for growing grapes may be severely affected both by short-term climate variability and long-term climate change. A vast majority of earlier studies on the impacts of climate change have analysed the effects on domestic markets, leaving underinvestigated the effects on world production (Reilly and Hohmann, 1993). In the wine-related literature, previous studies reveal that the impacts of climate change are likely to differ across producing regions of wine. Jones et al. (2005) suggest that, currently, Old World Producers (i.e., European regions) benefit of better growing season temperatures than New World Producers. However, future climate scenarios may push some regions into climatic regimes favourable to grape growing and wine produc-tion (Lamonaca and Santeramo, 2021). All in all, there is the potential for relevant changes in areas planted with vines due to changes in climate (Moriondo et al., 2013; Seccia and Santeramo, 2018).

Projected scenarios of future climate change at the global and wine region scale are likely to impact the wine market. In particular, spatial changes in viable grape growing regions, and opening new regions to viti-culture would determine new productive scenarios in the wine sector at the global level.Given this background, our contribution aims at understanding how productive patterns allow differ-ent producing regions (e.g., Old World Producers, New World Producers) to respond to changes in climate. Specifically, we examine the linkage between climate change and productivity levels in the global wine sector. In this regard, Rosenzweig and Parry (1994) argue that doubling of the atmospheric carbon dioxide concentration would lead to only a small decrease in global agri-cultural production. In addition, Reilly and Hohmann (1993) suggest that interregional adjustments in production buffer the severity of climate change impacts both at global and domestic level. From a methodological perspective, the study of agricultural supply response has traditionally decomposed it in terms of acreage and yield responses (e.g., Haile et al., 2016; Kim and Moschini, 2018).

Our contribution examines how climate change affects acreage and yield response for grape-vines. To this aim, we assume that land allocations are consistent with the choices of a representative farmer who maximises expected profit. We posit that crop-land can be allocated between grapevines and all other crops. Because these two allocation choices exhaust the set of possible land allocations, total county cropland is assumed to be fixed. Thus, the decision problem can be stated as that of choosing acreage. We assume that the acreage shares are a function of expected per acre revenue, given by the product between the output price and expected yield, and of climate change. Investigating both the responsiveness of grapevine acreage and yield to cli-mate change allows us to conclude on the global supply response. While our cross-countries analysis is informative on the production patterns in the wine sector at a global scale, it cannot conclude on the effects of climate change at the micro-level (e.g., grape growers, wine producers). Indeed, a country-level analysis does not capture differences within countries in terms of both grape-vine yield and climate variability, particularly in geo-graphically heterogeneous countries such as the United States, Canada, Russia, China (Kahn et al., 2019).

DOI: https://doi.org/10.36253/bae-9676

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