American Agriculture, Water Resources, and Climate Change

Gary D. Libecap & Ariel Dinar in this NBER paper analyse how American farming community has responded to changing climatic conditions:

This paper highlights the role of agriculture in the American economy and society over time and points to farmer historical and contemporary responses to varying climatic conditions. It indicates the importance of water as an input to agricultural production and identifies possible impacts of climate change on access to water. It then summarizes a set of eleven papers from an NBER research project on water, climate change, and the agricultural sector.

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The studies focuses on a subset of adaptation options and provides examples of possible directions available for varying farm types, regions, and water situations. Overall, the research indicates that the responses examined lead to positive changes in the performance of the
agricultural sector at the region or state level analyzed either in terms of yield or net revenue. A complete benefit-cost assessment of farmer adaptation strategies, however, would include any external costs associated with new crop and seed varieties, water efficient irrigation
technologies, resort to common groundwater, investment in water conveyance systems, and design and implementation of new institutional arrangements.

In the case of groundwater, where property rights are relatively complete, such as with tradable extraction rights to Southern California’s Mojave Aquifer (Ayres et al 2021) or where management institutions exist, such as in groundwater management districts in Nebraska (Edwards 2016), the losses may be minimal. Externalities are more significant where these conditions are lacking. Increased fertilizer application and associated downstream runoff is an example, and when costs are not privately internalized, fertilizer use may be excessive within a cost/benefit framework. Alternatively, where farmers adopt easements with downstream benefits, not all gains are privately captured, resulting in under adoption. In these respects, the research can be seen as part of an emerging and critical agenda for analysis of adaptation in the agricultural sector to greater water scarcity resulting from climate change.

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