The impact of climate change on grape yields: Evidence from Australia

Precipitation patterns are projected to change in different directions across wine regions in Australia, but temperatures are projected to increase in all wine regions, making them less prone to frosts but more prone to heatwaves and more arid. This research aims to estimate how climate change could affect grape yields in Australia. This is, to our knowledge, the first study using a panel data framework to estimate the potential impact of climate change on grape yields. This framework involves a two-step approach in which the first step consists of estimating the impact of weather on grape yields using a fixed effects panel data model, and the second step involves estimating the potential impact of climate change projections using the estimates from the first step. We also estimate a novel hybrid model that interacts weather with climate, potentially accounting for long-run adaptation. The results suggest that climate change by 2050 may lead to higher yields in most regions but lower yields in some of the country's largest regions. Put differently, an increase in yields may be expected in the coolest regions, while a decrease may be expected in the hottest regions. Consequently, the average yield in Australia may change very little.