Economic effects of projected decrease in Brazilian agricultural productivity under climate change

This paper aims to analyze the economy-wide and regional effects of climate change-induced productivity decrease in Brazil. Our methodological framework was based on the General Equilibrium Analysis of the Brazilian Economy Project-PAEGDyn,a dynamic CGE model. The results show that the projected falls in agricultural productivity impose reductions in the performance of Brazilian GDP over time. Even with the use by other sectors of the economy of the factors unemployed in agriculture, there is no intersectoral compensation in economic production over time able to bring it back to the reference trajectory. In addition, the impact will be greater in warmer and poor regions, which depend on agriculture and present greater income inequality, accentuated by the free mobility of production factors within the national border. Therefore, the main implication of this study is the need to allocate scarce resources for adaptation and mitigation policies primarily for these regions, including broadly stimulating economic development with more income distribution. This will allow these regions to protect themselves by making investments in new technologies and modern infrastructure for the agricultural sector.