Uneven responses to climate and market influencing the geography of high-quality wine production in Europe

Analysis of the adaptive capacity and vulnerability of production systems faced with increasing risk from sources including climate change and fluctuating market forces is essential for the development of practical strategies to sustain product viability. In the wine production industry, market and climate risk factors are closely related. Climate influences both yields and quality and thereby prices and revenue, while market pressures force farmers to maintain levels of quality wine production in order to meet increasing consumer demand. This paper analyses wine production at regional European level by explaining technical efficiency in a multiple exposure context and exploring climate-efficiency and climate-performance relationships. The methodology includes estimation of a multi-output frontier production function and an inefficiency effects model. The results reveal significant effects of climate variables, most notably temperature, both on output and efficiency, as well as regional differences in adaptive capacity. The use of larger quantities of intermediate inputs has contributed to reducing the vulnerability of the northern regions to climate change, while labour and capital-intensive technologies have been used to adapt to market changes. The potential to improve economic performance by increasing technical efficiency is considerable, particularly in the southern regions, where the existing level is lower.