Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Agriculture's Portfolio for an Uncertain Future: Preparing for Global Warming

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Agriculture's Portfolio for an Uncertain Future: Preparing for Global Warming

Article excerpt

On June 3, world leaders will convene in Rio de Janeiro for the United Nations Conference on Environment and Development--or what people around the world are calling "Earth Summit." Earth Summit will draw legions of official delegates and perhaps up to 50,000 observers, all anxious to see whether nations can agree on a strategy for maintaining economic progress while coping with mounting concerns about the environment. Recognizing that lofty aim, some are calling this conference the ecological equivalent of Bretton Woods, the 1944 New Hampshire summit that set the global financial framework for a generation of postwar economic growth.(1)

The conference will take up many issues, but the central topic will be global warming. The burning of fossil fuels and a host of other human activities are putting more greenhouse gases like carbon dioxide in the atmosphere, threatening a warmer climate in the future. Like other industries, agriculture emits greenhouse gases, but it is unique in that it also absorbs them through photosynthesis. Delegates at the conference will consider ways to cut emissions of greenhouse gases, store the gases that are emitted, and help the global economy adapt to a different climate.

Global warming poses a bigger threat to agriculture than to any other industry. Agriculture is conducted mostly outdoors, and changes in climate affect where, when, and how food and timber are produced. But climate is always changing, and for centuries farmers and foresters have been discovering ways to adapt to climate change. In the twentieth century, dramatic advances in technology have made agriculture even more adaptable. Thus, while global warming may pose a very real threat, U.S. agriculture will have many tools with which to respond and adapt.

Many attempts have been made to predict how global warming would affect U.S. agriculture, but these predictions remain inconclusive because tomorrow's climate is so uncertain. To decide how public policy should prepare for the threat of global warming, the following questions must be answered.

First, does U.S. agriculture play a big role in emitting greenhouse gases, and can it emit less and store more? The first section of this article describes the greenhouse effect and shows that U.S. agriculture contributes only fractionally to global greenhouse gases. Still, agriculture could store substantial amounts of the gases in forests and soil, if necessary.

And second, what can U.S. agriculture do to adapt successfully to future climate change? The second section concludes that the nation should manage a diverse portfolio of agricultural assets to adapt to an uncertain future climate. The nation has a strong base portfolio of ten assets--each of which can help agriculture adapt. A crucial asset will be the world market that facilitates trade flows among countries. But if agriculture is to adapt successfully, steps must be taken now both to strengthen those assets--including world trade channels--and to increase the flexibility in using them.


The greenhouse effect, although widely discussed, is still widely misunderstood. part of the confusion is that the greenhouse effect is both natural and induced. The natural greenhouse effect results from gases like carbon dioxide and water vapor forming an atmospheric thermal blanket around the earth, trapping the warmth of sunlight and making the earth habitable. It has been estimated that without that natural blanket of greenhouse gases, sunlight would simply be reflected back into space and the earth's temperature would be colder by 33 degrees Celsius (C), or 59 degrees Fahrenheit (F). The induced greenhouse effect, or what scientists call climate forcing, is the result of additional greenhouse gases put into the atmosphere through human activities, such as the release of carbon dioxide when fossil fuels are burned. The induced greenhouse effect is well understood, and the rise in greenhouse gases from human activity is well documented. …

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