Potential economic effects of climate change on Finnish agriculture

Abstract

In the assessment of the economic effects of climate change, changes in returns and costs have to be taken into consideration. Changes in returns are mainly caused by changes in the yield level. Costs are determined by various factors. Harvesting conditions may improve as the temperatures are higher. However, an increasing need for disease and pest control results in higher costs. Various extensive studies have indicated that rising temperatures with the CO2 fertilizing effect increase the crop potential in Finland. From the economic point of view an increase in yield level is highly significant, because the increase in costs remains quite small. A 10% increase in the yield level raises the farm income by about 6%. Because agriculture is supported in many ways either directly or indirectly, the rise in income level may be offset by lowering the support. Consequently, farmers may not benefit from an increase in the yield level, but the benefit will go to the state economy. However, an increase in the yield level resulting from rising temperatures is advantageous to the national economy, regardless of whether the benefit goes to the farmers or to the state.;