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Abstract

More than most other economic sectors agriculture depends on climatic conditions. This report presents an analysis of possible climate change effects on Eastern Germany’s agriculture. It suggests that the risk of Eastern Germany’s acreage losing in value is low. Negative regional impacts of climate change could be countered by appropriate adaptation measures, crop yields in many areas could even be raised and yield losses might be of set by counteracting price increases on the world market. The projection is based on a regional climate scenario. Using the statistical scenario-model STAR II available large scale projections from climate change global circulation models for middle Europe were downscaled to the existing network of East-German weather stations. The available weather records for the period 1951 to 2003 were extended for the scenario period 2004-2055. For the extension, a general increase of the average annual temperature in Eastern Germany by up to 2.7 degrees Celsius (4.8 degrees Fahrenheit) was assumed until the middle of the 21st century. The increase in temperature was triggered by a rise in atmospheric CO2 concentration from 386 at present to 542 ppm in 2055. The scenario model STAR II was used to derive the associated changes of the other major climate variables. Following the results the average annual rainfall is projected to decrease only marginally. However, shift of rainfall patterns is to be expected. Summertime rainfall will probably decrease while wintertime rainfall is likely to increase. This trend can already be monitored today and will continue as a tendency into the future. According to the projections this development will be interrupted infrequently, though, by relatively humid phases with comparatively high amounts of rainfall during the summer months. Based on this scenario, the future crop yield potentials were evaluated for the summer crop maize and the winter crop wheat in Eastern Germany. The evaluation used statistical yield models relating yearly changes in major climate variables to those in crop yield at the county level. The models were calibrated for the period 1990 to 2006 and then used for simulating the climate dominated yield variability beginning in 1951 up to 2055. The results received after integration revealed that the climate-determined yield level will probably remain stable under the projected climatic conditions for the next 20 to 30 years. A significant yield loss is to be expected by the middle of the 21st century, especially at locations in the eastern sandy lowlands distant from coast and mountain regions. The losses will be greater in the cultivation of the summer crop maize than that of the winter crop wheat. However, the increase in atmospheric concentration of carbon dioxide (CO2) might compensate part or all of these losses. Due to the fertilizing effect of this greenhouse gas, yields of wheat can even be expected to increase above current levels and yield losses of maize due to water stress will be mostly diminished. An optimum nitrogen provision is a necessary precondition for the CO2 fertilization to come to its full effect, though. In contrast to wheat and maize, yields of fast growing aspen in short rotation coppice plantation are expected to increase under the presumed changes of climate also on sandy soils with low water holding capacity even when neglecting the beneficial effect of higher CO2. This is indicated by simulation results using the eco-physiological forest dynamics model 4C. The model was applied to those areas of East-Germany’s arable land where cereal cropping is less productive than the current median level. Following these results, short rotation coppicing of aspen is a promising cultivation alternative for farmers to secure future incomes. Woody biomass generated in short rotation coppice plantations with aspen is particularly suitable for bio-energy production. In this paper we present an algorithm that deals with trade interactions within a multi-region model. In contrast to traditional approaches this algorithm is able to handle spillover externalities. Technological spillovers are expected to foster the diffusion of new technologies, which helps to lower the cost of climate change mitigation. We focus on technological spillovers which are due to capital trade. The algorithm of finding a pareto-optimal solution in an intertemporal framework is embedded in a decomposed optimization process. The paper analyzes convergence and equilibrium properties of this algorithm. In the final part of the paper, we apply the algorithm to investigate possible impacts of technological spillovers. While benefits of technological spillovers are significant for the capital-importing region, benefits for the capital-exporting region depend on the type of regional disparities and the resulting specialization and terms-of-trade effects.