Assessing the economy–climate relationships for Brazilian agriculture

Studies of the anticipated consequences of climate change suggest that among all economic sectors, agriculture would be the most affected. In Brazil, this issue is particularly relevant, since the agricultural sector and its related activities account for a significant share of the country’s GDP and employment. Using a fixed effects panel model and data from 1990 through 2012, this paper empirically analyzes the vulnerability of agriculture to climate variables in Brazil’s ten main agricultural states and the possible resulting loss of agricultural value in the face of future climate change. Our work is differentiated from prior studies in that it employs state level annual data series, which allows the aggregation of a great deal of relevant current information to the analysis. The results indicate that climate variables have a significant impact on most of these states’ agricultural production, especially air temperature, whose effects showed higher estimated magnitude than those from rainfall. Considering the estimated elasticities and climatic projections, the most severe damage to agriculture is expected in Espírito Santo, Minas Gerais, and Rio Grande do Sul.