Implications for the Iranian economy from climate change effects on agriculture-a static computable general equilibrium approach

Agricultural sectors worldwide are under direct threat from climate change conditions. In Iran, agricultural production has decreased due to droughts originating in an increase in annual maximum temperatures-with the corresponding increase in crop respiration and evapotranspiration-and a decrease in accumulated precipitation. Based on a static computable general equilibrium approach, this paper reports implication for the Iranian economy from the effects of climate change on agriculture--as modeled through three scenarios relying on assumptions about the magnitude of continued reduction in total agricultural production. Reductions of 6%, 12%, and 18% in total agricultural production reasonably cover the range of impacts that climate change is expected to impose on the Iranian agricultural sector--under the assumption that no behavioral adaptations or policy interventions are in place. Our simulations suggest that effects on the Iranian economy imply a reduction in GDP ranging between 3.7 and 6.3%. In addition, 5-17% of labor moves away from the agriculture sector--this labor relocation occurs due to declining agriculture incomes. Findings illustrate that climate change will reduce households' consumption and income in all economic sectors, particularly among rural households. We suggest that policies in Iran should focus on improving cultivation methods to save water resources and alleviate the expected effects of climate change. The current study's outcomes are helpful for policymakers, especially in countries with water scarcity.