Economics of Climate Smart Agriculture: An Overview

Climate change, especially through greater frequency and intensity of climate extremes, is expected to negatively impact agriculture and food security, particularly in developing countries highly dependent on rain-fed agriculture. Promoting growth and food security must draw on the rich literature of the past 50–60 years while also addressing potential structural shifts in the factors that promote growth. This paper summarizes the economic considerations of Climate Smart Agriculture, a concept developed by the FAO to address the complex issue of how to achieve sustainable agricultural growth for food security under climate change. It addresses the lack of coherence on the CSA approach by building a formal basis of the CSA concept and methodology. We do this by posing a dynamic optimization problem wherein a social planner seeks to maximize expected discounted welfare associated with agriculture of the population they serve, both now and in the future. We analyze constraints, choices, and features of design of CSA to illustrate on the concept can be applied across a range of locations and conditions. This has implications for research, innovation, and policy design.