Sectoral impacts of climate change in Iran: A dynamic analysis with emphasis on agriculture

Abstract

Iranian agriculture, the largest consumer of water, is highly vulnerable to sever climate change-induced droughts. This study aimed to analyze the impact of climate change on various sectors, with a focus on agricultural output and gross domestic product (GDP). To achieve this, a dynamic Computable General Equilibrium (CGE) model incorporating a climate damage function was utilized to project the consequences of climate change on various sectors of Iran's economy. The damage function is based on the temperature anomaly. This study simulated the impact of shocks caused by climate scenarios by 2060. The modified Social Accounting Matrix served as the primary dataset for CGE modeling. By simulating climate scenarios up to 2060, the findings indicated that certain agricultural products, such as cereals and livestock, have the potential for an annual output expansion of 2–3.5 % under the most severe climatic scenarios. This expansion is attributed to their lower reliance on capital inputs and their increased final demand for agricultural commodities. Conversely, the growth rates of output expansion and final demand for services products are lower than those for agricultural products. With climate change options, there may be a shift in output composition, favoring crops, agricultural industries, and energy products, while the growth of services output remains comparatively lower. The GDP growth path also deviates from the current path of 1.8 %, reaching rates of 1.5–1.7 %. In the most restrictive scenario, the GDP is projected to decline in the mid-2050s. Similarly, the range for consumption growth is estimated to be 1.8–2.1 %. Climate change does not significantly alter the income distribution within rural and urban income groups. However, it exacerbates rural-urban inequality by favoring urban households with higher consumption levels. The current state of the Iranian economy, especially the agricultural sector, faces increased vulnerability due to climate change. Nevertheless, certain agricultural activities may experience a relatively greater increase in output because of the growing demand for these products.