2007 Reports

Economic Value of Climate Variability Impacts on Coconut Production in Sri Lanka

Zubair, Lareef M.; Peiris, T. S. G.; Ranasinghe, C. S.; Ratnasiri, J.

This paper assesses the economic value of climate variability, employing a percentile analysis on an array of 31-years national annual coconut production data from 1971 to 2001. Of the production array, 10% and 90% percentiles have been considered respectively as lower and upper production extremes. The 60% of production departures of each year of extremes with respect to the mean production of 10% to 90% percentile were attributed to climate variability because studies show that the 60% of the variation of coconut production is explained by climate. These production deviations were then valued multiplying by free-on-board (FOB) prices of fresh coconuts. Results show that the foregone income from coconuts due to low rainfall varied between US$ 32 million to US$ 73 million while the incremental coconut income in crop glut extremes due to high rainfall varied between US$ 42 million and US$ 87 million. Results show that the climate variability causes income losses to the economy estimated at US$ 32 million to US$ 73 million in years of extreme crop shortage. And in years of extreme crop surplus, the economy realises income gains of US$ 42 million to US$ 87 million. These indicate the potential for significant economic benefits from investments in adaptations that would reduce variability in nut production which is caused by variations in climate. Further work is however needed to estimate the effectiveness and economic benefits that might be achieved from investments in adaptation.