<p>Changing temperatures and precipitation patterns
from climate change could be a major risk to crop yields. Producers have technology
options for mitigating climate change risk. One technology is Drainage Water
Recycling (DWR), which involves diverting subsurface water to ponds where it is
stored for later irrigation. Crop insurance could interfere with DWR by
providing producers with another option to manage climate-change risk. It is
hypothesized there exists a spillover effect from crop insurance, which
inhibits climate-change technology adoption. The analysis investigates the DWR
investment decision from a producer’s viewpoint using real options analysis.
The analysis considers two policy regimes: one where crop insurance is not in
effect and one where crop insurance is in effect. In a Poisson jump process, it further considers the
insurance effect of producer’s
returns jumping when facing a crop disaster. Results indicate crop
insurance has a minimal effect on DWR adoption, and in many scenarios, the DWR
adoption thresholds are too large for a producer to invest for climate-change
mitigation. The benchmark DWR adoption scenario requires a revenue of more than
double the conventional revenue of $649 per acre before a producer would
consider adopting. </p>
| Identifer | oai:union.ndltd.org:purdue.edu/oai:figshare.com:article/8028851 |
| Date | 10 June 2019 |
| Creators | Sarah C Sellars (6623600) |
| Source Sets | Purdue University |
| Detected Language | English |
| Type | Text, Thesis |
| Rights | CC BY 4.0 |
| Relation | https://figshare.com/articles/Does_Crop_Insurance_Inhibit_Climate-Change_Technology_Adoption_/8028851 |
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