J. ISSAAS Vol. 20, No.

1:16- 28 (2014)

SIMULATING CLIMATE-INDUCED IMPACTS ON PHILIPPINE AGRICULTURE

USING COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS

Arvin B. Vista

Department of Agricultural Economics, College of Economics and Management

University of the Philippines Los Baños
College, Laguna 4031, PHILIPPINES
Corresponding author: [email protected]

(Received: July 21, 2013; Accepted: March 22, 2014)

ABSTRACT

This research employed a computable general equilibrium model to analyze the likely extent
of climate-induced impacts on the Philippine economy and its agricultural subsectors. Using two
simulation scenarios (i.e. decline in agricultural productivity, and combination of a decline in
agricultural productivity and fishery policy response), the results reveal that the real gross domestic
product (GDP) at factor cost, export quantity, import quantity and employment will decrease.
However, if the government will employ fishery policy response that would target an increasing
production in the fishery subsectors (i.e. ocean fishing, freshwater/coastal fishing, and aquaculture),
then the reduction in percent deviation from the base for real GDP, export and import quantity, and
employment will be lower. Overall, climate-induced impacts will result in a net loss to the Philippine
economy and its key agricultural sectors in the short run. Therefore, it is imperative for Philippine
farmers to adopt adaptation measures that will lessen the impacts of climate change such as use of
organic, indigenous and/or diversified farming practices coupled with safety nets provided by the
national and local government units for the affected farmers in the agricultural subsectors – banana,
corn, sugarcane, rice and fiber products.

Key words: climate change, closure, modeling, shock, short-run

INTRODUCTION

The Philippines is a minor emitter of global greenhouse gases, but its location and geography
make it highly vulnerable to the impacts of climate change specially by natural disasters and periodic
El Niño and La Niña (Rincon and Virtucio, 2008). In 2007, the Philippines was ranked as the 43rd
largest emitter of carbon dioxide in the world, accounting for 0.27% of the total global carbon dioxide
emissions (MtCO2e), excluding land use change (WRI, 2011). Indeed, climate change is a serious
threat to the country’s economy especially to agricultural sector. Since agricultural production relies
heavily on the environment, increased uncertainties and risks from natural calamities and disasters
greatly affect the production of agricultural goods.

Rainfall and temperature variability are the two main contributing factors affecting
agricultural production in the country. Intergovernmental Panel on Climate Change (IPCC, 2007, p.
475) reported that since 1971, average temperatures in the Philippines have increased by 0.14 ºC per
decade. This has led to increased annual mean rainfall (since the 1980s), increased number of rainy

16
days (since the 1990s), and increased inter-annual variability of onset of rainfall. This situation is
most likely to continue, since the Philippine Initial National Communication on Climate Change
(PINCCC) (Republic of the Philippines, 1999) have projected a temperature increase of 2-30C in
annual temperatures.

There are varying estimates of climate change impacts resulting in yield reduction of selected
Philippine agricultural crops and production losses due to damages from onslaught of climate-induced
events, such as typhoons, floods, drought/El Niño, La Niña, and pests and diseases. Increasing
temperature due to climate change results in: (1) decreased crop yield due to heat stress; (2) increased
livestock deaths due to heat stress; and (3) increased in outbreak of insect pests and diseases.
Meanwhile, the variability in rainfall (including the El Niño Southern Oscillation) results in: (1)
increased frequency of drought, floods, and tropical cyclones (associated with strong winds), causing
damage to crops; (2) changes in rainfall patterns affecting current cropping pattern, crop growing
season, and sowing period; and (3) increased runoff and soil erosion resulting in declining soil fertility
and crop yields (IPCC, 2001).

Tables 1 and 2 show the varying estimates of climate change impacts resulting in yield
reduction of selected Philippine agricultural crops (rice, corn, banana, cotton, sugarcane, tomato and
coffee)1 and production losses due to damages from the onslaught of climate-induced events, such as
typhoons, floods, drought/El Niño, La Niña, and pests and diseases. For example, rice yields are
expected to result in a 15% to 27% for a temperature increase of 2°C (Escaño and Buendia, 1994)
because of heat stress, decrease in sink formation, shortening of growing period, and increased
maintenance for respiration. SEARCA (2005) estimated the yield reduction coefficients2 would range
from 1% to 100% due to typhoon, flood, drought and pest and diseases for selected Philippine
agricultural commodities. Typhoon/flood damages in rice fields are estimated to result in losses of
about 2.6-62.54%. Losses due to droughts are estimated 1.5%, while losses due to pests and diseases
are seen at about 10% (Rincon and Virtucio 2008; SEARCA 2005). Delos Santos et al. (2007)
stressed the impacts of extreme climatic events on corn production in the Philippines.

Based on the reports of the farmers, up to 70% of corn crops can be damaged by typhoons,
while flooding can wipe out the entire corn farms (Table 2). Meanwhile, drought and La Niña
episodes can result in yield losses of 50%-70% and 16%, respectively. On the other hand, Global
Circulation Models predicted that corn yields would decline by 12.64% for the first crop of PS 3228
variety and 19% for the first crop of sweet corn (Republic of the Philippines, 1999).

Such uncertainties and risks further stress the importance of assessing the impacts of climate
change to Philippine agriculture and the overall economy. This assessment of climate-induced impacts
will provide a useful vehicle for practical policy analyses and targeted climate-change adaptation and
mitigation strategies and measures. To date, there is no study yet that uses the computable general
equilibrium (CGE) model to estimate economy-wide implications of climate change in Philippine
agriculture.

1
These crops were selected because they are the commodities with reported estimates of yield
reduction due to climate change. Other agricultural commodities were not included in this paper due
to unavailability of literature citing estimates of yield reduction due to climate change as of January
2012.
2
Reduction coefficient (RC) is defined as: RC = (1-RT)*(1-RF)*(1-RD)*(1-RP&D), where RT, RF,
RD and RP&D are reduction coefficients for typhoon, flood, drought, pests & diseases. RC is
synonymous to the measure of risk due to climate induced events. Yield loss = Potential yield *
Reduction Coefficient
17
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

Table 1. Reported yield reduction (%) and yield reduction coefficients (%) of selected agricultural
crops in the Philippines.

Yield Reduction Coefficient (%)a

Yield
Commodity Pest &
Reduction (%) Typhoon Flood Drought
Diseases
Rice 15-27b 10 30-80 15 10
Corn 12-19c 80-100 85 90 25-90
Banana 85 90 1-30
Cotton 85 90 20-99
Sugarcane 85 90 5-80
Tomato 85 90 10-70
Coffee 85 90 5-60
Source: aSEARCA (2005), bgiven 20 C increases in temperature (Escaño and Buendia, 1994),
c
Republic of the Philippines (1999)

Table 2. Production losses (%) of selected agricultural crops in the Philippines.

Losses (% Damages)
Commodity
Typhoon/Flood Drought/ El Niño La Niña Pest & Diseases
a b a
Rice 2.6 , 62.5 1.5 10.0b
Corn 70.0c, 75.0b 27.0-70.0c , 87.0b 16.0c 65.8b
Banana 5.5b 4.4b 9.4b
Cotton 76.7b 87.0b 72.7b
Sugarcane 18.3b 47.5b 30.0b
Tomato 43.9b 32.5b 27.0b
Coffee 44.2b 43.6b 25.7b
a b c
Source: Rincon and Virtucio (2008), SEARCA (2005), Delos Santos et al. (2007)

The earliest CGE models of the Philippines were done by Clarete (1984) on trade policy and
Habito (1984) on fiscal policy and income distribution. Since then, quite a number of models have
been constructed that evaluated the impacts on welfare, poverty, outputs, prices, international trade,
consumption, employment, pollution emissions, income distribution, food security, and agriculture,
among others. For Philippine agriculture, CGE models were employed to assess the trade policies and
impacts of avian influenza outbreak (Rodriguez et al., 2007); impacts of Philippines-USA free trade
agreement (Rodriguez and Cabanilla, 2006); biofuel (Rodriguez and Cabanilla, 2008); agricultural
policies (Habito, 1986; Clarete and Warr, 1992), poverty (Cororaton and Corong, 2006), and welfare
(Coxhead and Warr, 1992).

This research is the first to assess the economy-wide estimates of climate-induced impacts on
Philippine agriculture. Specifically, this research determined the extent of climate-induced impacts on
the different subsectors of Philippine agriculture, and assessed the total macroeconomic impact of
climate-induced changes in agricultural production.

18
 METHODOLOGY

Overview of the Model

CGE model is a useful tool for analyzing the likely extent and induced distributional impacts
of climate change on all the sectors of the economy and the different subsectors of Philippine
agriculture. The tool used in the analysis was based on the ORANI-G, a generic single-country CGE
model using the Philippine input-output (IO) data. This CGE model is named AGRIK.

The ORANI was designed for comparative-static simulations. The ORANI applied general
equilibrium (AGE) model of the Australian economy is widely applied and adapted by economists
and academicians in the government and private sectors for practical policy analysis, e.g. study of
macroeconomic and sectoral shocks addressing competition and trade policies (Horridge, 2003).
ORANI-G has been adapted to build models of South Africa, Pakistan, Sri Lanka, Fiji, South Korea,
Denmark, Vietnam, Thailand, Indonesia, Philippines, and China. In particular, the Philippine’s
TARFCOM model is an adapted CGE model of Orani-G with Philippine data (Rodriguez and Cabalu,
2005).

The ORANI-G–based model was used in general equilibrium modeling because of the
following advantages. First, the model allows for direct implementation of production and
consumption shocks in the analysis. Second, it contains equations that explicitly link agriculture,
manufacturing, and trade sectors to other industries in the economy. Finally, the model computes
macroeconomic variables (e.g. gross national product (GNP), imports and exports, among others) that
allow an overall assessment of the impacts. In particular, the theoretical structure of ORANI-G
consists of equations describing producers’ demands for produced inputs and primary factors,
producers’ supplies of commodities, demands for inputs to capital formation, household demands,
export demands, government demands, relationship of basic values to production costs and to
purchasers’ prices, market-clearing conditions for commodities and primary factors, and numerous
macroeconomic variables and price indices. Horridge (2003) presented a detailed guide of the
ORANI-G model, its structure, assumptions and drawback, key relationships, closures, etc.

The AGRIK model includes 25 industries and 25 commodities, 15 of which are agricultural.
Moreover, there are two sources (domestic and imported) and two occupation types (skilled and
unskilled). Producers were assumed to be price takers operating in competitive markets for both their
outputs and inputs. Furthermore, the model used the assumptions of constant returns to scale and
marginal cost pricing to eliminate quantity variables from the industry zero pure profits condition.
Each industry produces a mixture of all the commodities using domestic inputs and imported
commodities, labor types, land and capital. This mixture varies according to the relative prices of
commodities. In addition, commodities destined for export were distinguished from those which are
for local use. There is no substitution between produced inputs, primary factors and other inputs or
between inputs of different commodity categories. However, there is substitution between aggregate
labor, capital and agricultural land, and between alternative sources (i.e. domestically produced goods
and imports) of produced inputs of a given commodity category. The 25 industries are also the
investors themselves. Capital was assumed to be produced with inputs domestically produced and
imported commodities and no primary factors were used directly as inputs to capital formation.
Furthermore, the model includes market-clearing equations for locally-consumed commodities, both
domestic and imported.

19
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

The Database of the AGRIK Model

The data used in the AGRIK model was based on the 2004 Philippine input-output (IO) table
from the Global Trade Assistance and Protection (GTAP) database (version 7), which has 57 GTAP
commodities (Corong, 2008). The 2004 Philippine IO was an updated 2000 IO table of the country
with 240 commodities. The IO table contains data on payments made by various agents on the
commodities and factor services provided by the other agents. The 2004 IO table from GTAP
database has 57x57 sectors, which was aggregated into 25x25 sectors in the AGRIK model, following
the commodity definition of the 2000 Philippine IO. Other data used in the model were obtained from
the National Statistics Coordination Board (NCSB), the Bureau of Agricultural Statistics, and the
Food and Agriculture Organization of the United Nations Statistical Database.

Figure 1 shows the structure of the information contained in the IO table. Demanders
identified in the column headings (i.e. the absorption matrix) include:
domestic producers divided into I industries;
investors divided into I industries;
a single representative household;
an aggregate foreign purchaser of exports;
government demands; and
changes in inventories.

V1BAS (c, s, i) represents the flow of commodity c in basic value from source s to industry i
for intermediate use. V2BAS (c, s, i) represents the flow of commodity c in basic value from source s
to industry i for investment. V3BAS (c, s) represents the flow of commodity c in basic value from
source s for household consumption. V4BAS (c) represents the flow of export commodity c in basic
value. V5BAS(c, s) represents the flow of commodity c in basic value from source s for government
consumption. V6BAS (c, s) represents the inventories of basic flow of commodity c in basic value
from source s. V1MAR (c, s, m) is the value of margin type m used to deliver commodity type c from
sources s to producers (user 1). V2MAR (c, s, m) is the value of margin type m used to deliver
commodity type c from sources s to investors (user 2). V3MAR (c, s, m) is the value of margin type m
used to deliver commodity type c from sources s to households (user 3). V4MAR (c, s, m) is the value
of margin type m used to deliver commodity type c from sources s for exports (user 4). V5MAR (c, s,
m) is the value of margin type m used to deliver commodity type c from sources s to government (user
5). V1TAX (c, s, i) represents the sales tax imposed on commodity c from source s for intermediate use
by industry i. V2TAX (c, s) represents the sales tax imposed on commodity c from source s for
investment use by industry i. V3TAX (c, s) represents the sales tax imposed on commodity c from
source s consumed by households. V4TAX (c) represents the sales tax imposed on export commodity
c. V5TAX (c, s) represents the sales tax imposed on commodity c from source s for government
consumption. V1LAB (i, o) represents the wage bill by industry i by occupation. V1CAP (i) represents
the capital rentals by industry i. V1LND (i) represents the land rentals by industry i. V1PTX is an ad
valorem production tax while V1OCT (i) represents the other costs incurred by industry i. The MAKE
(c, i) represents the make matrix at the bottom of Figure 1 by commodity c, by industry i, i.e. the
value of output of each commodity by each industry. V0TAR (c) represents the tariff revenue by
commodity c.

Updating the 2004 Philippines Input-Output Table

The 2004 Philippine IO above may not be appropriate for policy analysis because it no
longer reflects the present structure of the Philippine economy, which went through significant
structural changes from 2004 to 2009.

20
 Absorption Matrix
1 2 3 4 6 5
Change in
Producers Investors Household Export Governmen Inventories
t
Size ← I → ← I → ← 1 → ← 1 → ← 1 → ← 1 →
Basic ↑
Flows C×S V1BAS V2BAS V3BAS V4BAS V5BAS V6BAS
↓
↑
Margins C×S×M V1MAR V2MAR V3MAR V4MAR V5MAR n/a
↓
↑
Taxes C×S V1TAX V2TAX V3TAX V4TAX V5TAX n/a
↓
↑ C = Number of Commodities
Labor O V1LAB I = Number of Industries
↓
↑ S = 2: Domestic, Imported
Capital 1 V1CAP O = Number of Occupation Types
↓
↑ M = Number of Commodities used as Margins
Land 1 V1LND
↓
Production ↑
Tax 1 V1PTX
↓
Other ↑
1 V1OCT
Costs
↓

Joint Production
Matrix Import Duty
Size ← I → Size ← 1 →
↑ ↑
C MAKE C V0TAR
↓ ↓

Fig. 1. The database (Horridge, 2003).

Appendix Table 1 shows the percentage changes in real aggregates from 2004 to 2009 from
the demand and supply sides of the economy. The expenditure side includes household and
government final consumption expenditures, capital formation, exports and imports, while the supply
side includes employment and population (or number of household). Gross value added of each major
industry was used for the industry output. Since the employment data is more aggregated for the
agriculture sector, it is assumed that the changes in productivity within this sector are the same.
Therefore, following Buetre and Ahmadi-Esfahani (2000), the Philippine IO table was updated from
2004 to 2009.
21
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

The procedure outlined in Buetre and Ahmadi-Esfahani (2000) in updating the database followed the
simulation technique based on Dixon and McDonald (1993), which employed the CGE model. This
macroeconomic historical simulation requires the following variables to be included in the database:3
real household consumption (x3tot), aggregate real investment expenditure (x2tot_i), export volume
index (x4tot), import volume index (x0cif_c), and aggregate real government demands (x5tot) from
2004 to 2009 as shown in Appendix Table 1.

This inclusion requires the adoption of new closure4. In this regard, the following macroeconomic
variables were endogenized:

• a1primgen - a general technological change or total factor productivity

• ff_accum - a general shifter for aggregate investment
• twist_src_bar - a general twister for import
• f4q_general - a general shifter for exports
• f5tot2 - a general shifter for aggregate 'other' demand.
•
Moreover, the following shocks were introduced:
• employment (employ_i) = 10.91. This is the percentage change in aggregate employment in
the Philippines during the period.
• number of households (q) = 19.86. This allowed for the changes in consumption to be
measured in terms of per household basis.
• consumer price index (p3tot) = 32.67. This allowed the actual change in aggregate consumer
price to be imposed exogenously, leading to an updated database expressed in 2009 values.

Simulation Scenarios

Two simulation scenarios were implemented in the CGE application. The agricultural
production scenario (1st) highlights the possible climate-induced impacts on the Philippine economy
and on the selected agricultural subsectors. In the first simulation, production shocks were
simultaneously employed for rice (-18%), corn (-16%), sugarcane (-32%), banana (-6%), and other
crops (-15%). These assumptions were based on the information presented in Tables 1 and 2.

On the other hand, the fishery policy-response scenario (2nd) that would target an increasing
production in the fishery sector (ocean fishing, freshwater/coastal fishing, and aquaculture) is viewed
as a potential policy response given climate change impacts on the selected subsectors of Philippine
agriculture, i.e. 1st simulation scenario. This second scenario is a possible policy response to climate
change impacts since the Philippine fishery sector is less vulnerable to the impacts of climate change
compared with those in 137 other economies (Allison et al., 2009). Furthermore, the Philippine
Government’s increased provision of grants in the form of agri-fishery inputs, equipment and
facilities, including farm-to-market road projects, are expected to further boost the development of the
agricultural and fishery sector and increase the productivity of fisherfolks and small farmers to
selected provinces and local government units in the country. In the fishery policy-response scenario,
it was assumed that fishery production could be increased by 10%.

Given the two scenarios, CGE model was employed to estimate the changes on the following
macroeconomic variables: real gross domestic product (GDP) at factor cost, consumer price index
(CPI), export quantity, import quantity, employment, and average return to land (rent). Likewise,

3
These variables are estimated from the respective changes in the expenditures on commodities in
each of the five categories in the final demand, hence usually treated as endogenous in the model.
4
A closure must be satisfied wherein the number of endogenous variables must equal the number of
equations so that the CGE model will run and the equation system can be solved using GEMPACK.

22
changes in the sectoral activity-level or value added for the 25 sectors of the Philippine economy were
estimated. Fifteen of the 25 sectors in the CGE model comprised the agriculture, fishery and forestry
sectors.

Since the AGRIK model discussed above has more variables than equations, closure rules
were imposed so that the number of equations is equal to the number of endogenous variables. In
solving the CGE model, both the short-run or long-run closure rules can be employed. In the short-run
closure, capital stocks are held fixed, implying that it is not affected easily by the short run shocks.
Likewise, real wages are held fixed in the short run closure, accompanied by an endogenous level of
aggregate employment. This assumes that firms do not substitute between labor of different types. A
short-run closure rule assumes that a) unemployed resources exist and b) there will be a short period
of time (1-3 years) needed for economic variables to adjust to new equilibrium (Horridge, 2003). In
other words, short-run influence connotes “a short period of time (1-3 years) needed for economic
variables to adjust to new equilibrium.” On the other hand, the long-run closure rule allows the real
wage rate to adjust to an exogenously determined level of aggregate employment. This long-run
scenario assumes that the economy is operating under full employment.

Given high unemployment in the country (7.5% in April 2013), a long-run scenario was not
adopted in the CGE application. While in terms of time period, the impacts of climate change on
agriculture and economy is significant in the long-run; however, given the timescale of the
simulations employed and employment condition of the country, a short-run closure was more
appropriate to use. Hence, the most appropriate assumption, based on the given needs or timescale of
the proposed simulations above, is the use of short-run closure. Hence, all the results below were
treated as representatives of the simulated short-run influence of climate-induced impacts on the
Philippine agriculture and economy.

Short-run closure was adapted in the implementation of the AGRIK model. The macro
variables are swapped as follows:
disconnecting government from household consumption by treating x5tot as exogenous variable
instead of f5tot2;
household consumption x3tot as exogenous variable rather than w3lux;
inventory changes delx6 as exogenous variable rather than fx6; and
average real wage as exogenous variable rather than the overall wage shift, f1lab_io.

The AGRIK model was implemented using the General Equilibrium Modelling PACKage
(GEMPACK) system. GEMPACK is a flexible system for solving CGE models and facilitates the
automation process of translating the model specification into a model solution program.

RESULTS AND DISCUSSION

On the macro level, simulation results show that climate-induced impacts are likely to reduce
aggregate output. This can be seen from the 1.83% projected decline in real GDP accompanying the
production shock (simulation 1). Results from the combination of production shock and fishery policy
response shock (simulation 2) indicated a possible 1.63% reduction in aggregate output (Table 3).

A decline in agricultural production is expected to raise the general price level (as measured
by consumer price index) by 0.15%, while increasing the production of the fishery sector given
climate induced impacts on agricultural production is seen to reduce aggregate prices by 1%. Climate-
induced impacts would mostly affect the country’s quantity of export and import, as well as
employment, though the country would be benefiting slightly from the fishery policy response of
increasing production. The decline in agricultural production due to climate change was reflected in

23
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

the reduction of quantity exported by 6.54% and quantity imported by 1.93%. Likewise, the country’s
employment will decrease by 4.91% with the assumed reduction in selected agricultural production.

Table 3. Simulated macroeconomic effects, in percent deviation from the base.

Simulation 1 Simulation 2
Variables Agricultural production Agricultural production + fishery
policy response
Real GDP at factor cost -1.83 -1.63
Consumer’s price index 0.15 -1.00
Export quantity -6.54 -5.72
Import quantity -1.93 -1.89
Employment -4.91 -4.36
Average return to land 73.26 75.27

Given reduction in agricultural production due to climate change and targeted fishery policy
response, the percent deviation from the base in export quantity is lower at 5.72% decline, a decrease
of 1.89% in import quantity, and a decrease of 4.36% in employment. In addition, land rent is
expected to increase by 75.27%, which might trigger improvement in production efficiency and
further input intensifications (Table 3). Simulation 2 results indicated that the fishery policy response
could increase real GDP, employment, export and import in the fisheries subsectors.

Detailed disaggregation of the results shows a similar pattern. The reduction in activity level
or value-added was most significant in corn, banana, sugarcane, manufacturing, and rice sectors
(Table 4). Value-added for forestry rose slightly by 0.12%. In simulation 1, 23 of the 25 sectors will
have a decrease activity level. On the other hand, simulation 2 caused the value-added of 18 sectors to
decline. The fisheries sectors (ocean fishing, freshwater/coastal fishing, and aquaculture) are the only
sectors that gained positively from simulation 2. Moreover, there were slight increase in the value-
added for forestry (0.29%), mining and quarrying (0.02%) and construction (0.01%) sectors.

Given the structure of the Philippine economy, the simulation results show that the decrease
rate of most of the sectors in simulation 2 is lower than that in simulation 1. The model implies that
with fishery policy response, the value-added created in the three subsectors of the fishery will have
multiplier effects in the economy and the associated subsectors of the country. For example, Table 4
shows that given simulation 2, transport subsectors will benefit slightly from fishery policy response
since without it, the reduction in value added will be higher at 0.44% compared with 0.13% with the
fishery policy response.

CONCLUSION AND RECOMMENDATIONS

Overall, climate-induced impacts will result in a net loss to the Philippine economy and its
key agricultural sectors in the short run. Since production would be greatly affected and would have
ripple and multiplier effects in the economy, it is imperative for Philippine farmers to employ
adaptation measures to lessen the impacts of climate change.

Therefore, boosting the fisheries subsectors may lessen the impact of climate change on the
Philippine economy. In 2009, commercial fisheries contributed PhP 58M of the total fish (27%)
production, municipal fisheries contributed PhP 75M (35%), and aquaculture contributed about PhP
81M (38%) (BFAR, 2009). Since climate change would have an impact on the greater number of
municipal fishing operators, an increase in the capacity of commercial fishing and aquaculture

24
operators may be encouraged. In the country, climate change shortens fishing season5 as heavy rains
and strong waves now begin as early as late March or early April.

The use of organic farming practices is one of the strategies being advocated by the
Department of Agriculture in response to climate change. Some government subsidies may be needed
to promote indigenous and diversified farming practices in the countryside. Furthermore, going local
and buying local produce may benefit the domestic economy in the short run. Finally, government
should establish safety nets for those stakeholders affected by declining employment and reduced
food crop production. Priorities should be on the most affected subsectors - banana, corn, sugarcane,
rice, and fiber products.

Table 4. Simulated sectoral activity level/value-added effects, in percent deviation from the base.

Simulation 1 Simulation 2
Sectors Agricultural Agricultural production +
production fishery policy response
Rice -4.83 -4.48
Corn -7.32 -7.09
Vegetable and oil seeds -2.49 -2.22
Fruits and nuts -2.49 -2.22
Sugarcane -6.05 -5.76
Abaca -3.72 -3.44
Cotton and other fiber crops -3.72 -3.44
Banana -7.55 -7.25
Other crops -2.49 -2.20
Livestock -3.11 -2.83
Other livestock products -3.64 -3.40
Forestry 0.12 0.29
Ocean fishing -0.17 9.86
Freshwater/coastal fishing -0.17 9.86
Aquaculture -0.17 9.86
Mining and quarrying -0.05 0.02
Manufacturing -5.54 -5.18
Electricity, gas and water -1.83 -1.70
Construction -0.03 0.01
Trade -2.01 -1.86
Transportation, communication
and storage -0.44 -0.13
Finance -0.39 -0.28
Private services -0.45 -0.08
Government services -0.03 -0.01
Dwellings 0.00 0.00
No. of sectors with lower activity-
level/value added 23 18

5
Heavy rains and strong waves in the Philippines coincide with the rainy/typhoon season which
commonly start in June.
25
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

ACKNOWLEDGEMENTS

This research was supported by funds from the Economy and Environment Program for
Southeast Asia (EEPSEA) through the Center for Economics and Development Studies (CEDS),
Faculty of Economics - Padjadjaran University. The author is grateful to its CGE instructors,
primarily Dr. Arief Yusuf and Dr. Ian Bateman. Thanks are due also to Kim Narvaez for his
assistance in this research. Any errors are sole responsibility of the author.

REFERENCES

Allison, E.H., Perry, A.L., Badjeck, M.-C., Neil Adger, W., Brown, K., Conway, D., Halls, A.S.,
Pilling, G.M., Reynolds, J.D., Andrew, N.L., and Dulvy, N.K. 2009. Vulnerability of
National Economies to the Impacts of Climate Change on Fisheries. Fish and Fisheries, 10,
173-196.

Buetre, B.L. and Ahmadi-Esfahani, F.Z. 2000. Updating an Input-Output Table for Use in Policy
Analysis. The Australian Journal of Agricultural and Resource Economics, 44, 573-603.

Bureau of Fisheries and Aquatic Resources. 2009. Philippine Fisheries Profile, 2009. BFAR,
Department of Agriculture. 71 p.

Clarete, R. 1984. The Costs and Consequences of Trade Distortions in a Small Open Economy: A
General Equilibrium Model of the Philippines. PhD Dissertation, University of Hawaii. 146
p.

Clarete, R. and P. Warr, 1992. The Theoretical Structure of the Agricultural Policy Experiments
(APEX) Model of the Philippines. APEX Project Workshop. From
http://rspas.anu.edu.au/economics/apex/papers.php. Accessed on November 17, 2011.

Corong, E. 2008. GTAP 7 Data base Documentation - Chapter 7 I-O: Philippines. Created by G.
Batta. Center for Global Trade Analysis. Department of Agricultural Economics, Purdue
University, Indiana, USA.

Cororaton, C. and E. Corong, 2006. Agriculture Sector Policies and Poverty in the Philippines: A
Computable General Equilibrium Analysis. MPIA Working Paper 2006-Poverty and
Economic Policy (PEP) Research Network. 49 p.

Coxhead, I and P. Warr, 1992. Poverty and Welfare Effects of Technical Change: A General
Equilibrium Analysis for Philippine Agriculture. APEX Working Paper No. 3. 35 p.

Delos Santos, W.L., Lansigan, F.P. and Hansen, J. 2007. Linking Corn Production, Climate
Information and Farm-Level Decision-Making: A Case Study in Isabela, Philippines,
Chapter 16A, in Sivakumar, M. & J., H. (Eds.), Climate Prediction and Agriculture:
Advances and Challenges. Springer Berlin Heiderlberg, NY, pp. 157-164.

Dixon, P.B. and McDonald, D. 1993. Creating 1990-91 Input-Output Tables for Australia by Orani
Simulation, in 17th Annual Conference of Australia-New Zealand Regional Science
Association, Armidale.

Escano, C.R. and Buendia, L.V. 1994. Climate Impact Assessment for Agriculture in the Philippines:
Simulation of Rice Yield under Climate Change Scenarios, in Rosenzweig, C. and Iglesias,
A. (Eds.) Implications of Climate Change for International Agriculture: Crop Modeling

26
 Study. US Environmental Protection Agency, Office of Policy, Planning and Evaluation,
Climate Change Division, Adaptation Branch, Washington, DC. 466 p.

Habito, C.F., 1984. Equity and Efficiency Trade-offs in Philippine Tax Policy: A General Equilibrium
Approach. Phd Dissertation. Harvard University. 256 p.

Habito, C. 1986. A General Equilibrium Model for Philippine Agricultural Policy Analysis. Journal of
Philippine Development, 23, 208-225.

Horridge, M. 2003. ORANI-G: A Generic Single-Country Computable General Equilibrium Model,

in Practical GE Modelling Course Edition. Centre of Policy Studies and Impact Project,
Monash University, Australia. 72 p.

Intergovernmental Panel on Climate Change (IPCC). 2001. Climate Change 2001 Synthesis Report.
Cambridge University Press, Cambridge, United Kingdom and New York NY, USA. 208 p.

Intergovernmental Panel on Climate Change (IPCC). 2007. IPCC Fourth Assessment Report: Climate
Change 2007. Accessed on Nov. 17, 2011 from
http://www.ipcc.ch/publications_and_data/ar4/wg2/en/ch10s10-2-2.html. 74 p.

National Statistical Coordination Board (NSCB). 2004. 2004 Philippine Statistical Yearbook. Makati:
NSCB.

National Statistical Coordination Board. 2010. 2010 Philippine Statistical Yearbook. Makati: NSCB.

Republic of the Philippines. 1999. The Philippines' Initial National Communication on Climate
Change (PINCCC). Philippines Inter-Agency Committee on Climate Change. 91 p.

Rincón, M. F. G. and F. K. Virtucio Jr. 2008. Climate Change in the Philippines: A Contribution to
the Country Environmental Analysis Workshop: World Bank. 42 p.

Rodriguez, U., and Cabalu, H. 2005. A User’s Guide to the TARFCOM Model. John Curtin Institute
of Public Policy, Western Australia, Australia. 166 p.

Rodriguez, U., Garcia, Y., Tan, R., and Garcia, A. 2007. Can Trade Policies Soften the Economic
Impacts of an Avian Influenza Outbreak? Simulations from the CGE Model of the
Philippines. Asian Journal of Agriculture and Development, 4, 41-50.

Rodriguez, U. and Cabanilla, L. 2006. The Impact of a Philippines-USA FTA: The Case of Philippine
Agriculture, in PIDS Discussion Paper Series No. 2006-06.

Rodriguez, U. and Cabanilla, L. 2008. Sugar as a Biofuel: Implications on Agriculture and Food
Security. The Philippine Agricultural Scientist, 91, 459-468.

SEARCA, 2005. Assessment and Management of Risks Due to Natural Calamities in Support of
QUEDANCOR Lending Operations. Final Report for Quedan and Rural Credit Guarantee
Corporation. 149 p.

Yusuf, A.A. and Francisco, H. 2010. Hotspots! Mapping Climate Change Vulnerability in Southeast
Asia. Economy and Environment Program for Southeast Asia (EEPSEA). 82 p.

27
 J. ISSAAS Vol. 20, No. 1:16- 28 (2014)

World Resources Institute. 2011. Climate Analysis Indicators Tool Version 5.0. Accessed on August
15, 2011 from http://cait.wri.org.

Appendix Table 1. The Philippines macroeconomic data for historical simulations.

Variable 2004 2009 % Change

Household final consumption expenditure 903,814 1,152,6580 27.5
Government final consumption expenditure 75,455 101,163 34.1
Capital formation 234,065 243,052 3.8
Exports 539,950 574,284 6.4
Imports 628,911 621,543 (1.2)
Employment (1,000 persons) 31,613 35,061 10.9
Population 76,946,500 92,226,600 19.9
Gross national expenditure 1,252,331 1,654,936 32.2
CPI (1994 = 100) 121 160 32.7
Sources: Philippine Statistical Yearbook (2004, 2010)
Note: Expenditures are in million Pesos, constant 1985 prices.

28