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Agriculture Assets Face $8 Trillion Risk from Climate Change, Water Scarcity

stranded assetsEnvironmental hazards such as climate change, land degradation and water scarcity could wipe out as much as $8 trillion in agriculture assets each year, a major study warned.

The study, released today by the University of Oxford’s Smith School of Enterprise and the Environment, aims to show the scale of the asset bubble faced by the agricultural sector. The study focuses on so-called stranded assets, a term used to describe environmentally unsustainable assets that suffer from unanticipated or premature write-offs, downward revaluations or are converted to liabilities, and can be caused by a range of environment-related risks.

The potential challenge of stranded assets in agriculture is currently being exacerbated by an ongoing agricultural boom, which is feeding off high commodity prices and poor investment returns elsewhere in the economy to push farmland values to record highs in many markets, the study says.

The study determined value at risk calculations under three scenarios: current, moderate and extreme. The report found a one in 20 chance the world’s farmland assets and agricultural capital stock could lose between $4.4 trillion (the current scenario) and $8 trillion (the extreme scenario) in a single year.

The study also determined the total natural capital cost from agriculture is $2.369 trillion each year in terms of lost ecosystem services.
Cornell University has started a center to help farmers adapt their operations to climate change. The Cornell Institute for Climate Change and Agriculture will serve as a clearinghouse for research, climate monitoring, decision-support tools and applications at the intersection of climate and agriculture.One of the institute’s first steps will be to develop a website for disseminating and gathering information on farm-level impacts and trends, losses and gains from extreme weather and climate change, according to the university news site.

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