Weather and Climate Services to Support a Risk-Sharing Mechanism for Adaptation of the Agricultural Sector. A Theoretical Example for Drought-Prone Areas

Abstract

Sharing the burden of adaptation is key for the agricultural sector in developing countries. For the agricultural sector in developing countries, the losses will go from 3% under 1.5 °C scenario to 7% under 2 °C scenario (Masson-Delmotte et al. 2018). This anticipated information on possible climate change-driven challenges possesses a big load in farmers management that might ex-ante stop investing because of the negative consequences of the scenarios presented. This situation could be even worse in subsistence farming system totally dependent on the yields. Crop insurances can be a good way to overcome some of the losses. In this paper, we present weather-based insurance schemes (WII), which are based on weather index objectively determined for the specific agricultural region, and therefore the individual loss assessment, which makes insurances too expensive, is not necessary. We present the results of decisions based on perfect and imperfect weather forecasts and conclude by offering insights in the difference of decision-making if a perfect forecast might be available or not and the consequences for farmers income.