Abstract: The paper addresses future climate and policy uncertainty for agricultural production and food security in Norway. The two crop simulation models, CSM-CERES-Wheat and, the LINGRA model, were used to determine the impact of climate change on grain yield of spring wheat, and harvest security and biomass yield of timothy, an important forage grass in Northern Europe, respectively. Harvestable yield distributions from the crop models were fed into a stochastic version of the economic sector model Jordmod. Distributions of the rates of agricultural subsidies rates were assessed based on past policy changes and prospective reforms. The model was used to assess the effects of both climate and policy uncertainty on agricultural production, land use, and national food security. Jordmod is comprised of a supply module in which stochastic profits for more than 300 regional farms are maximized and a deterministic market module which maximizes social welfare in the agricultural sector. Socio-economic scenarios were developed around the level of ambition of Norwegian agricultural policy makers. The model results were contrasted with the deterministic results based on average yield and payment rates. The innovation of this paper lays in assessing the combined effects of future climate and policy uncertainty for the agricultural sector in Norway. It also highlights the potential errors made by neglecting these types of uncertainty in economic modelling. No Label

Abstract: Highlights • A framework to study climate and policy uncertainty in agriculture is presented. • Combining both sources of uncertainty has ambiguous effects on agriculture. • Uncertainty needs to be highlighted in modelling tools for policy analysis. Abstract Farmers are exposed to climate change and uncertainty about how that change will develop. As farm incomes, in Norway and elsewhere, greatly depend on government subsidies, the risk of a policy change constitutes an additional uncertainty source. Hence, climate and policy uncertainty could substantially impact agricultural production and farm income. However, these sources of uncertainty have, so far, rarely been combined in food production analyses. The aim of this study was to determine the effects of a combination of policy and climate uncertainty on agricultural production, land use, and social welfare in Norway. Output yield distributions of spring wheat and timothy, a major forage grass, from simulations with the weather-driven crop models, CSM-CERES-Wheat and, LINGRA, were processed in the a stochastic version Jordmod, a price-endogenous spatial economic sector model of the Norwegian agriculture. To account for potential effects of climate uncertainty within a given future greenhouse gas emission scenario on farm profitability, effects on conditions that represented the projected climate for 2050 under the emission scenario A1B from the 4th assessment report of the Intergovernmental Panel on Climate Change and four Global Climate Models (GCM) was investigated. The uncertainty about the level of payment rates at the time farmers make their management decisions was handled by varying the distribution of payment rates applied in the Jordmod model. These changes were based on the change in the overall level of agricultural support in the past. Three uncertainty scenarios were developed and tested: one with climate change uncertainty, another with payment rate uncertainty, and a third where both types of uncertainty were combined. The three scenarios were compared with results from a deterministic scenario where crop yields and payment rates were constant. Climate change resulted in on average 9% lower cereal production, unchanged grass production and more volatile crop yield as well as 4% higher farm incomes on average compared to the deterministic scenario. The scenario with a combination of climate change and policy uncertainty increased the mean farm income more than a scenario with only one source of uncertainty. On the other hand, land use and farm labour were negatively affected under these conditions compared to the deterministic case. Highlighting the potential influence of climate change and policy uncertainty on the performance of the farm sector our results underline the potential error in neglecting either of these two uncertainties in studies of agricultural production, land use and welfare.