Economic Losses Due to Climatic Damage in Viticulture: Adaptation Proposals ^†

Abstract

In the wine production chain, climate change affects the yields and quality of the wine. Several studies have found that high temperatures have a significant impact on the value of wine production. In this context, adaptation measures represent a good practice to face the damage caused by negative climatic events. Since these practices have a cost, this study aims to provide an estimate of economic convenience for their adoption, using the methodology developed within the LIFE Adaptation in Agriculture project. In this paper, four measures used in winemaking processes and useful for reducing damage induced from climatic events were analyzed. The findings show that the adaptation measures considered in the wine sector usually have an initial investment cost of medium/high. Large farms, due to their size and resources, can opt for one or more measures with a greater ease of cost depreciation. Overall, the analysis shows that although the implementation of measures presents medium/high investment costs, it is always appropriate to assess the specific business case, even where the results indicate a lower degree of cost-effectiveness. When deciding on the adoption of measures, it should be kept in mind that costs depend not only on farm characteristics but also on the choice of implementation method and staff training and specific public subsidies.

1. Introduction

This paper investigates economic convenience due to the implementation of a set of climate adaptation measures for farms in the Italian wine sector. These measures aim to mitigate the effects of climate change on the yields and quality of wine and their revenues. According to the European Environment Agency [1], extreme climate-related events, such as the increase in heavy rainfall observed in some parts of Europe, and socio-economic trends, such as changes in human activities and infrastructure in areas at risk, generate ever more significant economic losses. The yields of several crops have decreased in many countries due to increasingly frequent and unpredictable climate events such as extreme heat, frost, and drought. In Italy, in 2023, extreme meteorological events increased by 22% compared to the previous year, with an increase in floods, landslides, storm surges, hailstorms, and exceptional temperatures [2]. By some estimates, in the absence of effective adaptation, global yields could decline by up to 30 percent by 2050 [3]. Farmers could engage in adaptation activities to mitigate this risk [4]. However, despite the growing need to adapt to climate change, there is still a lack of understanding of the concepts involved in evaluating the costs and benefits of a successful plan to face adverse climatic events. Within this perspective, the literature highlights a poor presence of studies evaluating the costs and benefits of adaptation measures to climate change because economic analysis is made difficult by several factors. The uncertainty associated with climate change complicates the cost–benefit assessment, which should rely on climate change-related models, data, and factors [5]. In the case of the wine production supply chain, the increase in maximum temperatures significantly affects vineyards and grapes, causing a decrease in the value of production. These study findings are the result of the LIFE ADA project (Adaptation in Agriculture) (https://www.lifeada.eu/it/, accessed on 25 February 2024), which aims to promote the capacity of the agricultural sector in the definition of adaptation plans to climate change to improve risk management and damage prevention. In the wine sector, four adaptation measures aimed at winemakers have been identified to deal with climate events linked to drought and high temperatures [6]. In this paper, we discuss, for each measure, an analytical information sheet that has been drawn up based on the developed methodology, with a qualitative assessment of the convenience of implementing the adaptation measure.

2. Methodology

Our analysis considers the following measures:

• Use of food-grade cold through inert gas (solid CO₂);
• Use of acidic must;
• Membrane technologies;
• Production process control system.

The methodology [7] enabled us to provide the following information for each individual measure:

(1)

Information on costs to be incurred (investment cost; average annual cost per hectare; cost compared with usual practice).

(2)

Information on benefits (degree of effectiveness of the measure with respect to climatic risk: high, medium, and low; influence on production quality and yield; environmental benefits; possibility of receiving public support).

(3)

Evaluation: based on the above-mentioned information, an assessment of the costs/benefits of adopting the measure is provided.

The evaluation is essentially based on the estimate of the damage avoided through the implementation of the adaptation measure, with the damage being caused by adverse climate events. The damage was calculated by taking as a reference the three-year average (2017–2018–2019) of the value of the gross salable production (PLV) recorded by the farms in the FADN sample by production orientation (supply chain) and economical size class. Furthermore, a graphical representation of the degree of convenience in adopting the measure is reported based on an estimation model [8].

3. Results and Conclusions

The results are presented in the table below (

Table 1. Evaluation of adaptation climate measures in wine sector.

Climate Change Adaptation Measures	Evaluation by Farm Size
	Large	Medium	Small
Use of food-grade cold through inert gas (solid CO2)
Use of acidic must
Membrane technologies
Production process control system

Key: not convenient at all ; not convenient ; close to convenient ; convenient ; quite convenient ; very convenient ; extremely convenient .

), which summarizes a qualitative assessment associated with the convenience of adopting the adaptation measure.

Our results show that the adaptation measures considered in the wine sector have a medium/high initial investment cost compared with a medium/high effectiveness in countering the maximum extreme temperatures. Large farms, due to their size and resources, can opt for this measure with a greater ease of cost amortization. Otherwise, such depreciation is burdensome for small- and medium-sized farms and can act as a barrier to their climate change strategy. However, small- and medium-sized farms may benefit from specific public subsidies to adopt the adaptation measure. Quantifying cost and benefits in agriculture is an urgent issue; there is an urgency dictated by the need for a better understanding of the costs and benefits of adaptation measures and the costs of adaptation compared to the costs of failure to act. For the entire agricultural sector, our paper contributes to the challenge of implementing a profound transformation through appropriate political debate and the economic literature. A key role will be played by the ability to create and disseminate information to improve the awareness of producers and consumers to increase the resilience and sustainability of agriculture.