# **SUMMARY**

This paper analyzes the impact of climate change on animal husbandry in Africa. It uses the Ricardian method, a cross-sectional approach, to examine the economics of animal husbandry in Africa. The net revenue from raising animals in small and large farms across Africa is regressed on climate, soil and other control variables to test the climate sensitivity of livestock. The study is based on a survey of over 9000 farmers across 11 countries conducted by the World Bank and the Global Environment Facility (GEF) project. From this dataset, 5400 farms were found to rely on livestock.

Two empirical models were tested. A single-equation model examines net revenue per farm, regressed on climate and other control variables. The second model has two equations: the first examines the value of animals owned per farm and the second the net revenue per value of owned animal. Both equations in the second model regress the dependent variable on climate and other control variables. All the estimated equations test whether small and large farms have different climate response functions. That is, the models test whether the climate coefficients of small and large farms are similar. It turns out that small farms tend to be more labor intensive, rely on native stocks, and have few animals; large farms tend to be more commercial operations, with much larger stocks and more modern approaches.

The single-equation Ricardian model finds that the livestock net revenues of large farms in Africa fall as temperatures rise but that small farms are not temperature sensitive. The twoequation model finds that higher temperatures reduce both the size of the stock and the net revenue per value of stock for large farms. However, for small farms, higher temperatures do not affect the size of the stock and they increase the net revenues per value of stock. Large farms in Africa are vulnerable to warming but small farms are not. It is likely that large farms are vulnerable to warming because they rely on species such as beef cattle that are not well suited to high temperatures. Small farms are not vulnerable to warming because they can substitute species such as goats that can tolerate high temperatures.

The single-equation model finds that increases in precipitation would reduce livestock net revenue per farm for both small and large farms. The elasticity of net revenue per farm is particularly large for small farms. The two-equation model reveals that increased precipitation reduces both the size of the stock and the net revenue per animal owned. Although higher precipitation generally increases the productivity of grasslands, it also leads to the conversion of grasslands into forest. Further, animal diseases are likely to increase with warm wet conditions. Finally, as precipitation increases, many farmers find it advantageous to shift from livestock to crops. The positive side of these precipitation findings is that if precipitation declines, livestock net revenues will increase, especially for small farmers. Livestock thus provides an important agricultural adaptation for reductions in precipitation should they occur.

The report also explores the impact of several uniform climate change scenarios that test the importance of large changes in climate in isolation. Although these scenarios are not realistic, they provide an indication of how the model behaves. A warming of 2.5 ° C increases small farm livestock income by 26% (+$1.4 billion). This increase comes strictly from an expansion of the stock. If the temperature rises, the net revenues per animal fall slightly. A warming of 5 ° C 2