Role of climate-smart agriculture in fighting against climate change in competitive supply chains

Abstract

Climate-smart agriculture (CSA) is a United Nations-recommended approach to help farmer collectives (FCs) build crop resilience against climate-related yield uncertainty. In this study, we develop game-theoretical models to analyse the impact of CSA on the competitive agricultural marketplace. FCs can choose either a direct-to-consumer mode (i.e., selling to consumers directly without using CSA) or a CSA-enabled mode (i.e., selling to consumers through the e-platform with the use of CSA). We find that CSA adoption is preferable for FCs when the climate-related yield uncertainty is sufficiently high but unprofitable for FCs when the climate-related yield uncertainty is sufficiently low. Moreover, we identify how climate-related yield uncertainty and segmented agri-market selection (e.g., staple or side crop) affect yield competition. When FCs plant a crop with a low substitution rate (e.g., a staple crop), yield competition will be intensified if at least one FC does not adopt the CSA-enabled mode, whereas when FCs plant a crop with a high substitution rate (e.g., a side crop), yield competition will be intensified if all FCs adopt the CSA-enabled mode. We also find that the industrywide welfare improvement, total yield improvement, and FCs’ profit can benefit from inconsistent CSA modes, rather than consistent ones in supply chains. Our results provide guidelines to both FCs and policymakers on CSA adoption for alleviating the crop supply shortage and fighting against climate change.