actually increases by 0.2 billion pesos per year with a tariff
reduction strategy (Table 16). The total cost of the NFA subsidy is around 41.6 billion pesos per year, which would more
than compensate for the anticipated
26.2 billion
pesos
per
SUMMARY
| APRIL
2010
year cost of climate change. The benefit of removing the
NFA subsidy also results in higher private consumption and
investment, with a slight increase in government consumption.
The results are similar for the two policies, with the exception of staple crops, including rice (Table 15). Rice benefits
more through direct investment in increasing rice productivity. Rice production is also much higher with the National
Food Authority (NFA) subsidy, but export crop production is
considerably higher without it. The NFA rice subsidy appears
to have the unintended consequence of diverting production
from higher to lower value crops. Overall, with the NFA subsidy in effect, the cost of climate change is reduced by only
17 billion pesos per year for rice productivity, and the cost
Table 15. Impact on macroeconomic variables of policy response to climate change, 2011–2050
Sectors
Agriculture
Staple crops
Export crops
Other crops
Livestock
Industry
Service
Gross domestic product
Total climate
effect
0.12
–0.06
0.95
0.01
–0.10
–0.06
–0.01
–0.02
Yearly change from baseline
With National Food Authority subsidy
Without National Food Authority subsidy
Increased rice
Agricultural tarIncreased rice
Agricultural tariff reproductivity
iff reduction
productivity
duction
Percent (%)
0.18
0.13
0.18
0.12
0.05
–0.07
–0.14
–0.29
1.07
1.01
1.22
1.21
0.04
–0.03
0.07
0.01
–0.07
–0.09
–0.05
–0.07
–0.05
–0.06
–0.04
–0.05
–0.01
–0.02
0.01
0.01
0.00
–0.02
0.01
0.00
Source: Calculated by authors based on Phil-DCGE simulations results.
Table 16. Benefit or cost of policy response on total absorption in yearly net present value, 2011–2050
Variable
Total climate
effect
With National Food Authority
subsidy
Increase rice
productivity
Agriculture tariff
reduction
Without National Food
Authority subsidy
Increase rice
productivity
Agriculture
tariff
reduction
Mean cost of
National Food
Authority
subsidy
Php billion
Yearly absorption
Private consumption
Investment
Government consumption
–26.2
–21.5
–5.8
1.1
–9.3
–7.0
–3.5
1.3
–26.4
–20.8
–6.3
0.7
Source: Calculated by authors based on Phil-DCGE simulations results
11
30.0
13.9
12.0
4.0
17.2
4.4
9.5
3.3
41.6
22.8
16.0
2.7