A model-based assessment of adaptation options for Chianti wine production in Tuscany (Italy) under climate change

This paper covers a comprehensive economic analysis of climate change adaptation options for a specific wine producing region, namely Tuscany. As temperature increases under climate change, rainfall patterns will be different, and Chianti wine production in Tuscany therefore needs to adapt in the near future. We address the adaptation challenges and identify grape yield and quality loss as the main impact of climate change on wine production. Relocation of vineyards uphill and introducing drought-resistant varieties are considered as adaptation measures. We appraise these adaptation measures using an optimization framework, where regional wine producers maximize income subject to economic constraints including the climate change impacts on wine productivity and quality. Our simulation shows quantitatively to what extent a higher degree of climate change impact demands a higher degree of adaptation. We find that a combination of the two measures provides a better strategy because it leads to higher economic efficiency. However, uncertainty regarding the efficiency of the new variety discourages the use of this new drought-resistant variety, whereas a higher efficiency would make this choice more favourable. Sensitivity analysis for time horizon and discount rate confirms the theory of investment under uncertainty, showing a shorter time horizon (or more frequent investment) provides the possibility to postpone the decision to implement adaptation measures due to the value of flexibility, while a higher discount rate leads to a later adaptation decision, because uncertainty creates a value of waiting for new information.