Climatic Change

, Volume 137, Issue 1–2, pp 15–27 | Cite as

The downside risk of climate change in California’s Central Valley agricultural sector

  • Michael Hanemann
  • Susan Stratton Sayre
  • Larry DaleEmail author


Downscaled climate change projections for California, when translated into changes in irrigation water delivery and then into profit from agriculture in the Central Valley, show an increase in conventional measures of variability such as the variance. However, these increases are modest and mask a more pronounced increase in downside risk, defined as the probability of unfavorable outcomes of water supply or profit. This paper describes the concept of downside risk and measures it as it applies to outcomes for Central Valley agriculture projected under four climate change scenarios. We compare the effect of downside risk aversion versus conventional risk aversion or risk neutrality when assessing the impact of climate change on the profitability of Central Valley agriculture. We find that, when downside risk is considered, the assessment of losses due to climate change increases substantially.


Risk Aversion Online Appendix Water Delivery Downside Risk Certainty Equivalent 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



Dr. Hanemann’s research was supported by NSF Award 1204774 to Arizona State University. Our research relies on modeling results provided to us by California Department of Water Resources and CVPM computer code provided by Steven Hatchett. We thank Sydny Fujita and Nathaniel Bush for research assistance. This draft has benefitted from the helpful suggestions of several anonymous reviewers and the associate editor. Any remaining errors are our own.

Supplementary material

10584_2016_1651_MOESM1_ESM.pdf (155 kb)
ESM 1 (PDF 155 kb)
10584_2016_1651_MOESM2_ESM.pdf (120 kb)
ESM 2 (PDF 119 kb)


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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  • Michael Hanemann
    • 1
  • Susan Stratton Sayre
    • 2
  • Larry Dale
    • 3
    Email author
  1. 1.Arizona State UniversityTempeUSA
  2. 2.Smith CollegeNorthamptonUSA
  3. 3.Lawrence Berkeley National LaboratoryBerkeleyUSA

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