Climate, water, and carbon: Three essays in environmental and development economics

his dissertation is composed of three essays. The first essay seeks to estimate the impact of climate change on households' welfare on Mt. Kilimanjaro. Unlike previous studies, the approach used in this essay limits the bias from unobservables by applying the analysis in a relatively small geographical area composed of homogeneous farmers with similar cultures, agricultural systems, and market influence. However, these farmers inhabit places that have relatively large differences in rainfall. The data for the analysis were gathered from a random sample of over 200 households in 15 villages and the precipitation from rainfall observation posts placed in each of the surveyed villages. Due to the prevalence of intercropping among local farmers and the spatial distribution of home-plots within and between villages, the study applies a spatial multivariate approach that assumes endogeneity between crop revenues. Doing so allows the study to capture the adaptation strategies that smallholders use by diversifying their farm portfolios. The results indicate that Mt. Kilimanjaro's agriculture is vulnerable to precipitation variation, especially November precipitations. Farm revenue vulnerability is heterogeneous across space, crops, and monthly precipitation. The study finds some evidence about the ability of irrigation usage to reduce revenue vulnerability to precipitation change. With regards to households' welfare, we simulated crop revenue response to a median of seven Global Climate Models (GCMs), and found evidence that climate change will negatively affect household welfare on Mt. Kilimanjaro.;The second essay analyzes the potential benefits of introducing improved irrigation schemes on Mt. Kilimanjaro to help rain-dependent farmers cope with the risks of climate change. The study uses the Contingent Valuation Method (CVM) to elicit farmers' willingness to pay (WTP) for eliminating the risks of crop loss associated with climate change by accessing improved irrigation schemes. The data for the analysis were gathered using a double bounded survey approach from over 200 randomly-sampled farmers in 15 villages. The study makes important contributions to both policies in Africa and the applied welfare literature. The policy contribution consists of valuation of improved irrigation in the presence of climate change risks. The applied welfare contribution consists of empirical evidence about the impact of farmers' risk beliefs, subjective perceptions about rainfall distribution; and farmer's self-protective actions on welfare valuation. On average, Mt. Kilimanjaro farmers are willing to pay up to 10% of their income to have access to the proposed improved irrigation schemes. Last, the study finds that farmers' expected increase in revenues associated with the improved irrigation scheme will equal the cost of building it after 8 to 10 years.;The purpose of the third essay is twofold. First, the essay seeks to determine the potential for soil carbon sequestration on Mt. Kilimanjaro. Second, the essay aims at estimating the marginal cost of sequestering soil carbon on Mt. Kilimanjaro. To answer these questions, the essay develops a Markov decision model that maximizes the net present value (NPV) of farm profit by allowing the farmer to choose optimal farm management strategies subject to crop yield, soil carbon stock, and exogenous carbon price. Unlike previous studies, this essay uses a dynamic optimization approach to find the optimal combination of farm management strategies at various carbon prices in a developing country. The essay concludes that there is potential for economically viable carbon sequestration contracts on Mt. Kilimanjaro. At...