Climate change and food security in South Asia: the importance of renewable energy and agricultural credit

South Asia is predominantly agrarian, with around 70% of its population in rural areas and roughly 39% arable land across a geographically constrained region that supports about a quarter of the world’s population. The region faces high vulnerability to land and soil degradation, water-induced erosion, and climate-related shocks, all of which jeopardize agricultural productivity and food security. Recent extreme events and policy disruptions (e.g., Pakistan’s exceptional 2022 monsoon flooding, India’s heat waves damaging wheat harvests, and Sri Lanka’s fertilizer ban amid climate stress) have intensified food insecurity, already exacerbated by COVID-19. Given agriculture’s energy intensity and exposure to oil price shocks, the transition to renewable energy could buffer production costs and environmental damages. Simultaneously, constrained access to agricultural credit hampers input use and technology adoption, limiting productivity. The study aims to empirically evaluate the short- and long-run relationships between climate change, renewable energy, agricultural credit, and food security in five South Asian countries (1990–2021), employing the Dynamic Common Correlated Effects (DCCE) approach to address cross-sectional dependence and heterogeneity.

The empirical literature documents wide-ranging adverse impacts of climate change on agriculture, livestock, fisheries, and hence food security. Rising temperatures, sea levels, and extreme events reduce staple crop yields (rice, wheat, maize), degrade soils and water availability, and increase livestock heat stress, morbidity, and mortality; freshwater biodiversity and fisheries are also threatened, diminishing diet diversity and nutrition. Regarding finance, limited access to agricultural credit constrains input use and technology adoption, lowering productivity and food security; studies report that credit availability improves agricultural output and growth. On energy, agriculture’s dependence on fossil fuels raises input costs and emissions; renewable energy can reduce greenhouse gas emissions, environmental degradation, and potentially enhance food security by supporting sustainable production. Prior studies often find positive associations between renewable energy and food security or sustainability, although the strength and persistence vary by context.

Conceptual framework: Following Thomson and Metz (1997), food availability is central to food security. The study measures food security via the food production index (as in Zhu, 2016; Mahrous, 2019). Model specification: FS is modeled as a function of climate change, renewable energy, and agricultural credit, with inflation and population as controls. The baseline panel model (all variables in logs) is: FS_it = β1 + β2 Climate_it + β3 RE_it + β4 AgriC_it + β5 Inf_it + β6 Pop_it + u_it. Data and sample: A balanced panel of five South Asian countries—Pakistan, Bangladesh, India, Sri Lanka, and Nepal—over 1990–2021. Data sources: Food production index (WDI), renewable energy consumption (IEA; includes wind, solar, hydropower, biofuels), temperature change as a proxy for climate change (FAO), agricultural credit (FAO), and controls population and inflation (WDI). Econometric strategy: The Dynamic Common Correlated Effects (DCCE) estimator of Chudik and Pesaran (2015) is employed to estimate short- and long-run effects while addressing slope heterogeneity, cross-sectional dependence, weak exogeneity, endogeneity, and small-sample biases. Preliminary tests include: (i) cross-sectional dependence using biased-adjusted LM-CD tests (Breusch-Pagan type), indicating significant cross-sectional dependence; (ii) stationarity via Pesaran’s CADF and CIPS tests, accommodating cross-sectional dependence—variables are largely I(1), with stationarity in first differences; (iii) cointegration via Pedroni (1999) and Westerlund (2006, with bootstrap) tests, both supporting long-run relationships despite cross-sectional dependence and potential structural breaks. Estimation recovers both short- and long-run elasticities within the DCCE dynamic specification, incorporating lags of the dependent and explanatory variables and cross-sectional averages to capture unobserved common factors.

- Cross-sectional dependence: Biased-adjusted LM-CD tests reject cross-sectional independence (e.g., LM adj = 3.10, p = 0.0019), justifying second-generation methods. - Unit roots and cointegration: CADF/CIPS suggest variables are mostly I(1); Pedroni and Westerlund tests indicate cointegration among variables. - DCCE short-run estimates (coeff., p-value): Climate −0.043 (0.018), Renewable energy +0.366 (0.089), Agricultural credit +0.563 (0.092), Inflation −0.087 (0.062), Population +1.46 (0.405, not significant). - DCCE long-run estimates (coeff., p-value): Climate −0.165 (0.081), Renewable energy +0.574 (0.130, not significant), Agricultural credit +0.215 (0.036), Inflation −0.148 (0.021), Population −1.538 (0.063). - Model diagnostics: R-sq = 0.48; R-sq (mg) = 0.97; CD-Stat p = 0.029; overall F-stat p ≈ 0.063. Substantive findings: (1) Climate change significantly reduces food security in both the short and long run; (2) Renewable energy boosts food security in the short run but exhibits no statistically significant effect in the long run; (3) Agricultural credit significantly and positively affects food security, with stronger evidence in the long run; (4) Inflation undermines food security in the short and long run; (5) Population growth exerts a negative long-run effect on food security (marginal significance), with no short-run effect.

The study demonstrates that climate change erodes food security in South Asia by disrupting planting calendars, intensifying extreme events, and reducing the length and intensity of favorable growing conditions. The positive short-run effect of renewable energy likely reflects immediate cost and environmental benefits in agricultural operations, buffering farmers from fossil fuel price shocks and reducing emissions. However, the long-run effect becomes statistically negligible, possibly because growing population and energy demands, and structural constraints in land use, agricultural practices, and distribution systems, dilute sustained benefits absent broader systemic changes. Access to agricultural credit consistently enhances food security by easing liquidity constraints, enabling investment in productivity-enhancing inputs and technologies in the short run, and facilitating longer-term capital formation, risk management, and diversification. Inflation hampers food security by raising input, import, wage, and transport costs, thereby elevating production costs and food prices, and eroding consumers’ purchasing power. Overall, the results address the research question by quantifying short- and long-run elasticities and highlighting policy levers—credit provision and clean energy integration—that can mitigate climate risks to food security.

The study assesses how climate change, renewable energy, and agricultural credit shape food security in five South Asian countries (1990–2021) using the DCCE estimator. It concludes that climate change decreases food availability and heightens food insecurity in both the short and long run; renewable energy improves food security only in the short run; and agricultural credit significantly bolsters food security, especially over the long run. Inflation and population growth adversely affect food security in the long run, with inflation also harmful in the short run. Policy recommendations include investing in climate services and forecasting, climate-resilient infrastructure, drought-resistant crops, and reinforced agricultural practices; expanding renewable energy—particularly small-scale solar—for agricultural applications; and enhancing access to affordable agricultural credit through strengthened financial sector capacity and favorable lending terms. These measures can collectively mitigate climate risks and support sustainable food production in South Asia.