The impact of climate change on the wine business: risk metrics on selected Italian production areas

Abstract

Wine production is considered as the canary in the coal mine of climate change risk. The objective of this thesis is to analyze the possible implications of climate change on the Italian wine sector’s profitability. The thesis firstly discusses the main features of the wine sector that are relevant in the context of climate change. Then, by means of a literature review, it identifies the challenges that prevent carrying out a standard econometric analysis of the impact of climate change on firms’ values in the wine business. Secondly, a qualitative analysis of the credit risk is conducted, identifying the transmissions channels that starting from climate change-related hazards may worsen the financial position of wine firms and credit institutions that finance these firms. In the final part, an empirical risk analysis is conducted on the main viticultural Italian areas, using an agroclimatic indicator (Huglin Index) commonly used in the wine business. This analysis is conducted on two projected emissions scenarios (RCP 2.6 and RCP 6.0), using a dataset covering the period 1951-2099.