Effect of climate change on tea production in Bangladesh: economic implications for domestic consumption, export earnings and trade deficit

Abstract

This paper explores climate change’s effects on Bangladesh’s tea production, focusing on the economic consequences for domestic consumption, export earnings, and trade deficits. This study utilizes annual time series data from 1971 to 2022 to analyze the influence of climate variables on tea production. The findings indicate that while both maximum and minimum humidity negatively affect tea production, only maximum humidity has a significant impact, suggesting optimal production at moderate humidity levels. Rainfall plays a crucial role by enhancing root growth, soil moisture, nutrient supply, and pest prevention, significantly boosting tea production. Temperature effects are mixed; minimum temperature supports production, whereas maximum temperature has harmful effects, such as heatwaves, pest outbreaks, and reduced photosynthesis. Additionally, carbon dioxide (CO₂) emissions enhance both tea production and leaf quality by improving photosynthesis and respiration. From 2002 to 2021, domestic tea consumption surged significantly due to population growth, rising incomes, urbanization, changing preferences, and perceived health benefits. Conversely, export earnings declined significantly, driven by high domestic consumption, falling global prices, limited tea varieties, and increased international competition. The study identifies a persistent trade deficit over the past 12 years, linked to high production costs, low productivity, poor quality, and insufficient innovation. To mitigate these challenges, the study recommends strategies including import tariffs, export incentives, infrastructure improvements, higher labor wages, the creation of new tea varieties, improving quality, adopting modern technologies, and fiscal and monetary policy adjustments to boost export earnings and achieve trade balance.

Bangladesh J. Agril. Res. 49(1): 73-89, March 2024