Miguel Torres recently warned that the wine industry is not doing enough to fight climate change and there is no doubt that he is right. There is a lot happening, as the recent Porto conference on climate change and wine makes clear. Wine is ahead of most other global industries. But it is not enough.
One reason climate change does not get even more attention in our industry (and I think that this is true of other sectors as well) is that we tend naturally to focus on the direct effects on our businesses, assuming that these are the most important ones to us. So climate change is seen as something to mitigate in the short term using appropriate viticultural techniques and other strategies.
In Australia, for example, there is a shift from French to Spanish and Italian wine grape varieties and investment in cooler regions including especially Tasmania. The fact that firms can adapt in this way lessens the sense of risk and urgency. Climate change is seen, to draw from the title of Al Gore’s film, an inconvenient truth. Inconvenient and sometimes expensive, but not necessarily an existential threat, especially since some elements of climate change actually benefited winegrowers in the not-too-distant past.
Taking the Heat Off
Not everyone thinks this way, of course. Torres has gone all in to combat climate change and he is not alone. But the fact that mitigation techniques exist and more are being developed tends takes the heat off the sense of urgency that might otherwise prevail.
But these direct effects of climate change are not necessarily the most important ones. In order to properly assess the climate change threat to wine we must look deeper into the future and broader to the impact on the overall economic environment in which wine is embedded.
So what does the future hold, assuming current trends continue in some form? There has been a lot of research on how changing climate will affect the viability of wine grape growing in the traditional regions. Some areas will suffer minor impacts that can be mitigated through changing viticultural practices. Other regions will remain viable, but perhaps need to re-graft vines with different grape varieties more suitable to the new conditions. Old World appellations will have to rethink many of the regulations that current define them.
Other regions will will cease to be viable for quality wine grapes – period – while elsewhere we’ll see areas in the spotlight as emerging wine regions. All this will take place in the context of increasing instability of weather patterns, which most of us have already observed.
Outside the Wine Box
All these factors are important, but I think it is necessary to think further outside the wine box. Climate change will impact all of agriculture in one way or another and a great many other industries, too. The problem of feeding the world (and earning an income in it) will not grow easier overall if trends continue. This will put a squeeze on living standards and wine, because it is far from a necessity, will be squeezed harder than some other products.
At some point, and I hope it is sooner rather than later, coordinated action to slow or potentially reverse climate change is in the cards. Economists like me have long advocated a carbon tax as part of the package. Carbon taxes exist today, but in a patchwork quilt of policies and regulations with widely varying tax rates.
Carbon Tax and Wine
A coordinated carbon tax works by raising the relative price of goods and services that contribute to climate change problems. Consumers are discouraged from purchasing them by the higher price. Producers are given an incentive to innovate products and processes that replace old systems to lessen tax burdens and climate change impacts at the same time. Economists favor a carbon tax because it creates incentives for private actors to reduce emissions whereas direct regulation creates incentives to get around the regulations (see VW diesel emissions fraud).
A well-designed broad-based carbon tax might be the best way to counter climate change. It would harness private self interest to combat climate change in a way that other solutions cannot.
If climate change will affect wine as noted above, how would the carbon tax impact the industry? Well, the modern globally-integrated wine industry has a substantial carbon footprint and a carbon tax would be a big shock. Even firms that are carbon neutral in the vineyard and cellar face the fact that the supply chain is a problem.
Take glass bottles, for example. Glass of course takes a lot of energy to make, which is an important issue, but that’s not the end of the story. The U.S. wine industry is dependent on glass bottle imports from China. The ships that carry containers full of glass bottles are significant sources of pollution. Transportation from bottling plant to warehouse to retailer to consumer adds to the carbon footprint, too.
Beer and spirits might well be less affected by a carbon tax since they can more efficiently be produced close to major markets using ingredients such as grains that can be shipped efficiently by rail. The fact that wine is mainly produced close to the agricultural source and then shipped to far away markets is a disadvantage in a carbon tax system compared with products where weight and bulk (in the form of water) can be added closer to the final consumer.
Need to Do More
I have obviously just scratched the surface here, both in terms of the broader impact of climate change on the wine industry’s economic environment and the potential impacts of policies designed to resist or reverse current trends. But I hope my point clear. The impact of climate change on your wine business goes beyond what you see in your vineyard or cellar and the cost of inaction now in terms of future consequences is likely to be pretty high.
Climate change creates losers and some winners and the policies that are eventually adopted to deal with it will be the same. It is difficult to imagine a scenario where wine will be among the winners and we can already see the negative effects. It’s time to join Miguel Torres and the Porto Protocol team who ask us all to do more.
An earlier version of this article made referenced to a report in The Drinks Business about Richard Smart’s views about climate change and hybrid grapes. Smart disagreed with the way his views were reported and the interview was removed. Here is the explanation.