When Does Climate Adaptation Capacity Shift Agricultural Support Toward Sustainability-Oriented Instruments Under Drought Conditions? Evidence from OECD

Although climate adaptation has become increasingly visible in agricultural policy across OECD countries, it remains unclear to what extent this orientation is reflected in agricultural support through more sustainability-oriented instruments. This study examines whether climate adaptation capacity conditions the relationship between drought stress and the climate orientation of agricultural support. Using a balanced panel of 11 OECD policy units over 2005–2023 (N = 209), we estimate two-way fixed-effects models interacting a three-pillar Adaptation Capacity Index (ACI), governance, risk management, and financial/implementation capacity, with the 12-month Standardized Precipitation–Evapotranspiration Index (SPEI-12). Adaptation capacity does not display a systematic association with the climate-aligned share of agricultural support under average conditions but becomes more consequential under drought conditions. Under severe drought, a one-unit increase in overall capacity is associated with a 0.73 percentage-point increase in the climate-aligned support share (p < 0.01). Governance capacity displays a more gradual marginal-effect profile, whereas risk management and financial/implementation capacity exhibit stronger non-linear patterns concentrated at higher levels of institutional maturity. In lower-capacity contexts, drought conditions are not associated with a stronger climate-aligned support share, suggesting more limited adaptation-oriented adjustment within the support system. Overall, the findings suggest that the climate orientation of agricultural support depends not only on expenditure composition itself, but also on the institutional capacity context through which climatic stress is translated into policy adjustment.