Economic impact of variability in monsoonal climate on tea plantations in sri lanka: a panel ricardian analysis

This study examines the long-term effects of monsoonal climate variations on tea net revenue, a key perennial crop in many developing countries. Using panel data from 49 tea estates across all tea-growing regions in Sri Lanka over 15 years, a two-way fixed-effects panel Ricardian model was estimated to capture the impact of seasonal temperature and rainfall variations on net revenue. Results reveal heterogeneous climate effects across regions and seasons. Rising temperatures significantly reduce tea estate net revenue, particularly in the up-country and mid-country regions, where the strongest adverse effects occur during the Northeast Monsoon and Southwest Monsoon seasons. The largest estimated temperature effect indicates that a 1°C increase in Southwest Monsoon temperature reduces net revenue by 14.5% in the up-country region. Temperature exerts a stronger influence on tea estate profitability than rainfall, particularly in higher-elevation estates. Projections indicate distinct seasonal and elevation-specific variability in future climate impacts, with projected net revenue losses becoming more pronounced over time and reaching approximately 25% under medium-term climate scenarios. The findings highlight substantial regional differences in climate sensitivity and future climate impacts, emphasizing the importance of region-specific adaptation strategies to enhance climate resilience in tea production.