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Rice, China's most important food crop, is highly dependent on irrigation, but an increasing number of extreme drought events have challenged rice production in many regions. This paper investigates the role of local irrigation infrastructure in improving farmers' ability to respond to drought and its effectiveness in mitigating the drought risk in rice production in China. The analysis relies on a moment-based specification of the stochastic production function, capturing mean, variance and skewness effects. Using household survey data from 86 villages in five provinces, we jointly estimate farmers' adaptive irrigation decisions and their effects on rice yield and production risk. Our econometric analyses show that irrigation infrastructure in villages contributes to enhancing farmers' irrigation capacity in adapting to drought, and increased irrigation leads to a significant increase in mean yield and a reduction in exposure to risk as well as downside risk in rice production. The paper concludes with policy implications.

As an arid and semiarid region in that is frequently hit by drought, Northwest China is ecologically vulnerable. Faced with drought and other extreme events, policy makers have given top priority to the formulation and implementation of adaptation policies. This paper investigates the roles of community assets, including community social capital and access to public services, in mitigating the impact of drought in Northwest China. Based on a micro-level dataset of individual households and villages from two provinces, we find a major effect of community assets on grain yields, after controlling for other influences. Our econometric analyses show that the severity of drought in the study areas significantly reduces grain yields. The negative impact of drought, however, can be significantly mitigated in villages with better community assets. Several policies, including enhancing investments in communities’ infrastructure and providing public services related to drought, are recommended to both improve local adaptive capacity to drought and reduce poverty in the drought-prone areas.

Although the importance of forests in climate change mitigation has been widely recognized, there has been a lack of empirical research regarding the role of forests in agricultural adaptation to climate change. This paper uses a careful designed household survey in South China that considers an exogenous shock of drought, to determine whether the presence of natural and planted forests near rice-producing villages can reduce the adverse effects of drought on rice yield. After controlling for local climate and water infrastructure, we find robust evidence that natural forests and not planted forests have significant positive effects on rice yield, due to their influence on the availability of water for irrigation. Although drought hinders farmers access to irrigation, which negatively affects rice yield, forests near villages provide protection for rice against drought. These findings support the adoption of forest ecosystem-based adaptation (EBA) to cope with climate change and enhance food security. Acknowledgement

In this chapter Jikun Huang and Yangjie Wang provide an overview and case studies of the connection between agriculture, foreign aid and climate change, and argue the extent to which agriculture is heavily underfunded and that foreign aid needs to be scaled up significantly to tackle the great challenge of food security in a climate change context. They also point at how to make climate finance through foreign aid more effective to tackle mitigation and adaptation in agriculture across different types of mitigation and adaptation measures.

We use “China's sulfur dioxide (SO2) emissions trading program” as a quasi-natural experiment to identify the causal effect of this market-based environmental regulation on firm's labor demand. Based on the difference-in-differences (DID) method and a series of robustness tests, we observe robust evidence that the emissions trading program significantly increases the labor demand of regulated firms, and that this positive employment effect is driven by the expansion of firm's production scale. The observable evidence leads us to cautiously conclude that the market-based environmental regulations in even developing countries could achieve the double dividend of coexistence of environmental protection and employment growth.