Rajapaksha P. D. Gunathilaka

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 14.50% 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 25.00% 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.

Limited opportunities for crop switching and lengthy preharvesting periods make the plantation sector particularly vulnerable to climate change. Surprisingly, however, the economic consequences of climate change on plantation crops are seldom analysed. Drawing on a unique primary panel data set from a representative cross section of 35 tea estates in Sri Lanka over the period 2002–2014, this study implements a structural model of estate profit maximisation to estimate the elasticity of labour demand with respect to different components of weather. Results indicate a negative relationship between labour demand and rainfall in the south‐west monsoon, the north‐east monsoon and the second inter‐monsoon. A positive relationship is found between labour demand and rainfall in the first inter‐monsoon. Overall, predicted changes in rainfall by 2050 are anticipated to reduce labour demand by approximately 1,175,000 person‐days per year across Sri Lanka's tea plantation sector. This is likely to have considerable social and welfare implications, particularly for the Indian Tamil women who comprise the majority of the sector's workforce.

The Tea Industry and a Review of Its Price Modelling in Major Tea Producing Countries