Tigray is situated in the drier northern part of Ethiopia and belongs to the African Drylands in the Sudano-Sahelian region. The average annual average rainfall goes from 200 mm in the northeastern lowlands to 1000 mm in the southwestern highlands. High rainfall variability is one of the basic characteristics of the area, the Coefficient of Variation for annual rainfall is 28%, compared to 8% for Ethiopia on average.

Households have learnt to adjust to this risky environment over decades and centuries. When we think about possible future climate change and how best to respond, there is a lot to learn from studying existing responses to climate risks. Households have a number of well developed ex-ante as well as ex-post strategies to handle climate risk. However, with increasing population pressures some of these strategies are less efficient than before. Households have therefore become increasingly dependent on safety net programs and other institutional arrangements to reduce their vulnerability and harmful effects from climate shocks.

In our first baseline survey in 1998 we found that selling of livestock was their main response to climate shocks in form of droughts. Other commonly stated coping responses in decreasing order of importance included Food-for-work (FFW), borrowing from relatives, cash for work (CFW) and other employment locally or elsewhere in Ethiopia, and borrowing from others than relatives. Some stated that selling of trees was an important response. Very few stated that they would use cash or bank savings, beg for help from relatives or reduce expenditure.

However, their first response, selling of animals, is costly due to the covariate nature of such shocks. Livestock prices tend to decline substantially while food prices tend to go up. The total costs to the households are therefore much higher than the value of crop loss due to drought. Alternative buffer stocks or safety net or rainfall insurance systems may therefore be preferable. When we again asked about this in 2003 after a drought year, participation in Food-for-work had become their most important response to drought.

Investments that reduce the dependency on rainfall, such as irrigation, may also reduce the vulnerability. Improvement of roads also leads to better market integration and reduced local price volatility. Alternative savings mechanisms, like in credit and savings institutions do not have the same risk as saving in form of livestock. Several of our students will study a number of effects of climate risk, such as how it affects household subsistence production, asset dynamics, and consumption smoothing. This is also linked to how the productive safety net program helps households to protect themselves against these risks. Our 5-round household panel data is well suited for this type of analysis.