Impact of Climate Change on Sri Lanka’s Pepper Production and Export Industry

Sri Lanka’s pepper production and export industry is increasingly affected by climatic variability. This study examines the influence of temperature, rainfall, wind speed, and daylight duration on district-level pepper production (2018–2024) and national monthly pepper export volumes (2014–2024). Panel data analysis is employed to quantify the effects of climatic variables on pepper production, using Fixed Effect (FE) and Random Effect (RE) estimations, while the Difference Generalized Method of Moments (GMM) approach is applied to account for dynamic production persistence. Export behavior and forecasting performance are analyzed using the Autoregressive Distributed Lag–Error Correction Model (ARDL–ECM) and Seasonal Autoregressive Integrated Moving Average (SARIMA) model. The results show mean temperature has a positive and statistically significant contemporaneous effect on pepper production, while rainfall remains insignificant in static panel models. Difference GMM results confirm strong production persistence, with temperature emerging as the dominant positive driver and wind speed exerting a significant negative effect. Export modeling reveals short-run and long-run relationships between climatic variables and pepper exports. The ARDL–ECM framework confirms a stable long-run equilibrium, with about one-third of disequilibrium corrected within one month. Temperature and wind speed show significant lagged effects, while rainfall plays a limited role. Forecast comparisons indicate the ARDL model incorporating climatic variables outperforms SARIMA in predictive accuracy, although SARIMA better captures seasonal patterns. These findings show temperature and wind speed are key climatic drivers of Sri Lanka’s pepper sector. The positive and persistent temperature effect suggests the need for adaptive crop management to address heat stress, while the negative impact of wind speed highlights the importance of protective measures such as windbreak systems. The identified lagged climatic effects and long-run equilibrium indicate climate shocks influence exports with delays, supporting the integration of climate indicators into export forecasting and trade planning. Strengthening climate-resilient production and climate-informed export strategies is therefore essential for sustaining sector stability and competitiveness.