Generating Economic Impacts from Physical Climate Impacts: Implications for California Prof. Charles D. Kolstad Environmental Economics Program Bren School of Environmental Science & Management University of California, Santa Barbara www.ckolstad.org CCST, May 24, 2007
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Generating Economic Impacts from Physical Climate Impacts: Implications for California Prof. Charles D. Kolstad Environmental Economics Program Bren School.
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Generating Economic Impacts from Physical Climate Impacts:
Implications for California
Prof. Charles D. KolstadEnvironmental Economics Program
Bren School of Environmental Science & Management
University of California, Santa Barbarawww.ckolstad.org
CCST, May 24, 2007
UCSB Bren School of Environmental Science & Management
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Problem Statement• Regional impact models give us physical
dimensions of a changed climate for the State of California– Temperature and precipitation changes– Runoff – Sea level changes– Frequency of extreme weather events
• How to translate those physical impacts into economic impacts?– How will agents (eg, farmers) adjust and adapt to
changed climate?– What will be the costs to business of the changed
climate?– What are the losses to individuals of climate change
(hotter summers, less rain, etc)?
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The (Messy) Causal ChainNeed info on all these links
Water ResourcesChanges in water supplyWater qualityIncreased competition for water
Coastal AreasErosion of beachesInundation of coastal landsCosts to protect coastal communities
ForestsChange in forest compositionShift geographic range of forestsForest health and productivityPest outbreaks
Species & Natural AreasShift in ecological zonesLoss of habitat and species
Different paths to sectoral impactsDifferent paths to sectoral impactsNeed information on diseases, vectors,Weather extremes and susceptibilities.
Need information on adaptation, productivity,Crop choice, farm programs, and water Allocation.
Need knowledge of productivity changes,Disease and harvesting changes.
How will water supply change? AllocationPolicies (eg ag vs. urban)? Demand and Increased prices?
What protective measures are possible,What is the rate of change? How do stormSurges change? What capital is at risk?
What are the ecological consequences?How do those translate to habitat require?What are implications for people?
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Plus welfare impacts
• How worse/better do people feel with changed climate?
• How is cost of living affected?– Energy use– Housing costs– Water costs– Recreational opportunities
• Other?
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Role of Policy in Assessing Impacts
• Water– Water availability depends on allocations– Do we continue with old allocations (ag vs eco vs
urban)?– Do we adapt to changes with new allocations?– Do we invest in more public infrastructure?– Do we change water pricing?
• Sea level– Do we proactively and gradually move capital (mostly
buildings) away from at-risk coast?
• Other?
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A closer look at agriculture
• What matters– Productivity changes and cropping decisions– Farmer profit– Investments in irrigation– Employment and wages– Resource use (eg, water and energy)– Risk and uncertainty– Distribution of gains and losses
• Role of policy– Pricing of water– Allocation of water to different users– Ag price supports and other programs
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A somewhat non-Californian exampleSome random acre in the Central Valley
Prior to climate change
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A somewhat non-Californian exampleSome random acre in the Central Valley
Simple results of productivity analysis
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A somewhat non-Californian exampleSome random acre in the Central Valley
Simple results of productivity analysis
Loss from productivity analysis
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A somewhat non-Californian exampleSome random acre in the Central Valley
Result with crop change
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A somewhat non-Californian exampleSome random acre in the Central Valley
Loss with crop change
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Additional Factors
• Encroachment of urban areas changes land prices
• Climate change may affect global crop prices and input prices (eg, fertilizer)
• UCDavis may come up with more adaptable crops
• Sacramento and Washington may change farm policies
• Water policy is the big one.
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For example….
Offsetting- crops move to
different parts of CA
- crops move to different micro-climates (grapes)
- Varieties change- Crops change- UCDavis fixes
problem- Prices increase
Reinforcing– Water moved
to urban users– Pests increase– Risk increases– Change
unobserved
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What do we need to generate impacts in ag?
• Good models of farmer choice and adaptation to changed climate– Represent uncertainty about climate change– Represent affect of weather extremes– Represent time path to change– Based in California experiences in different parts of
the state– Based on history, not speculation
• Identification of likely policy responses to a change climate (tough).
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Assessing Impacts to CA: Some Steps• Commission studies of major sectors
vis-à-vis affect of weather outliers and changes in dist’n of weather.
• Track activity at county level• Identify spatial leakage
– One county to the next– Move beyond state boundaries
– Energy use– Coastal erosion– Cost-of-living– Distributional consequences– Overall well-being
• Embed within accounting framework
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Summary• Generating economic impact from regional climate
models is important and doable• Need expanded set of physical consequences than
simply changes in temperature and precipitation• Significant work needs to be done to develop the
tools to be able to translate temp/precip impacts into economic impacts– Research at sectoral level– Focus on adaptation and other responses to changed
climate– Effect of extreme weather also important
• Adaptation, both autonomous and public are important