Generating Economic Impacts from Physical Climate Impacts: Implications for California Prof. Charles D. Kolstad Environmental Economics Program Bren School

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

Physical Climate Change (eg, temp)

Expanded Physical Consequences (eg, runoff)

Biological ChangesMan-made ecoysystems(eg, forests, agriculture)

Policy Changes (eg, water allocation)

Other HumanActivities

Adaptation Investments

Natural Ecosystems

OVERAL IMPACTS


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HealthWeather-related mortalityInfectious diseasesAir-quality respiratory illnesses

AgricultureCrop yieldsIrrigation demandsPest outbreaks

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

Potential Climate Change ImpactsPotential Climate Change Impacts

Climate Changes(means, variances, extremes)

Sea Level Rise

Temperature

Precipitation

Adapted from EPA

Individual well-being


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Different paths to sectoral impactsDifferent paths to sectoral impactsNeed information on diseases, vectors,Weather extremes and susceptibilities.


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Need information on adaptation, productivity, Crop choice, farm programs,and water allocation.


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Need information on adaptation, productivity,Crop choice, farm programs, and water Allocation.

Need knowledge of productivity changes,Disease and harvesting changes.


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How will water supply change? AllocationPolicies (eg ag vs. urban)? Demand and Increased prices?


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What protective measures are possible,What is the rate of change? How doStorm surges change?What capital is at risk?


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Species & Natural AreasShift in ecological zonesLoss of habitat and species





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

14UCSB Bren School of Environmental Science & Management

A somewhat non-Californian exampleSome random acre in the Central Valley

Prior to climate change



Simple results of productivity analysis



Simple results of productivity analysis

Loss from productivity analysis



Result with crop change



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

• Analyze ecosystem changes• Track consumer affects

– 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

Documents

Generating Economic Impacts from Physical Climate Impacts: Implications for California Prof. Charles D. Kolstad Environmental Economics Program Bren School