Generating Economic Impacts from Physical Climate Impacts: Implications for California

1. 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

2. 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)? UCSB Bren School of Environmental Science & Management

3. The (Messy) Causal ChainNeed info on all these links Physical Climate Change (eg, temp) Expanded Physical Consequences (eg, runoff) Man-made ecoysystems (eg, forests, agriculture) Other Human Activities Biological Changes Natural Ecosystems Adaptation Investments Policy Changes (eg, water allocation) OVERAL IMPACTS UCSB Bren School of Environmental Science & Management

4. Potential Climate Change Impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Individual well-being Agriculture Crop yields Irrigation demands Pest outbreaks Climate Changes (means, variances, extremes) Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Temperature Precipitation Water Resources Changes in water supply Water quality Increased competition for water Sea Level Rise Coastal Areas Erosion of beaches Inundation of coastal lands Costs to protect coastal communities Adapted from EPA Species& Natural Areas Shift in ecological zones Loss of habitat and species UCSB Bren School of Environmental Science & Management

5. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. UCSB Bren School of Environmental Science & Management

6. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. Agriculture Crop yields Irrigation demands Pest outbreaks Need information on adaptation, productivity, Crop choice, farm programs, and water allocation. UCSB Bren School of Environmental Science & Management

7. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. Agriculture Crop yields Irrigation demands Pest outbreaks Need information on adaptation, productivity, Crop choice, farm programs, and water Allocation. Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Need knowledge of productivity changes, Disease and harvesting changes. UCSB Bren School of Environmental Science & Management

8. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. Agriculture Crop yields Irrigation demands Pest outbreaks Need information on adaptation, productivity, Crop choice, farm programs, and water Allocation. Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Need knowledge of productivity changes, Disease and harvesting changes. Water Resources Changes in water supply Water quality Increased competition for water How will water supply change? Allocation Policies (eg ag vs. urban)? Demand and Increased prices? UCSB Bren School of Environmental Science & Management

9. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. Agriculture Crop yields Irrigation demands Pest outbreaks Need information on adaptation, productivity, Crop choice, farm programs, and water Allocation. Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Need knowledge of productivity changes, Disease and harvesting changes. Water Resources Changes in water supply Water quality Increased competition for water How will water supply change? Allocation Policies (eg ag vs. urban)? Demand and Increased prices? What protective measures are possible, What is the rate of change? How do Storm surges change? What capital is at risk? Coastal Areas Erosion of beaches Inundation of coastal lands Costs to protect coastal communities UCSB Bren School of Environmental Science & Management

10. Different paths to sectoral impacts Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Need information on diseases, vectors, Weather extremes and susceptibilities. Agriculture Crop yields Irrigation demands Pest outbreaks Need information on adaptation, productivity, Crop choice, farm programs, and water Allocation. Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Need knowledge of productivity changes, Disease and harvesting changes. Water Resources Changes in water supply Water quality Increased competition for water How will water supply change? Allocation Policies (eg ag vs. urban)? Demand and Increased prices? What protective measures are possible, What is the rate of change? How do storm Surges change? What capital is at risk? Coastal Areas Erosion of beaches Inundation of coastal lands Costs to protect coastal communities Species & Natural Areas Shift in ecological zones Loss of habitat and species What are the ecological consequences? How do those translate to habitat require? What are implications for people? UCSB Bren School of Environmental Science & Management

11. 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? UCSB Bren School of Environmental Science & Management

12. 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? UCSB Bren School of Environmental Science & Management

13. 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 UCSB Bren School of Environmental Science & Management

14. A somewhat non-Californian example Some random acre in the Central Valley Prior to climate change UCSB Bren School of Environmental Science & Management

15. A somewhat non-Californian example Some random acre in the Central Valley Simple results of productivity analysis UCSB Bren School of Environmental Science & Management

16. A somewhat non-Californian example Some random acre in the Central Valley Loss from productivity analysis Simple results of productivity analysis UCSB Bren School of Environmental Science & Management

17. A somewhat non-Californian example Some random acre in the Central Valley Result with crop change UCSB Bren School of Environmental Science & Management

18. A somewhat non-Californian example Some random acre in the Central Valley Loss with crop change UCSB Bren School of Environmental Science & Management

19. 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. Additional Factors UCSB Bren School of Environmental Science & Management

20. 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 For example…. UCSB Bren School of Environmental Science & Management

21. 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). UCSB Bren School of Environmental Science & Management

22. 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 UCSB Bren School of Environmental Science & Management

23. 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 UCSB Bren School of Environmental Science & Management