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Using InVEST to Calibrate Economic Models of Climate Change

Using InVEST to Calibrate Economic Models of Climate Change. Justin Andrew Johnson jandrewjohnson@gmail.com JustinAndrewJohnson.com April 23, 2012. Research Question. “How will climate change impact economic growth through changes in ecosystem services?” Three basic tasks

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Using InVEST to Calibrate Economic Models of Climate Change

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  1. Using InVEST to Calibrate Economic Models of Climate Change Justin Andrew Johnson jandrewjohnson@gmail.com JustinAndrewJohnson.com April 23, 2012

  2. Research Question • “How will climate change impact economic growth through changes in ecosystem services?” • Three basic tasks • Create a dynamic calculable general equilibrium (DCGE) model that impresses economists • Identify accurate climate change damage functions with respect to ecosystem services • Calibrate the model to specific geographic locations and ecosystem services

  3. What is a normal DCGE? • A model of economic growth that accounts for: • Utility maximizing individuals • Profit maximizing firms • Changing prices • Capital accumulation • Market responses • Lets us predict economic growth while accounting for dynamic, changing relationships • Economists like them • Lots of functions and proofs!

  4. What is a DCGE? Global GDP Years past 2012

  5. DCGEs in Existing Climate Models • DICE/RICE Models from Nordhaus • PAGE Model from Stern • Many others (CRED, World Bank, ADB) • Where my model is different: • Include more detail in the economy (8 sectors) • Account for impacts on ecosystem services • Use more accurate damage function(s)

  6. Existing Damage Functions are Very Simplified • A damage function is a relationship between Temperature Increase and Economic Damage

  7. My Approach to Damage Functions • Include multiple functions that describe specific impacts on specific sectors, such as: • Agriculture damage from increasing precipitation volatility • Capital loss from sea-level rise • Crucially, ecosystem service value lost from changing climate

  8. Comparison of Damage Functions Traditional Model

  9. Process for identifying climate impact on ES: • Step 1: • Run InVEST on current landscape

  10. Process for identifying climate impact on ES: • Step 2: • Create future landscape scenarios by interacting climate predictions with land change modelers

  11. Process for identifying climate impact on ES: • Step 3: Run InVEST on future landscapes • Step 4: Calculate change in value for specific geographic locations • Step 5: Use this information in the Ecosystem-Services sector in the DCGE to assess what the long-term growth impacts are.

  12. Preliminary Results • As a proof of concept, I have created a 3-sector model with a simple damage function • Calibrated to IPCC A1F1 Scenario • Damages based on Weisman Formula

  13. Preliminary Results • Model predicts fast growth at first, but eventually climate damages offset growth in capital

  14. Validation – Replicates Past Data with Backcasting

  15. Where I Still Need Help • Getting good at InVEST! • Data for InVEST inputs • Identifying the correct set of damage functions

  16. Thank you • Questions? • Feel free to email any questions or to request more information and works cited to jandrewjohnson@gmail.com • Additional information on this model and presentation included at justinandrewjohnson.com/climate

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