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. UCSB Bren School of Environmental Science & Management 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)?

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

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

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

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

7. UCSB Bren School of Environmental Science & Management 7 Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Agriculture Crop yields Irrigation demands Pest outbreaks Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Different paths to sectoral impacts Need 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.

8. UCSB Bren School of Environmental Science & Management 8 Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Agriculture Crop yields Irrigation demands Pest outbreaks Water Resources Changes in water supply Water quality Increased competition for water Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Different paths to sectoral impacts Need 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? Allocation Policies (eg ag vs. urban)? Demand and Increased prices?

9. UCSB Bren School of Environmental Science & Management 9 Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Agriculture Crop yields Irrigation demands Pest outbreaks Water Resources Changes in water supply Water quality Increased competition for water Coastal Areas Erosion of beaches Inundation of coastal lands Costs to protect coastal communities Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Different paths to sectoral impacts Need 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? 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?

10. UCSB Bren School of Environmental Science & Management 10 Health Weather-related mortality Infectious diseases Air-quality respiratory illnesses Agriculture Crop yields Irrigation demands Pest outbreaks Water Resources Changes in water supply Water quality Increased competition for water Coastal Areas Erosion of beaches Inundation of coastal lands Costs to protect coastal communities Forests Change in forest composition Shift geographic range of forests Forest health and productivity Pest outbreaks Species & Natural Areas Shift in ecological zones Loss of habitat and species Different paths to sectoral impacts Need 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? 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? What are the ecological consequences? How do those translate to habitat require? What are implications for people?

11. 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?

12. 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?

13. 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

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

15. 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

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

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

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

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

20. UCSB Bren School of Environmental Science & Management 20 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

21. 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).

22. 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 distn 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

23. 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