1. Introduction to estimates of climate change impacts Emanuele Massetti FEEM and CMCC Capacity Building Programme on the Economics of Adaptation 2 nd Regional Training Workshop Agenda Bangkok, 30 September – 4 October

2. Outline Brief introduction to the Ricardian Method Hands-on with Excel – Data Example – Functional forms – Marginal impacts – Absolute impacts – Sums across total farmland – Sums across

3. Ricardian method Land values reflect present and future (expected) productivity of land Analysis of data on agricultural land values and climate – Data from a “cross-section” with different land values and different climate Estimates of the value of climate used to infer the impact of climate change

4. Land value and climate Climate Variable Value of Land Source: Mendelsohn, Nordhaus and Shaw (AER, 1994) 4

5. Example: data FarmerAnnual mean temperature (°C)Value of land ($/hectare) A12 300 B15 350 C25 600 D35 320 E21 500 F32 330 G28 512 H14 420 I19 480 Assumption: one hectare of land for each farmer

7. Functional forms

9. ObservedLinearQuadratic T Land Value Predicted land value Difference Difference squared Predicted land value Difference Difference squared A 12300418-11813818295530 B 15350419-694801404-542943 C 2560042517530590531694780 D 35320431-1111230129030914 E 21500423775963524-24593 F 32330429-999834401-714999 G 2851242785725249715221 H 1442041912371492366 I 19480422583409499-19362 8796917206

10. Marginal value of temperature

11. Impact of +2°C Observed Predicted (Temperature) Predicted (Land Values) Temp. Land Value ($/ha) Land (ha) Total Land Value ($) Temp. Change New Temp. Land value ($/ha) Land values with +2°C ($/ha) Impact of +2°C (total) A123001 21429537177 B153501 21740445955 C256001 227531512-19 D353201 237290197-92 E215001 22352453511 F323301 234401330-70 G285121 230497456-41 H144201 21637143362 I194801 22149952425 Total3812Total Impact ($)7 Impact (%)0.2%

14. Impact of +2°C with different farmland Observed Predicted (Temperature) Predicted (Land Values) Temp. Land Value ($/ha) Land (ha) Total Land Value ($) Temp. Change New Temp. Land value ($/ha) Land values with +2°C ($/ha) Impact of +2°C (total) A12300123600214295371922 B153502380502174044591259 C256004527000227531512-846 D353209028800237290197-8311 E215002512500223524535265 F323303511550234401330-2460 G285122010240230497456-817 H14420156300216371433931 I194802512000221499524633 Total120040Total Impact ($)-8424 Impact (%)-7.0%

15. Impact of local temp. change Observed Predicted (Temperature) Predicted (Land Values) Temp. Land Value ($/ha) Land (ha) Total Land Value ($) Temp. Change New Temp. Land value ($/ha) Land values with +2°C ($/ha) Impact of +2°C (total) A123001 1.813.829536470 B153501 1.616.640444945 C256001 2.327.3531508-23 D353201 2.237.2290187-102 E215001 2.123.152453511 F323301 2.1534.15401325-76 G285121 1.8529.85497460-37 H144201 2.116.137143665 I194801 1.920.949952324 Total3812Total Impact ($)-24 Impact (%)-0.6%