An Economic Assessment of Ecosystem Services Under Climate Change: A CGE Perspective

Transcription

1 An Economic Assessment of Ecosystem Services Under Climate Change: A CGE Perspective Francesco Bosello FEEM, CMCC, University of Milan Ecosystem Services Training Day Fondazione Artigianelli Venice, 29 September 2010

2 1. Research aims Proposing a methodology for the economic assessment of climate change impacts on ecosystem services. Still based on market values, but beyond direct costing. i.e. considering market adjustments thus the final impact on the economic performance (resources re-allocation and impact interdependences i.e. market-driven autonomous adaptation) General Equilibrium perspective Exploratory use of CGE models for this purpose 1

3 2. Sketching a CGE model supply Income Input markets K, L, Land, NR Consumers (households, government) Demand and supply functions mimic observed economic systems (market exchanges between multiple industries and countries): parameters are calibrated on real data. All markets are interdependent. Input and output re-locate internationally/sectorally responding to price signals: AUTONOMOUS ADAPTATION Income demand Output markets Goods and services Maximise welfare from consumption Constrained by income They meet in Constrained by technology 2 demand Producers (firms, government) supply Minimise cost of production

4 2. Research structure: IA Climatic Drivers Impacts on Ecosystem Services Social Economic Impacts Economic Assessment WITH market adaptation 3 Identify these services their change their relevance for human (read market) activities Δ Agr. Prod. Δ Forest Prod. Δ Tourism activity.. Effect on GDP performance

5 3. The idea Without climate change impacts GDP or Welfare With climate change impacts including those on ecosystems services With climate change impacts but without those on ecosystems services With climate change impacts including those on ecosystems services Economic GE assessment of climate change impacts on EU ecosystem services Time 4

6 4. The investigation tool for the assessment : the ICES model Recursive - dynamic CGE running Regions: USA: United States Med_Europe: Mediterranean Europe North_Europe: Northern Europe East_Europe: Eastern Europe FSU: Former Soviet Union KOSAU: Korea, S. Africa, Australia CAJANZ: Canada, Japan, New Zealand NAF: North Africa MDE: Middle East SSA: Sub Saharan Africa SASIA: India and South Asia CHINA: China EASIA: East Asia LACA: Latin and Central America 17 Sectors: Rice Wheat Other Cereal Crops Vegetable Fruits Animals Forestry Fishing Coal Oil Gas Oil Products Electricity Water Energy Intensive industries Other industries Market Services Non-Market Services 5

7 5. The impact scenario without effects on ecosystem services Supply- side impacts Impact on labour quantity (change in mortality health effect of climate change) Impacts on labour productivity (change in morbidity health effect of climate change) Impacts on land quantity (land loss due to sea level rise) Impacts on land productivity (Yield changes due to temperature and CO2 concentration changes) Demand-side impacts Impacts on energy demand (change in households energy consumption patterns for heating and cooling purposes) Impacts on recreational services demand (change in tourism flows induced by changes in climatic conditions) C temperature increase in 2050 wrt 2000 (+1.4, C wrt average) Likely A2 range according to IPCC AR Impacts on health care expenditure 6

8 5. The impact scenario without effects on ecosystem services CC (3.1 C) vs baseline: Real GDP (% change) USA 4 3 Med_Europe North_Europe East_Europe 2 FSU KOSAU CAJANZ NAF MDE SSA SASIA CHINA EASIA LACA World

9 6. Ecosystem services investigated EU forest ecosystems & services Provisioning Regulating (sequestration) Cultural Translated into Change in the productivity of the forest input for the EU timber industry Change in the damages due to higher temperature if the service were removed Biodiversity in agricultural ecosystems & services Provisioning Regulating Translated into Change in the productivity of the land input for the EU agricultural sector 8

10 7. Direct CC impacts on EU agro&forest ecosystems provisioning service Changes in land and forest productivity isolating ecosystem effects (2050 % ch. wrt 2000) Med_Europe North_Europe East_Europe Land Productivity (+1.2 C) Forest Productivity (+1.2 C) Land Productivity (+3.1 C) Forest Productivity (+3.1 C) 9

11 8. Assessing the economic implications (GE impacts) Climate-change impact on discounted GDP (3% dr) with and without ecosystem provisioning effect CC-induced GDP losses NPV (dr=3%) Billion $ W/o impact on E/S (1) C T wrt 2000 With impact on E/S (2) Difference (2) (1) W/o impact on E/S (1) C T wrt 2000 With impact on E/S (2) Difference (2) (1) Med_Europe North_Europe , , East_Europe Economic GE assessment of CC impacts on EU agro-forest ecosystem provisioning services 10

12 9. Direct CC impacts on EU forest regulating service (sequestration) Climate change is estimated to affect negatively the overall capacity of EU forest ecosystem to store carbon Over the period this lower ability can be quantified in a additional temperature increase of C with respect to what would have occurred with an unaffected sequestration service All climate change direct impacts (positive and negative) become larger, of about, on average, roughly the + 2% Computing new impacts on GDP and comparing these with previous estimation based on a temperature of C lower, the GE value of CC impact on forest sequestration service can be estimated 11

13 9. Assessing the economic implications (GE impacts) Climate-change impact on discounted GDP (3% dr) with and without ecosystem regulating effect C T wrt C T wrt 2000 NPV (dr=3%) B$ 1.2 C C Annuity M$ NPV (dr=3%) B$ C C Annuity M$ (1) (2) (2)-(1) (1) (2) (2)-(1) Med_Eur North_Eur East_Eur Tot Europe World Economic GE assessment of CC impacts on EU forest ecosystem regulating service 12

14 10. Caveats Only CC effects on (some) EU ecosystems sevices are considered => interactions triggered by impacts on ecosystems outside the EU are neglected Ecosystem and economic dynamics are highly stylized: linear behavior is assumed (no tresholds, no irreversibility) Not perfect matching between the service considered and the economic variable represented by the model Investigation restricted to market aspects plus all the limitations related to the economic tool and the uncertainty related to the assessment of direct impacts 13

15 11. However We are exploring an innovative impact assessment methodology, that appears to be promising. Preliminary results are interesting and could be the first steps in establishing a consolidated approach in the economic evaluation also of impacts on ecosystems, and, trough these on biodiversity This methodology is however suited to define market values, it should thus complement and not substitute the traditional techniques for the assessment of non use/existence values. 14

16 Thank You! 15

17 Climate Change Impacts: Summary 4.0 % of GDP C 3.1 C 1.2 C 3.1 C 1.2 C 3.1 C 1.2 C 3.1 C 1.2 C 3.1 C 1.2 C 3.1 C Agriculture Energy Demand Health Sea Level Rise Tem perature increase Tourism All Impacts USA Med_Europe North_Europe East_Europe FSU KOSAU CAJANZ NAF MDE SSA SASIA CHINA EASIA LACA World 16