Economic Impacts of Climate Change The JRC PESETA II project Juan Carlos Ciscar San Sebastian, 15 July 2014 Authors Coordination JC Ciscar (ed.), L Feyen, C Lavalle, A Soria, F Raes Climate data pre-processing M Rozsai Climate bias corrected data A Dosio Agriculture biophysical M Donatelli, A Srivastava, D Fumagalli, S Niemeyer Agriculture CAPRI S Shrestha, P Ciaian, M Himics, B Van Doorslaer River floods R Rojas, L Feyen, A Bianchi Droughts G Forzieri, L Feyen, R Rojas, A Bianchi Energy P Dowling Transport F Nemry, H Demirel Forest Fires A Camia, G Libertà, J San Miguel Habitat Suitability D de Rigo, G Caudullo, J San Miguel, JI Barredo Tourism S Barrios, N Ibañez Human Health D Paci Economic, CGE analysis JC Ciscar, M Perry, D van Regemorter, J Pycroft, T Revesz, B Saveyn, T Vandyck, Z Vrontisi Tipping points D Ibarreta, F Nemry Land use modelling C Lavalle, C. Baranzelli, I Vandecasteele, F Batista e Silva Damage function D = a (ΔT)b D is damage, usually as % GDP ΔT is usually global temperature increase a and b are parameters This is the typical function behind the stylised IAMs models (RICE, FUND and PAGE; Nordhaus 1992, 2010; Hitz and Smith 2004; Stern 2007) Used e.g. to compute the social cost of carbon; around 20$t/CO2 for a 3% discount rate (EPA, 2010) Limitations, challenges Main limitations for adaptation (mitigation) insights: • Use results from literature, from different and possibly inconsistent climate scenarios • Only consider mean climate variables • Only temperature and, sometimes, precipitation are considered • Lack of the required geographical resolution Outline 1. Introduction: what are the questions? 2. The PESETA II project 3. Results 4. Conclusions 1. 1. Introduction EU Adaptation Strategy • Following the Green Paper (2007) and White Paper (2009) on adaptation, the EU Strategy on Adaptation to Climate Change was adopted in April 2013 (European Commission Communication) • The JRC PESETA II project provides background evidence on climate impacts in the Impact Assessment of the Communication Questions of interest 1) What are the climate impacts? 2) What are the distributional implications of climate impacts? Who gains and who losses? Regional equity issues 3) How much adaptation policy can reduce climate impacts? 4) Are spatial (cross-country) spillovers significant? Integrative, granular modelling • High space-time resolution of climate data, common to all impacts (considers spatial correlation) • Use of detailed physical impact models for each impact category • Integration of market impact results under a economic model: overall economic effects, direct + indirect; trade effects Future climate change (2080s) happening today 3 stages in the integration Socioeconomic scenario: GDP, population assumptions Climate model Stage 1: Modeling future climate Climate data (T, P, SLR) Agriculture model Physical impacts agriculture Valuation agriculture impacts Coastal Systems model River Flooding model Tourism model Physical impacts coasts Physical impacts floods Physical impacts tourism Valuation coasts impacts Valuation floods impacts Valuation tourism impacts General Equilibrium model Economic impacts Stage 2: Modeling physical impacts Stage 3: Modeling economic impacts 2. 2. JRC PESETA II project PESETA II Project strategy • Building climate impact modeling capabilities within JRC • • • • Existing data and resources within JRC Operational and research models Learning-by-doing within JRC To support the EC services on adaptation policy EU adaptation strategy DG AGRI, CLIMA, ENER, ENV, MOVE, REGIO, Others Climate scenarios 3.5°C (Reference Run) 2°C Seasonal temperature change (°C) 2071-2100, compared to 1961-1990 Winter Reference Run 2°C Change (°C) Summer Seasonal precipitation change (%) 2071-2100, compared to 1961-1990 Winter Reference Run 2°C Change ( % ) Summer Overview of Modelling Agriculture Energy Land use Biophysical and economic modelling River floods Forest fires Transport Coast Tourism Human Health Biophysical modelling Habitat Suitability Droughts Scoping work Tipping points Economic integration PESETA II Impact categories • Sectoral impact categories teams • • • • • • • • • • - • - Climate tipping points (IPTS) • • - Agriculture (ClimateCost project) - Coasts (ClimateCost project) Agriculture physical modelling (IES) Agriculture economic modelling (IPTS) Forest fires (IES) Tree species habitat suitability (IES) River flood (IES) Droughts (IES) Tourism (IPTS) Energy (IPTS) Transport (IPTS) Human health (IPTS) Climate data input • • • • • - Average temperature Maximum temperature Total precipitation Wind speed Relative humidity • Up to daily time resolution • Up to 25 km x 25 km space resolution EU Regions 3. Results Question number 1: What are the climate impacts? Reference run: headlines • Agriculture: EU agriculture productivity could be reduced by 10% in the 2080s; by 20% in the Southern Europe region • Energy: EU Energy demand could fall by 13% (with an increase in Southern Europe) • River floods: Flood damages could more than triple and people affected almost double • Droughts: EU cropland affected by droughts could multiply by seven (reaching 700,000 km2/year). People affected by droughts could also multiply by seven (reaching 144 million/year) Reference run: headlines (cont.) • Forest fires: Forest fires could more than double in Southern Europe (reaching 800,000 Ha) • Transport infrastructure: Damages due to climate change could increase by 50% • Coasts: Sea floods could more than triple • Tourism: tourism expenditure could drop by €15 billion/year, with Southern Europe half of that • Tree species habitat suitability of Albies alba: shift towards Northern and higher elevation areas • Human health: Mortality could double (reaching 100,000 deaths/year) Question number 2: What are the distributional implications of climate impacts? Who gains and who losses? Regional equity issues Welfare change (%GDP), Reference and 2ºC EU and regional breakdown 1.00 0.50 0.00 -0.50 -1.00 Health Coastal -1.50 Transport Tourism -2.00 River Flood Forest Fire Agriculture -2.50 Energy Northern Europe UK & Ireland Central Europe north Central Europe south Southern Europe 2°C Reference 2°C Reference 2°C Reference 2°C Reference 2°C Reference 2°C Reference -3.00 EU River Floods Relative change in Expected annual damage Reference Run Reference Variant 1 River Floods Relative change in Expected annual damage Reference Run Reference Variant 2 River Floods Relative change in Expected annual damage Reference Run Another Variant River Floods Relative change in Expected annual damage Reference Run Another Variant Droughts Change in total area affected 2080s Forest Fires Fire Weather Index Reference 2°C Question number 3: How much adaptation policy can reduce climate impacts? Coastal impacts, 2080s, adaptation (Welfare change, million €) Northern Europe UK & Ireland Central Europe north Central Europe south Southern Europe EU No Adaptation Adaptation ‐2,485 ‐43 ‐7,616 ‐181 ‐21,483 ‐844 ‐6,011 ‐378 ‐4,659 ‐132 ‐42,253 ‐1,577 Adaptation costs are over €2.5 billion/year in the 2080s Question number 4: Are spatial (cross-country) spillovers significant? Transboundary effects (Welfare change, million €) Coast / Central Agriculture / Europe North Southern Europe Northern Europe UK & Ireland Central Europe north Central Europe south Southern Europe EU ‐491 ‐1,677 ‐20,518 ‐1,966 ‐1,530 ‐26,181 ‐173 ‐798 ‐1,380 ‐1,209 ‐14,979 ‐18,540 Additional damages or around 25% 4. Limitations Limitations 1. Extreme impacts: not all considered, e.g. heat stress in agriculture 2. Impact categories not considered: migration, ecosystems, etc 3. Abrupt climate change not considered 4. Impacts in rest of the world (non EU) not considered - They all lead to underestimation of the climate damages Thanks for your attention! [email protected]