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Evaluating Climate Change Impactsan Integrated
Approach
Marco Lazzarin and Francesco Bosello Trieste,
09/07/03
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Evaluating Climate Change Impacts an Integrated
Approach
GCM
output
Temperature level
Temperature change
Envir. Impact Modules
Inputs for

Vegetation
Other (e.g. precip.)
Water
Interface(s) translating env. impacts in
changes in key economic variables
Sea Level
? in stocks (K,L,La,NR)
Agriculture
? in productivity
CGE
Economic Valuation
GHGs emissions
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Evaluating Climate Change Impacts an Integrated
Approach
Steps to conduct the exercise

• Take an economic model sufficiently
  disaggregated. (Simplified but good enough
  representation of the economic system).
• Build a baseline for the future without climate
  change.
• Over-impose to the baseline shocks in key
  economic variables induced by climate change.
• Comment results.

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Evaluating Climate Change Impacts an Integrated
Approach
Our CGE Economic Model

• GTAP (Global Trade Analysis Project) is a
  database (66 regions, 57 sectors) but also a
  global comparative static applied general
  equilibrium model calibrated in 1997
• The GTAP system of equations is based on
  microeconomic foundations providing a detailed
  specification of household and firm behaviour
  within individual regions and trade linkages
  between regions.
• Hertel, T.W., (1996) Global Trade Analysis
  Modelling and applications, Cambridge University
  Press.
• www.gtap.org

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Evaluating Climate Change Impacts an Integrated
Approach
Our CGE Economic Model

• GTAP-E extended by Burniaux and Truong (2001) in
  order to account for an environmental part (CO2
  emissions) version 8 ? 8.
• GTAP-EX our developed version of the model, by
  augmenting the industrial disaggregation,
  especially in the agricultural sector version 8
  ? 17.

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Evaluating Climate Change Impacts an Integrated
Approach
Regional and sectoral mapping of GTAP-EX
Regions USA United States EU European
Union EEFSU Eastern Europe and Former
Soviet Union JPN Japan RoA1 Oth.
Annex 1 countries Eex Net Energy
Exporters CHIND China and India RoW
Rest of the World
Sectors Rice Wheat Cereal Crops Vegetable
Fruits Animals Forestry Fishing Coal Oil Gas Oil
Products Electricity Water Energy Intensive
industries Other industries Market
Services Non-Market Services
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Evaluating Climate Change Impacts an Integrated
Approach
The baseline construction process

• Construction of baseline without climate change
  for the future selecting relevant years (2010,
  2030, 2050) and re-calibrating the model using
• projected data from G-Cubed model (McKibbin,
  1999) for stocks of capital, labour, population
  and related productivity
• IMAGE (RIVM 2001) for land productivity.
• McKibbin, W.J, Wilcoxen, P.J., (1998) The
  Theoretical and Empirical Structure of the GCubed
  Model, Economic Modelling, vol. 16(1)
• IMAGE (2001), The IMAGE 2.2 Implementation of
  the SRES Scenarios, RIVM CDROM, Bilthoven, The
  Netherlands.

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Evaluating Climate Change Impacts an Integrated
Approach
Modelling the impacts

• Tol (2002) reviews the available studies for
  impacts on human health, productivity in
  agriculture and forestry, losses of species and
  ecosystems, sea level rise, energy consumption
  and water resources.
• He discusses methodological issues and provides a
  meta-analysis, obtaining best guesses for the
  valuation of the various impacts
• Tol, R.S.J.,(2002) Estimates the Damage Costs of
  Climate Change Benchmark and Dynamic Estimates,
  Part I and II, Environmental and Resources
  Economics, vol. 21.

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Evaluating Climate Change Impacts an Integrated
Approach
Implementing Climate-Change Impacts on Health in
GTAP-EX
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Evaluating Climate Change Impacts an Integrated
Approach

• Climate change affects human health in several
  ways. Here we consider the influence of climate
  change on heat and cold stress related diseases
  (respiratory and cardiovascular), and on main
  Vector-borne diseases (malaria, dengue and
  schistosomiasis).
• Cardiovascular and respiratory disorders are
  worsened by both extreme cold and extreme hot
  weather and are mainly an urban phenomenon that
  affect differently people above and below 65
  years old. Vector-borne diseases may intensify
  and spread with warmer and more humid conditions.
• At this preliminary stage the main economic
  effect of the changes in health status that we
  consider are changes in labour productivity. In
  particular the change in labour productivity per
  year is related via statistical model to the
  total number of life years diseased due to the
  change in the incidence of the above mentioned
  illness.

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Evaluating Climate Change Impacts an Integrated
Approach
Nature of inputs Labour productivity loss due
to 1C or 2C temperature increase respect to
2000 per country (all).
Steps for implementation (a) Compute emission
pattern starting from data for 2010, 2030,
2050. (b) Compute temperature increase respect
to 2000 according to that pattern in 2010, 2030,
2050. (c) Re-scaling labour productivity
losses. (d) Aggregate losses according to
GTAP-EX 8 world regions. (e) Shock the GTAP-EX
system.
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Evaluating Climate Change Impacts an Integrated
Approach
CO2 Emissions (Giga Ton of C)
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Evaluating Climate Change Impacts an Integrated
Approach
Estimated Temperature Increase
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Evaluating Climate Change Impacts an Integrated
Approach
Labour productivity loss due to climate change

• Percentage changes respect to 2010, 2030 and
  2050 baselines.
• Aggregated according to GTAP-EX macro-regions.
• These are the shocks to labour productivity
  direct inputs for
• GTAP-EX

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Evaluating Climate Change Impacts an Integrated
Approach
Labour productivity loss due to climate change
some comments

• We can note firstly that the changes in
  productivity are quite small, for example maximum
  shock is smaller than 0.1
• We can note that these impacts are both positive
  and negative. In particular they are positive
  (increased productivity) for developed regions
  (except JPN) whereas they are negative for the
  developing world. This is due to the fact that
  major labour productivity losses are induced by
  vector-borne diseases, that are in practice equal
  to zero in the developed countries.
• interesting is the case of JPN where
  cardiovascular and respiratory diseases worsen
  decreasing labour productivity. This effect that
  is a counter tendency for developed regions is
  due to the high percentage and density of
  population living in urban areas.

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Evaluating Climate Change Impacts an Integrated
Approach
Climate change impacts on health selected
results
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Evaluating Climate Change Impacts an Integrated
Approach
Climate change impacts on health comments

1. EV is a welfare indicator Equivalent variation
   is the compensating payment that in the absence
   of the economic change moves the consumer to the
   welfare level associated with the change. For
   example, if we have a price increase, the
   equivalent variation is the maximum amount the
   consumer would be willing to pay to avoid the
   price increase.
2. It is possible to note that negative shocks on
   labour productivity translate in negative impacts
   on GDP and welfare and vice-versa. The same is
   true for emission in general a lower GDP implies
   lower emission
3. Again is interesting the case of Japan in 2030
   the variation of GDP respect to the baseline is
   negative whereas variation of emissions from the
   baselines are positive. This is a typical effects
   that a CGE model can highlight a substitution
   process between production factor. In this
   specific case labour is substituted with capital
   and, as a consequence, even though output
   declines the production mix is nevertheless more
   polluting.

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Evaluating Climate Change Impacts an Integrated
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Implementing Climate-Change Impacts on Sea Level
Rise in GTAP-EX
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Evaluating Climate Change Impacts an Integrated
Approach
Nature of inputs Dry-land loss fraction without
coastal protection due to 5, 15, 25 cm of sea
level rise estimated for 2010, 2030 and 2050
respectively

• Steps for implementation
• (a) Aggregate losses according to GTAP-EX 8 world
  regions.
• (b) Shock the GTAP-EX system.

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Evaluating Climate Change Impacts an Integrated
Approach
Re- scaled dryland loss due tosea-level rise

• Percentage changes respect to 2010, 2030 and
  2050 baselines.
• Aggregation according to GTAP-EX macro-regions.
• These are the shocks to stock of land direct
  inputs for GTAP-EX

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Evaluating Climate Change Impacts an Integrated
Approach
Impact of climate-change induced sea-level rise
selected results
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Evaluating Climate Change Impacts an Integrated
Approach
Impact of climate-change induced sea-level rise
selected results

1. In some cases GDP and equivalent variation do
   not move in the same direction, this is due the
   fact that EV doesnt take into account capital
   depreciation, and consequently considers as a
   positive investment the investment necessary to
   maintain capital stock at its productive
   capacity. Moreover EV is related to utility and
   the functional form used to aggregate utility
   components transforms considerably these
   components.
2. As before the variation in CO2 emissions doesnt
   have always the same sign of GDP variation.
   Consider, for instance, developed countries GDP
   falls respect to the baseline but CO2 emissions
   increase. In this case what is highlighted is a
   substitution process between land and capital.
   Interestingly this substitution seems
   particularly strong in developed regions which
   are relatively capital abundant
   (USA-EU-Japan-RoA1). On the contrary in
   developing regions variations in GDP and
   emissions have the same sign highlighting a
   weaker substitution possibility between land and
   capital.

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Evaluating Climate Change Impacts an Integrated
Approach
Implementing Climate-Change Impacts on Health and
Sea Level Rise in GTAP-EX
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Evaluating Climate Change Impacts an Integrated
Approach
Impact of climate change on sea-level rise and
health selected results
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Evaluating Climate Change Impacts an Integrated
Approach
Some Limitations

• The choice of modelling the climate change as a
  one-time event. Climate change occurs
  progressively over time, and natural systems
  interact dynamically with human systems.
• On the environmental side, the climate change
  has its own dynamics, due to the adaptation
  processes of natural and human systems to the
  changing environment.
• On the economic side, the static CGE model does
  not take into account the inter-temporal agents
  decisions process.

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Evaluating Climate Change Impacts an Integrated
Approach
Future developments
1. To enlarge the spectrum of climate change
effects in the comparative static analysis. 2.
To develop the environmental block of
equations. 3. To develop a recursive dynamic
version of the GTAP-E model (GTAP-ER). 4. To
have hard-link integration between modules.