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Texas in the Climate Change Squeeze: Economic Issues Bruce A. McCarl Distinguished Professor of Agricultural Economics, Texas A&M University [email protected], http//ageco.tamu.edu/faculty/mccarl Let's Avoid Climate Change Climate Change is Happening Mitigation Effects/Adaptation Quiz Bowl Class March 2009 Why would an economist consider climate change? Poses some large economic issues Why is climate change happening? Partially due to unpriced externality Emitters do not consider emission damages What will it do to society welfare? Altered production particularly in ag and forest Altered ecology Altered energy costs What can we do to mitigate or adapt and at what cost? US Government said Kyoto compliance too costly Adaptation can be disruptive What about land value and use? Plan of Presentation Degree of climate change What is happening up to now, What is projected Why is this happening Economic Issues Degree of climate change What is happening up to now – Temperature since 1979 Rates of change accelerating as time progresses (colored lines) Texas in a relatively rapidly warming area within continental US http://ipcc-wg1.ucar.edu/wg1/Figures/AR4WG1_Ch03-Figs_2007-10-23.ppt#299,43,FAQ 3.1, Figure 1 Degree of climate change What is happening up to now – Potential Precipitation Figure TS.8 Rainfall is increasing Degree of climate change What is happening up to now -- Precipitation Texas has areas that had largest decrease in continental US http://ipcc-wg1.ucar.edu/wg1/Figures/AR4WG1_Ch03-Figs_2007-10-23.ppt#269,14,Figure 3.13 Degree of climate change What is happening up to now -- Precipitation Rainfall became more concentrated and Texas again has such areas http://ipcc-wg1.ucar.edu/wg1/Figures/AR4WG1_Ch03-Figs_2007-10-23.ppt#296,40,Figure 3.39 Degree of climate change What is happening up to now -- Other Source : Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report WGI http://ipcc-wg1.ucar.edu/ Degree of climate change What is happening up to now – Hurricanes Figure TS.11. Tropical Atlantic (10°N–20°N) sea surface temperature annual anomalies (°C) in the region of Atlantic hurricane formation, relative to the 1961 to 1990 mean. {Figure 3.33} Source : Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report WGI http://ipcc-wg1.ucar.edu/ Why is this happening? Degree of climate change Why is this happening IPCC (1995) “The balance of evidence suggests a discernible human influence on global climate.” IPCC (2001) “Most of the warming of the past 50 years is likely (>66%) to be attributable to human activities.” IPCC (2007) ”Most of the observed increase in global average temperatures since the mid20th century is very likely (>90%) due to the observed increase in anthropogenic (human emission caused) greenhouse gas concentrations.” Degree of climate change Why is this happening Some gases, like carbon dioxide (CO), trap heat in the atmosphere by absorbing longwave radiation while letting the Sun's energy pass through. The transparent roof and walls of a greenhouse allow in the sunlight while keeping in the heat. Since these gases act similarly in the atmosphere, we call them greenhouse gases. Source : U.S. National Assessment/ http://www.usgcrp.gov/usgcrp/Library/nationalassessment/images/Greenhouse-s.jpg. Degree of climate change Why is this happening Pre industrial 1985 2007 - 275 Counting Non CO2 - 345 this is increase almost doubles - 380+ http://www.esrl.noaa.gov/gmd/ccgg/trends/co2_data_mlo.html Degree of climate change - Why is this happening CO2 and temperature linked but does not lead http://www.whrc.org/resources/online_publications/warming_earth/scientific_evidence.htm Degree of climate change – Texas and GHGs 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 A L A R A Z C A C O C T D C D E F L G A H I I A I D I L I N K S K Y L A M A M D M E M I M N M O M S M T N C N D N E N H N J N M N V N Y O H O K O R P A R I S C S D T N T X U T V A V T W A W I W V W Y 2003 State by State Energy related CO2 emissions -- Texas wins Emissions per capita – US wins http://en.wikipedia.org/wiki/Image:GHG_per_capita_2000_no_LUC.svg Emissions share http://www.epa.gov/climatechange/emissions/globalghg.html Degree of climate change – Emissions growing Emissions growing http://www.epa.gov/climatechange/emissions/globalghg.html Size of Potential Emissions Atmosphere 800 PgC (2004) Biomass ~500 PgC N. Gas Oil ~260 PgC ~270 PgC Soils ~1,500 PgC Coal 5,000 to 8,000 PgC Unconventional Fossil Fuels 15,000 to 40,000 PgC Source Jae Edmonds, Joint Global Change Research Institute at the University of Maryland What is projected? Degree of climate change - What is projected Climate models predict increasing emissions will cause a temp increase Source : IPCC AR4t Where we are Degree of climate change - What is projected Hotter Degree of climate change - What is projected • Less water Texas in relatively severely affected area Degree of climate change - What is projected • Very likely that heat waves will be more intense, more frequent and longer lasting • Precipitation generally increases but with general decreases in the subtropics • Precipitation intensity is projected to increase but there would be longer periods between rainfall events. • Tendency for drying of mid-continent during summer, indicating a greater risk of droughts in those regions. • Sea level projected to rise 1999 and 2099 by 0.18 to 0.59 m. • Likely increase in hurricane peak wind intensities - an increase in the numbers of the most intense. • Fewer mid-latitude storms- poleward shift of storm tracks • Atlantic Ocean Meridional Overturning Circulation (MOC) – Gulf Stream will slow down Economic Issues Does this do damage? What do we do about it? Mitigate Adapt Does this do damage? Simulating the future and doing cost benefit analysis Issues Diminished productivity Increased costs Loss in Ag and forest Energy Households Sea shore property Ecology • Welfare Today and in Future Price CS P PS QW US Market • Welfare Today and in Future S’ Price S P’ P Q’ Q • Welfare Today and in Future S’ Price S P’ P Q’ Q • Welfare Today and in Future S’ Price S P’ = a+b+d+e = c+g+f Consumers after Producers after =a = c+b Consumers loss Producers effect = -(b+d+e) = b-(g+f) Social loss = -(d+g+e+f) a b P Consumers before Producers before d e f c g Q’ Q • Empirical work how measure S to S’ shift S’ Price S P’ P Q’ Q Live with it - Agriculture Table 2 National crop sensitivity over all crops giving average yield change in percent to 2030 -- GCM behind Climate Scenario -Hadley Canadian CSIRO REGCM Corn Belt 24.02 18.23 6.05 6.58 Great Plains 25.29 17.28 3.67 4.82 Lake States 43.75 53.03 9.34 11.84 Northeast 9.48 -2.07 2.13 4.45 Rocky Mountains 27.74 19.37 18.27 15.04 Pacific Southwest 17.76 21.44 15.58 15.05 Pacific Northwest 65.42 17.01 17.22 18.30 South Central 13.25 -6.06 -0.71 -0.79 Southeast 10.00 -3.16 3.84 2.40 South West 21.66 14.69 3.38 2.60 National 25.14 16.51 6.02 6.46 Red signifies results below mean Source McCarl work for US National Assessment http://agecon2.tamu.edu/people/faculty/mccarl-bruce/papers/778.pdf Live with it - Agriculture • Consistent losses in the Corn Belt, South Central and Southeast • Mixed but largely negative results in the Southwest. There up to 20% less cropped land McCarl, B.A., "Agricultural Sensitivity to Climatic Change," in The Changing Climate of Texas: Predictability and Implications for the Future, Chapter 15, 179-198, 1995. • Positive results in the Pacific Northwest • Mixed but mostly positive results in the Great Plains, Northeast, Pacific Southwest • Mixed results in the Lake States, and the Rocky Mountains. Live with it – Ecology, Ag, M&I, Water Ha ys A Study of the Effects of Climatic Change on the Texas Edwards Aquifer Region in r cto Vi ia ak Liv eO La Salle iad as rB in x ilco o-W rriz er a C uif Aq les za e iv R l Go s Ba Dimmit n Go er er HAYS San Antonio Ri v Atascosa Frio iv R Lake/Reservoir Springs o ri -F Zavala n o ils W co an Ed Bl eup al er uif Aq s ce ue N rds wa d ua Co m al G Kinney S B an A Bexar n nto ni o Medina asi Uvalde Calhoun Bay COMAL BEXAR KINNEY UVALDE MEDINA Figure Corpus Christi Bay Study Area By Texas Counties Chen, C.C., D. Gillig, and B.A. McCarl, "Effects of Climatic Change on a Water Dependent Regional Economy: A Study of the Texas Edwards Aquifer," Climatic Change, 49, 397-409, 2001. Live with it – Ecology, Ag, M&I, Water Use data for 2030 and 2090 Canadian Climate Center Model (CCC) Hadley Climate Center Model (HAD) Average changes for the 10 year periods Climate Change Scenario HAD 2030 HAD 2090 CCC 2030 CCC 2090 Temperature (0F) 3.20 9.01 5.41 14.61 Precipitation (Inches) -4.10 -0.78 -14.36 -4.56 Live with it – Ecology, Ag, M&I, Water Strongest effects fall on springflow and the Ag sector Shifts in the sectoral water use share from Ag to M&I Decrease in M&I welfare Farm income falls 16-30% under the 2030 scenario and 30-45% under the 2090 scenario. Decrease in Comal springflows by 10-16% under the 2030 scenarios and by 20-24% under 2090 scenarios To maintain Springflow Pumping level decreases 35,000 to 50,000 af ala 2030 scenarios decreases 55,000 to 80,000 af ala 2090 scenarios Substantial economic costs: an additional cost of $0.5 to $2 million per year Live with it – Coastal Example 1 Sea Level and hurricanes Adapt Structural protection Abandonment http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsSLRMapsIndex.html http://www.glo.state.tx.us/coastal/erosion/reimbursement/pdf/Surfside_Beach_historic_shorelines.pdf Live with it – Coastal If small glaciers and polar ice caps on the margins of Greenland and the Antarctic Peninsula melt, the projected rise in sea level will be around 0.5 m. Melting of the Greenland ice sheet would produce 7.2 m of sea-level rise Melting of the Antarctic ice sheet would produce 61.1 m of sea level rise. Collapse of the grounded interior reservoir of the West Antarctic Ice Sheet would raise sea level by 5-6 m http://en.wikipedia.org/wiki/Sea_level_rise#Greenland_contribution http://environment.newscientist.com/channel/earth/mg19526141.600-huge-sea-level-rises-are-coming--unless-we-act-now.html Mitigation If damages are large what do we do Basic issue Market failure Future equity Externality Market failure a market failure is a situation wherein the allocation of production or use of goods and services by the free market is not efficient. Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that can be improved upon from the societal point-of-view. (Wikapedia) Integenerational equity The trustees of endowed institutions are the guardians of the future against the claims of the present. Their task in managing the endowment is to preserve equity among generations (Tobin and Wikapedia) – income distribution between generations Externality An externality is an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interests were not taken into account Classic example of a negative externality: pollution, generated by some productive enterprise, and affecting others who had no choice and were probably not taken into account. . http://economics.about.com/cs/economicsglossary/g/externality.htm Avoid it – GHG Emission Mitigation What are the strategies • Reduce where the emissions are • Fuel standards • Fuel switching • Emissions capture and storage • Conservation – lightbulbs • Lifestyle • Offset from elsewhere • Agriculture • Forestry • Biofuels Avoid it – Ag and Forest Agricultural/Forestry/Biofuel Mitigation Possibilities Strategy Basic Nature CO2 CH4 N2O Crop Mix Alteration Crop Fertilization Alteration Crop Input Alteration Crop Tillage Alteration Grassland Conversion Irrigated /Dry land Mix Emis, Seq Emis, Seq Emission Emission Sequestration Emission X X X X X X Biofuel Production Offset X X X Stocker/Feedlot mix Enteric fermentation Livestock Herd Size Livestock System Change Manure Management Rice Acreage Emission Emission Emission Emission Emission Emission X X X X X X X X X X X Afforestation (not today) Existing timberland Management Deforestation Sequestration Sequestration Emission X X X X X X X X Murray, B.C., A.J. Sommer, B. Depro, B.L. Sohngen, B.A. McCarl, D. Gillig, B. de Angelo, and K. Andrasko, Greenhouse Gas Mitigation Potential in US Forestry and Agriculture, EPA Report 430-R-05-006, November, 2005. http://www.epa.gov/sequestration/pdf/greenhousegas2005.pdf McCarl, B.A., and U.A. Schneider, "The Cost of Greenhouse Gas Mitigation in US Agriculture and Forestry," Science, Volume 294 (21 Dec), 24812482, 2001. Economic Problem Leakage Price P SQU US Market TQWM World Market SQROW Quantity Rest of World Leakage Price P SQU SQU US Market LEAK = 1- TQIT TQIT World Market SQROW - SQROW SQU - SQU Quantity Rest of World SQROW SQROW Adaptation and its inevitability Why Adapt - Inevitability Stabilization level (ppm CO2-eq) Global mean temp. increase at equilibrium (ºC) Year CO2 needs to peak Year CO2 emissions back at 2000 level Reduction in 2050 CO2 emissions compared to 2000 445 – 490 2.0 – 2.4 2000 - 2015 2000- 2030 -85 to -50 490 – 535 2.4 – 2.8 2000 - 2020 2000- 2040 -60 to -30 535 – 590 2.8 – 3.2 2010 - 2030 2020- 2060 -30 to +5 590 – 710 3.2 – 4.0 2020 - 2060 2050- 2100 +10 to +60 800 700 710 – 855 4.0 – 4.9 2050 - 2080 +25 to +85 855 – 1130 4.9 – 6.1 2060 - 2090 +90 to +140 600 500 So now what - actions Plan to adapt Inevitability of future -20 Kyoto Accords Long time to stabilize Precautionary action Develop crop and livestock varieties Pass a price signal GHG trading Induced innovation Harnessing ingenuity Reduce carbon footprint Moral suasion Planning with GHGs in mind Action on mitigation and eligibility Mobilize energy industry So now what - actions Adapt Inevitability of future -20 Kyoto Accords Long time to stabilize Precautionary action Develop crop and livestock varieties Pass a price signal GHG trading Induced innovation Harnessing ingenuity Reduce carbon footprint Moral suasion Planning with GHGs in mind Action on mitigation and eligibility Mobilize energy industry Plan to Adapt Investment to facilitate adaptation •Research •Extension •Capital investment Ag Adaptation •Irrigation •Drought resistant varieties •Tolerant breeds and varieties •Crop and livestock mix •Abandonment McCarl, B.A., Adaptation Options for Agriculture, Forestry and Fisheries, A Report to the UNFCCC Secretariat Financial and Technical Support Division, 2007. http://unfccc.int/files/cooperation_and_support/financial_mechanism/application/pdf/mccarl.pdf The onset and exact effects of climate change are uncertain Mitigation Effects Texas and Bryan is very Vulnerable We will be squeezed Basic Resources Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report - Climate Change 2007: Impacts, Adaptation and Vulnerability, http://www.ipcc.ch/. Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report - Climate Change 2007: Mitigation , http://www.ipcc.ch/. Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report - The Scientific Basis, http://www.ipcc.ch/. Intergovernmental Panel on Climate Change. IPCC Fourth Assessment Report – Synthesis Report, http://www.ipcc.ch/. National Assessment Synthesis Team, US Global Change Research Program , Climate Change Impacts on the United States:The Potential Consequences of Climate Variability and Change Overview: 2000 http://www.usgcrp.gov/usgcrp/Library/nationalassessment/overview.htm National Assessment Synthesis Team, US Global Change Research Program , Climate Change Impacts on the United States:The Potential Consequences of Climate Variability and Change Foundation: 2000 http://www.usgcrp.gov/usgcrp/Library/nationalassessment/foundation.htm http://agecon.tamu.edu/faculty/mccarl/papers.htm