Michael Hanemann University of California, Berkeley Guido Franco California Energy Commission California Climate Action Team March 11, 2009 Sacramento

 Economic researchers worked very closely with the physical scientists conducting the impacts studies.  Most studies consider two emissions scenarios: ◦ A2 (business as usual emissions) ◦ B1 (low emission scenario)  Emissions scenarios run through up to six global climate models. 2

 Existing economic literature contains a wide divergence in estimates of impact.  A complicating factor is the sheer complexity of interactions between crop growth and temperature, CO2, ET, pests, weeds & ozone.  For California agriculture, the primary driver is likely to be the effect of temperature on crop yield, including extreme temperature events. The second driver is water availability and cost. Energy cost may also become important. 3

4 Climate Scenario A23.0>3.0 B11.5>1.5 Scenario A2 estimates from Howitt et al. (2008). Scenario B1 estimates are 50 percent of the A2 estimates based on Hanemann et al. (2008). Estimates include crop substitution in response to changing conditions over time, but exclude impacts on livestock. Estimates also do not consider impacts due to sustained increases in ozone levels, or expanded ranges of pests and crop diseases.

 Warming would increase tree growth.  Declining snowpack and drought stress could reduce tree growth.  Complex shifts in species range: some reduction in species range, but also shift to higher value species in some northern Sierra locations.  Global timber prices could increase less than baseline with climate change.  Increased forest fires reduce timber yield. 5

6 Climate Scenario Impact A2Timber Forest Fires -0.4 to to to to 213 B1Timber Forest Fires to to to to 169 Negative numbers represent gains. Estimates from Hannah et al., (2008) Estimates do not include impacts from expanded ranges of pests or disease. Forest fires costs only reflect potential impacts on housing units.

 Warming reduces California’s effective water supply. Reduced storage in snow pack, earlier snowmelt, less surface water supply during growing season.  Economic impact depends crucially on institutional & economic adaptation to shift water from lower value agricultural crops to higher value crops and urban uses.  Population growth per se is a greater stress than climate change for urban water. Reduction in per capita urban use would mitigate this.  Non-climate sensitive supplies (wastewater re-use, desalination, and conservation) become increasingly important for urban areas. 7

8 Climate Scenario Impact A2Water supply Delta failure <0.16 >14 <0.4 >>14 B1Water supply Delta failure<7 <0.14 <14 Water supply impacts assume perfect foresight and adaptation. Delta failure costs include emergency response and repair costs, and damages to agriculture, infrastructure, property, public services and recreation. Estimates do not include potential losses due to increased inland flooding.

 Sea level rise exacerbates existing coastal flood risks.  A wide range of critical infrastructure also at increased risk ( e.g., roads, hospitals, schools, emergency facilities, wastewater treatment plants, power plants )  Large areas of wetlands and other natural ecosystems at increased risk.  Large sections of the Pacific coast are not vulnerable to flooding, but are highly susceptible to erosion.  Significant beach loss and impact on beach recreation in Southern California. 9

10 Climate ScenarioImpact A2Flooding: San Francisco Bay Flooding: Open coast Southern Recreation 36 < to > 0.08 B1Flooding: San Francisco Bay Flooding: Open coast Southern Recreation< <0.08 The estimates for flooding in the San Francisco Bay come from Table 22 in Heberger et al. (2008). The open coast flooding estimate for 2085 comes from Table 21 in Heberger et al Pendleton et al., report a total cost of about ~$0.08 billion/year for 1 meter (3.3 ft) sea-level rise. To extrapolate this number, this analysis assumed that in 2050 sea level would always be below 1 meter (3.3 feet) for both the A2 and B1 scenarios. At the end of this century, sea-level rise would be higher than 1 meter for the A2 scenario and lower than 1 meter for the B1 scenario. Flooding estimates do not include potential costs of accelerated erosion, damage to infrastructure, or environmental impacts.

 Warming reduces the need for winter heating, but raises need for summer cooling; net effect is likely to be increase in energy use and peak capacity needs.  Extreme temperature events can adversely impact energy supply.  Reduced snowpack storage adversely impacts hydropower generation. 11

12 Climate ScenarioImpact A2Electricity demand Generation B1Electricity demand Generation <1 Negative numbers represent cost reductions. Estimates do not include potential increases in electricity demand for additional urban or agriculture groundwater pumping or desalination in response to reduced surface water deliveries. Nor do they reflect any changes in the price for electricity.

 Climate change leads to ozone increases in SF Bay Area, Sacramento Valley, San Joaquin Valley and South Coast.  By 2050, may offset achievements of existing control programs for air pollutant emissions.  Additional reductions of 900 tons per day of reactive organic gases emissions and 500 tons per day of NOX emissions, in excess of 2007 State Implementation Plan (SIP) requirements, would be needed in these four regions.  Climate change may also increase ambient levels of particulate matter in California. 13

 Climate change leads to shifts in vegetation and loss of habitat.  However, with a carbon market, carbon sequestration has an economic value and this may encourage some types of habitat and ecosystem preservation. The effects depends on the price of carbon and other legal and institutional considerations. 14

15 Climate Scenario A2-2.3 to to 22 B1-2.5 to 13-8 to 11.8 Estimates from Shaw et al. (2008) include value of changes in carbon stock in forested ecosystems. Negative numbers are gains.

 Adverse economic impact on the ski industry due to the loss of snowpack.  Impacts of climate-change induced shifts in marine ecosystems and their consequences for California’s recreational and commercial fishing industries.  Effects of extreme weather events on the transportation and construction sectors.  No estimates are as yet available for California on climate change impacts on the small business sector.  Other ecological services 16

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