Climate Change Economics

This report examines adaptation and mitigation within an integrated framework. Global and regional costs of adaptation are assessed dynamically and the resulting benefits are quantified. This is accomplished by developing a framework to incorporate adaptation as a policy variable within three Integrated Assessment Models (IAMs); the global Dynamic Integrated model of Climate and the Economy (DICE), the Regional Integrated model of Climate and the Economy (RICE), and the World Induced Technical Change Hybrid (WITCH) model. The framework developed here takes into account investments in reactive adaptation and in adaptation "stocks", as well as investments in building adaptive capacity. This report presents the first inter-model comparison of results on adaptation costs using the emerging category of adaptation-IAMs. Results show that least-cost policy response to climate change will need to involve subsantial amounts of mitigation efforts, investments in adaptation stock, reactive adaptation measures and adaptive capacity to limit the remaining damages.

The effects of climate change on marine fisheries can be either mitigated by global action on greenhouse gas emission, or managed by encouraging appropriate adaptation. While fishers will autonomously adjust their activities in response to climate change, fisheries management systems may also need to be changed to facilitate adjustment. Identifying the scope of these management changes require some understanding of the impacts of climate change in the absence of any management changes. In this paper, we estimate the climate-related economic impact on Australian marine fisheries and associated sectors for the year 2030, ceteris paribus, based on expected biophysical changes to the resource and using an Input-Output model to capture impacts on the broader economy. Despite considerable uncertainties surrounding potential changes to the biological productivity of capture fisheries, the results suggest that most Australian fisheries and their related sectors could benefit from climate change. Appropriate adaptations could further enhance the benefits and reduce the losses to the fisheries investigated.

Adaptation to climate change has become an important policy question in recent years. Agriculture is an economic activity that is most sensitive to climate change. We evaluate the dynamic effects of productivity change and individual efforts to adapt to climate change. Adaptation actions in agriculture are evaluated to determine how the climate affects production efficiency. In this paper, we use the bi-directional distance function method to measure Japanese rice production loss due to climate. We find that (1) accumulated precipitation has the greatest effect on rice production efficiency and (2) the climate effect on rice production efficiency decreases over time. Our results empirically support the benefit of the adaptation approach.

This paper uses two different sources of data to investigate the association between the business cycle — measured with unemployment rates — and public concern about climate change. Building on recent research that finds internet search terms to be useful predictors of health epidemics and economic activity, we find that an increase in a state's unemployment rate decreases Google searches for "global warming" and increases searches for "unemployment," and that the effect differs according to a state's political ideology. From national surveys, we find that an increase in a state's unemployment rate is associated with a decrease in the probability that residents think global warming is happening and reduced support for the U.S. to target policies intended to mitigate climate change. We also examine how socio-demographic characteristics affect opinions about whether climate change is happening and whether government should take action. Beyond providing the first empirical estimates of macroeconomic effects on concern about climate change, we discuss the results in terms of the potential impact on environmental policy and understanding the full cost of recessions.