Analysis of methods and models for assessing the direct and indirect economic impacts of CO/sub 2/-induced environmental changes in the agricultural sector of the US economy

Abstract

This research was conducted by the Pacific Northwest Laboratory (PNL) for the Division of Carbon Dioxide Research within the Office of Basic Energy Sciences, U.S. Department of Energy (DOE). The overall purpose of this research was to assist DOE in developing methods for assessing the direct and indirect economic impacts due to the effects of increases in the ambient concentration of CO 2 on agricultural production. Specifically, the primary obj ec t i ves were:• To determine what economic methods and models have been developed or need to be developed to assess the direct and indirect economic impacts of CO 2 -induced environmental changes in the agricultural sector of the U.S. economy .• To provide information and recommendations which will enhance DOE's efforts to assess the direct and indirect economic impacts associated with CO 2 buildup, not only as they relate to the agricultural sector, but to other sectors of the U.S. economy as well.Several tasks were required to accomplish these objectives. First, a comprehensive literature search was undertaken to determine what types of models and methods have been developed, which could be effectively used to conduct assessments of the direct and indirect economic impacts of CO 2 buildup. Specific attention was focused upon: (1) models and methods for assessing the physical impacts of CO 2 -induced environmental changes on crop yields, (2) national and multi-regional agricultural sector models, and (3) macroeconomic models of the U.S. economy. The second task of this. research involved a thorough investigation of the research efforts being conducted by other public and private sector organizations in order to determine how more recent analytical methods being developed outside of DOE could be effectively integrated into a more comprehensive analysis of the direct economic impacts of CO 2 buildup. The third and final task of this research involved iii synthesizing the information gathered in the first two tasks into a systematic framework for assessing the direct and indirect economic impacts of Co 2 -induced environmental changes originating in the agricultural sector of the U.S. economy.The major findings of this research are listed below.• It is anticipated that the direct economic impacts of CO 2 on the agricultural sector and the indirect economic impacts caused by spillover effects from agriculture to other sectors of the economy will be pervasive; however, the direction and magnitude of these impacts on producers and consumers cannot be determined a priori.• Existing agricultural sector models can be effectively linked to macroeconomic models of the U.S. economy to assess the potential scope and magnitude of the economic impacts associated with CO 2 -induced environmental changes that originate in the agricultural sector.• Because of the time frame involved, it is highly unlikely that any type of economic analysis will be able to predict these impacts with any reliable degree of confidence at this time; however, existing models and methods can be used at this t...

Spatial Approaches to Panel Data in Agricultural Economics: A Climate Change Application

“…Much of the early literature estimating the effect of climate change on agriculture takes an agronomic or production function approach that uses detailed crop growth models to simulate how different crop yields will respond to changes in climate. Articles using this methodology include Callaway et al (1982), Adams et al (1988Adams et al ( , 1990Adams et al ( , 1995, Adams (1989), Rozenzweig andParry (1994), andRind et al (2002). Good surveys of the earlier work are cited in Mendelsohn, Nordhaus, and Shaw (1994) and include the National Research Council (1983), Smith and Tirpak (1989), and Cline (1992).…”

Consequences of climatic change for the human environment

“…Titus 1988), agriculture (Parry et al 1988a, b), and whole regions (Smith & Tirpak 1988), have recognized these feedbacks. A fully inte-' CVe acknowledge the difficulty of technological forecasting, but think that carefully-thought-out technological scenarios must a t least be attempted grated approach that also recognizes interactions between sectors was proposed by Callaway et al (1982), was partially implemented by Parry et al (1988a, b) for agriculture m some reglons, and is now being implemented for a single region in a Department of Energy (DOE)-sponsored study of the effects of climate change . Without a truly coordinated national or international program in climate impact assessment, most of the studies have focused on particular aspects of individual resource sectors in individual regions (e.g.…”

“…For example, Flaschka et al (1987) studied the response to climatic change of the Great Basin, while Idso & Braze1 (1984) and Callaway & Currie (1985) studied basins in the Lower Colorado region. Linder & Gibbs (1986) analyzed how electric utilities in New York State could be affected by climate change.…”

Forecasting the impact of climate on food systems: Model testing and model linkage

“…Evaluation of crop-climate models is also undertaken by Calloway et al, (1982), but still without specific or quantitative comparisons of model behavior or predictability. Katz (1979) performs some sensitivity analysis of statistical crop-weather models.…”

“…Simulation or dynamic models are more appropriate for long range forecasting especially where the relations between climate variables, and the form of economic structures, may change over the forecast period, making the fixed coefficients of input-output models inappropriate. Calloway et al, (1982) review the possible economic impacts of a carbon dioxide induced climate change in the agricultural sector. Their study has no quantitative results but provides a good review of the yield and economic models which might be used in an assessment.…”