Assessment of the economic cascading effect on future climate change in China: Evidence from agricultural direct damage

Abstract

The agricultural sector is extremely vulnerable to climate change and also plays a very important role in the operation of the entire economic system, leading many studies to evaluate the possible agricultural direct economic damage (ADED) of climate change. However, this damage may have an amplification impact through the intricate industrial linkages that exist among sectors, and this impact may be even greater than the original damage. Therefore, to elucidate the economic cascading effect (ECE) in China caused by ADED and industrial linkage, this paper used the ARIO model to evaluate the total ECE and analyse the differences in the 19 sectors by taking the ADED under future annual mean temperature (AMT) increases of 1–5 °C as the input condition and adjusting the exogenous parameters to enhance the adaptability of the model; the goal was to assess the economic impact of climate change in China. The results show that (i) there is a significant amplifying impact of ECE due to industrial linkage under the influence of warming, ECE will be 4.24–5.25 times that of ADED, and the total economic impact (ADED + ECE) will exceed the GDP of the Chinese capital of Beijing in 2012 when the AMT increases by 1.5 °C, while it will exceed one tenth of China’s GDP when it increases by 4 °C. (ii) Manufacturing will be the sector most affected by the industrial linkage under ADED, which accounts for 26.58% of total ECE, followed by agriculture (10.39%) and construction (8.5%). (iii) The decrease in cultivated land area will have a significant impact on the economy; when it is reduced to the minimum demand (1.41% less than 2012), ADED increases by 1.65 times and ECE increases by 2.35 times. This paper aims to provide a new perspective from which to evaluate the economic impact of climate change by studying ECEs behind sectoral interactions.