Characterizing regional economic impacts and responses to climate change

Abstract

While much progress has been made in recent years in modeling the impacts of greenhouse gases on global climate and impacts of global climate change on regional climates, much less progress has been made in modeling economic impacts and responses to climate change, particularly at a regional level. This lack of progress is due, in large part, to the fact that there is no generally accepted framework for characterizing the regional economic impacts of, and responses to, climate change. The objective of this paper is to make a start at such a framework. We divide economic impacts at a regional level into four broad categories: direct impacts on production of market goods and services; direct impacts on production of nonmarket goods and services; indirect impacts on other economic sectors within the region; and indirect impacts operating through other regions and countries. We go on to consider two modeling frameworks for responses to climate change: static, in which regional capital stocks, technologies, and public and private institutions are exogenous; and dynamic, in which these variables are endogenous. Dynamic responses in capital stocks, technologies, and institutions are likely to be the most important adaptations to climate change and its effects on ecosystems, but also the least well understood at the present time.