Abstract
The potential impacts of sea level rise (SLR) due to climate change have been widely studied in the literature. However, the uncertainty and robustness of these estimates has seldom been explored. Here we assess the model input uncertainty regarding the wide effects of SLR on marine navigation from a global economic perspective. We systematically assess the robustness of computable general equilibrium (CGE) estimates to model’s inputs uncertainty. Monte Carlo (MC) and Gaussian quadrature (GQ) methods are used for conducting a Systematic sensitivity analysis (SSA). This design allows to both explore the sensitivity of the CGE model and to compare the MC and GQ methods. Results show that, regardless whether triangular or piecewise linear Probability distributions are used, the welfare losses are higher in the MC SSA than in the original deterministic simulation. This indicates that the CGE economic literature has potentially underestimated the total economic effects of SLR, thus stressing the necessity of SSA when simulating the general equilibrium effects of SLR. The uncertainty decomposition shows that land losses have a smaller effect compared to capital and seaport productivity losses. Capital losses seem to affect the developed regions GDP more than the productivity losses do. Moreover, we show the uncertainty decomposition of the MC results and discuss the convergence of the MC results for a decomposed version of the CGE model. This paper aims to provide standardised guidelines for stochastic simulation in the context of CGE modelling that could be useful for researchers in similar settings.
Highlights
Sea-level rise (SLR) is one of the most studied impacts of climate change within the environmental economics literature
We focus on just two results of the computable general equilibrium (CGE) model, namely the Hicksian equivalent variation (HEV) and the percentage change of regional GDP
The HEV can be thought of as the dollar amount that the consumer would be indifferent about accepting in lieu of the shock caused by, in our case SLR; it is negative if the consumer would be worse off after the shock due to SLR (MasColell et al 1995)
Summary
Sea-level rise (SLR) is one of the most studied impacts of climate change within the environmental economics literature. Researchers have used, among other methods, computable general equilibrium (CGE) models to assess the wider economic implications of SLR for a number of different climate change scenarios (Bosello et al 2007, 2012a, b; Darwin and Tol 2001; Deke et al 2001). An extension to the aforementioned models includes the assessment of the broader economic impacts of SLR-induced coastal land and capital losses and their effect on sea transportation networks (Chatzivasileiadis et al 2016). Climate change-induced transportation disruptions, through productivity losses in sea transport, can have a substantial effect on the global economy. Based on the IPCC RCP8.5 scenario, Chatzivasileiadis et al (2016) show that climate change-induced transportation disruptions including coastal land and capital losses, could causes global welfare losses of circa USD 61 billion in 2050
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