Economic costs of environmental degradation and climate change
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ENV GLOBAL FORUM OCT 2016 - Session 3 - Rob Dellink "The economic consequences of environmental degradation"
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Economic costs of environmental degradation and climate change
- 1. The economic consequences of environmental degradation Joint work with Elisa Lanzi, Jean Chateau and others Paris, 24 October 2016 Rob Dellink OECD Environment Directorate
- 2. CIRCLE: Costs of Inaction and Resource scarcity: Consequences for Long-term Economic growth Calculating the costs of inaction: – Quantify how changes in environmental quality, climate change, natural resources affect the economy, and prospects for long-term growth Regional and sectoral quantitative approach where possible, coupled with more general insights where needed – Market impacts: production function approach – Non-market impacts: valuation approach 2 The OECD CIRCLE project
- 3. CIRCLE methodology 3 Economic model Projects sectoral and regional economic activity, and projects corresponding environmental pressure (such as emissions) Environmental model Links environmental pressure to indicators of the state of the environment (such as temperature change, pollutant concentrations, ...) Impact models Links environmental indicators to (sectoral) biophysical impacts (such as changes in crop yields or incidence of illness) Assessment of economic consequences Links biophysical impacts to changes in economic variables (such as changes in productivity of production factors)
- 4. CIRCLE project themes Climate change Air pollution Land-water-energy nexus Water Biodiversity and ecosystems Resource scarcity 4 Report published in November 2015 Report published in June 2016 Report to be published early 2017 Review paper published in 2016 Review paper published in 2015 Report on critical materials published in 2015; further work planned for the next biennium
- 6. 6 Regional cost of selected climate impacts Uncertainty ranges in 2060 dueto uncertainty in ECS -7% -6% -5% -4% -3% -2% -1% 0% 2010 2020 2030 2040 2050 2060 -South & South East Asia OECD Pacific Rest of Europe & Asia OECD Europe Latin America OECD America World -Sub Saharan Africa Middle East & North Africa Source: OECD (2016), The Economic Consequences of Climate Change
- 7. 7 Global importance of different impacts Global GDP loss: 2035: 0.3-1.0% Source: OECD (2016), The Economic Consequences of Climate Change Agriculture Coastal Zones Energy Demand Extreme Precipitation Events Health Tourism Demand Global damages 2060 Agriculture Coastal Zones Energy Demand Extreme Precipitation Events Health Tourism Demand Global damages 2035 2060: 1.0-3.3%
- 8. 8 Long-term damages -14% -12% -10% -8% -6% -4% -2% 0% 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 Likely uncertainty range - central projection until 2100 Likely uncertainty range - central projection until 2060 Central projection until 2100 Central projection until 2060 Weitzman damage function -14% -12% -10% -8% -6% -4% -2% 0% 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 Likely uncertainty range - central projection until 2100 Likely uncertainty range - central projection until 2060 Central projection until 2100 Central projection until 2060 (Committed by 2060) Weitzman damage function -14% -12% -10% -8% -6% -4% -2% 0% 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 Likely uncertainty range - central projection until 2100 Likely uncertainty range - central projection until 2060 Central projection until 2100 Central projection until 2060 (Committed by 2060) Weitzman damage function Source: OECD (2016), The Economic Consequences of Climate Change
- 9. 9 Other important consequences OECD country Current climate 2050 Mortality (thousands) Costs (billion USD) Mortality (thousands) Costs (billion USD) Canada 1 3 8 23 Chile 0 0 1 4 Mexico 1 4 12 36 USA 11 2 63 27 EU large 4 11 34 66 197 Other OECD EU 8 17 44 104 Other OECD 1 4 13 39 Aus. & New Z. 1 2 3 9 Japan 3 8 10 30 Korea 1 2 6 17 OECD total 38 75 226 487 RCP6.0 RCP8.5 Most OECD countries 0.5 1.1 Chile 0.3 0.6 Mexico 0.4 0.9 Non-OECD EU 0.3 0.7 Brazil 0.1 0.2 Russia 0.2 0.4 India 0.0 0.1 Indonesia 0.0 0.1 China 0.2 0.5 South Africa 0.4 0.8 Other regions 0.0-0.1 0.0-0.3 …and many more that could not be quantified! Urban flood damages Premature deaths from heat stress Loss of biodiversity and ecosystems Tipping points OECD country Current climate 2050 Mortality (thousands) Costs (billion USD) Mortality (thousands) Costs (billion USD) Canada 1 3 8 23 Chile 0 0 1 4 Mexico 1 4 12 36 USA 11 2 63 27 EU large 4 11 34 66 197 Other OECD EU 8 17 44 104 Other OECD 1 4 13 39 Aus. & New Z. 1 2 3 9 Japan 3 8 10 30 Korea 1 2 6 17 OECD total 38 75 226 487 RCP6.0 RCP8.5 Most OECD countries 0.5 1.1 Chile 0.3 0.6 Mexico 0.4 0.9 Non-OECD EU 0.3 0.7 Brazil 0.1 0.2 Russia 0.2 0.4 India 0.0 0.1 Indonesia 0.0 0.1 China 0.2 0.5 South Africa 0.4 0.8 Other regions 0.0-0.1 0.0-0.3 Source: OECD (2016), The Economic Consequences of Climate Change
- 11. 11 Disutility of illness Mortality Market costs Direct costs Indirect costs Labour productivity Health expenditures Direct costs Indirect costs Agricultural yields Direct costs Indirect costs Non-marketcosts Health costs Types of air pollution costs
- 12. Annual average total anthropogenic PM2.5 (µg/m3) Concentrations calculated with TM5-FASST (EU JRC Ispra) 12 Concentrations of air pollutants 2060 201020302060
- 13. 13 Numberofdeathsperyearpermillionpeople,2060 Premature deaths 2010: 3 million Premature deaths caused by outdoor air pollution Projection 2060: 6 – 9 million
- 14. 14 (GDP percentage change wrt no-feedback baseline, 2060) -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% Canada Chile Mexico USA EUlarge4 OtherOECDEU OtherOECD Aus.&NewZ. Japan Korea China Non-OECDEU Russia Caspianregion OtherEurope Brazil OtherLat.Am. MiddleEast NorthAfrica ASEAN9 Indonesia India OtherAsia SouthAfrica OtherAfrica World OECD America OECD Europe OECD Pacific Rest of Europe & Asia Latin America Middle East & North Africa South and South-East Asia Sub Saharan Africa Interaction effects Agriculture Labour productivity Health Expenditures -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% Canada Chile Mexico USA EUlarge4 OtherOECDEU OtherOECD Aus.&NewZ. Japan Korea China Non-OECDEU Russia Caspianregion OtherEurope Brazil OtherLat.Am. MiddleEast NorthAfrica ASEAN9 Indonesia India OtherAsia SouthAfrica OtherAfrica World OECD America OECD Europe OECD Pacific Rest of Europe & Asia Latin America Middle East & North Africa South and South-East Asia Sub Saharan Africa Interaction effects Agriculture Labour productivity Health Expenditures -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% Canada Chile Mexico USA EUlarge4 OtherOECDEU OtherOECD Aus.&NewZ. Japan Korea China Non-OECDEU Russia Caspianregion OtherEurope Brazil OtherLat.Am. MiddleEast NorthAfrica ASEAN9 Indonesia India OtherAsia SouthAfrica OtherAfrica World OECD America OECD Europe OECD Pacific Rest of Europe & Asia Latin America Middle East & North Africa South and South-East Asia Sub Saharan Africa Interaction effects Agriculture Labour productivity Health Expenditures Projected market costs of outdoor air pollution, 2060
- 15. Market and non-market costs 15 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 0 3,500 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 Billions of USD, 2010 PPP exchange rates Market costs (direct) Market costs (indirect) Non-market costs (lower estimate) Non-market costs (higher estimate) Market costs Non-market costs 0 35,000 Source: OECD (2016), The Economic Consequences of Outdoor Air Pollution
- 17. 17 The land-water-energy nexus EnergyLand Energy securityFood security Water security Energy Water Water Agriculture Policy objectives (III) Economic activities (II) Resources (I) Socioeconomic drivers Climate change Welfare Env. quality Policies
- 19. THANK YOU! For more information: www.oecd.org/environment/CIRCLE.htm www.oecd.org/environment/modelling rob.dellink@oecd.org