Public Release: 

Regional Model Key To Economic Impact Of Climate Change

Penn State

Philadelphia, Pa. -- Economists must look at the regional, not just the national or global picture, when assessing the effects of global climate change on the economy, according to Penn State economists.

"Changes in climate will vary significantly by region," says Dr. David Abler, associate professor of agricultural economics. "Adaptation and mitigation possibilities will also vary."

Many important decisions will be made at a local or regional level. he notes, and specific attributes of local economies will be key in understanding the situation and planning for the future.

"If, for example, North America warms, the northern United States and Canada could become more productive grain producers than the traditional U.S. grain belt, but only a regional assessment would show this," says Abler. "On a continental scale, the loss of productivity in the U.S. plains would be offset by the increase in productivity further north."

The process of averaging economic impats across regions covers up extremes so that the net effect can appear minimal. However, on a regional basis, communities could greatly benefit from climate change or suffer economic setbacks.

"Economists try very hard to get climate into their models," Abler told attendees today (Feb. 17) at the annual meeting of the American Association for the Advancement of Science. "Complex climate models coupled to economic models must be able to see individual regions, their internal resources and their interactions with the rest of the nation and the world." The researchers, who include Abler; Dr. James Shortle, professor of agricultural economics; Dr. Adam Rose, professor and head of the department of energy, environmental and mineral economics; and Rajnish Kamat and Gbadebo Oladosu, Ph.D. students in energy, environmental and mineral economics, are using a regional economic model of the Susquehanna River Basin in Pennsylvania to assess the economic impact of global warming.

A 1 percent decrease in productivity in five economic sectors -- agriculture and forestry, mining and construction, coal mining, oil and natural gas production and transport, communications and other utilities -- would have minimal effects on the economy as a whole.

"The overall economic impacts of productivity losses in the Susquehanna River Basin due to climate change are likely to be minimal, but some sectors could be significantly affected," says Abler.

The worst hit sector would be coal mining, with about a 33 percent reduction in production and employment. Next hardest hit would be oil and gas production with a 9 to 11 percent decrease in production and employment.

An increase in losses of buildings, roads and other infrastructure from severe weather events, might actually be economically beneficial due to a building boom after disaster struck, but, while this may be economically positive, it is not necessarily an improvement on the quality of life.

Also, a 1 percent loss in work time due to risks from new and recurring diseases in a warmer climate would cause only modest economic losses, but quality of life could suffer more than the economy. Abler notes that there should also be a greater capacity to prevent and treat diseases in the future.

Another consideration important for modeling the Susquehanna River Basin is that the economy itself is shifting away from agriculture, forestry and mining and, in the process, is becoming less sensitive to climate change. Also, warming could open up the area for increased recreation and outdoor activities.

However, Abler cautions that predicting the future is always difficult.

"One problem with long-term economic modeling, is we don't know for certain what the economic make-up of a region will be in 20 years or what new technologies will be developed," says Abler. "For example, no one in 1978 would have suggested that today there would be a personal computer on every desk, but now that industry accounts for billions of dollars in sales every year and is an integral part of our economy."

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EDITORS: Dr. Abler may be reached at 814-863-8630 or D-Abler@psu.edu by email.

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