The economics of climate change in agriculture

This paper presents a conceptual frameworkof the impact of climate change onagriculture. It assumes that climatechange will result in a fertilizationeffect and a shift of agro-ecologicalconditions away from the Equator towardsthe Poles. The agro-ecological shift islikely to reduce yield because of reducedacreage and the fertilization effect willincrease yield. The aggregate effectdepends on whichever of the two dominates. The overall effect of climate change may beless significant than its distributionaleffects and the results are consistentwith previous empirical studies. Theimpact of climate change depends on itspace. Faster changes in climate willresult in higher cost. The assessment ofthe cost has to consider that climatechange is a dynamic phenomenon that mayrequire continuous adjustment. Environmental regulation that emphasizesconservation may increase cost ofadjustment and environmental policiesshould emphasize adaptation andflexibility.     

Environmental policy with collective waste disposal

Centralized collection and disposal is an integral component of waste management strategies for many solid and liquid wastes, and carbon capture and storage is currently being considered for gaseous waste. In this paper we show how collective waste disposal systems introduce essential changes in the design of optimal environmental policy. Absent collective disposal, an optimal environmental policy imposes relatively stringent regulations on polluters in regions where local environmental damage functions are “high”; however, under collective waste disposal, the optimal environmental policy level increases monotonically over distance from the disposal site, and this is true irrespective of the degree of spatial heterogeneity in local environmental damage functions. We characterize the optimal spatial pattern of environmental policy levels under collective waste disposal and identify optimal membership size for waste disposal networks comprised of homogeneous producers.     

Potential Economic Impacts of Environmental Flows Following a Possible Listing of Endangered Texas Freshwater Mussels

Texas water resources, already taxed by drought and population growth, could be further stressed by possible listings of endangered aquatic species. This study estimated potential economic impacts of environmental flows (EFs) for five freshwater unionid mussels in three Central Texas basins (Brazos, Colorado, and Guadalupe‐San Antonio Rivers) that encompass 36% of Texas (~246,000 km²). A water availability model projected reductions in water supply to power, commercial and industrial, municipal, and agriculture sectors in response to possible EFs for mussels. Single‐year economic impacts were calculated using publicly available data with and without water transfers. Benefits of EFs should also be assessed, should critical habitat be proposed. Potential economic losses were highest during droughts, but were nominal (<$1 M) in wetter years — even with high EFs. Reduced supplies to San Antonio area power plants caused worst‐case impacts of a single‐year shutdown up to $107 million (M) during drought with high EFs. For other sectors in the study area, water transfers reduced worst‐case losses from $80 to $11 M per year. Implementing innovative water management strategies such as water markets, conjunctive use of surface water and groundwater, aquifer storage and recovery could mitigate economic impacts if mussels — or other widely distributed aquatic species — were listed. However, approaches for defining EFs and strategies for mitigating economic impacts of EFs are needed.