Joel Smith

Adapting to Climate Change: A Call for Federal Leadership

April 2010

BY:

Joel B. Smith, Stratus Consulting, Inc.
Jason M. Vogel, Stratus Consulting, Inc.
Terri L. Cruce
Stephen Seidel, Pew Center on Global Climate Change
Heather A. Holsinger, Pew Center on Global Climate Change

This report highlights the important role of the federal government in reducing the vulnerability and strengthening the resiliency of our economy and natural resources in the face of these changes. In addition to managing a significant amount of land and infrastructure that will be affected by climate change, the federal government is uniquely positioned to provide the necessary leadership, guidance, information, and resources. While many efforts to adapt to climate change will occur at the state and local level, the federal government is a critical player in an effective and coordinated approach to climate change adaptation in the United States.

Drawing on the expertise of local, state, federal, and international leaders in this area, the authors provide concrete proposals for “mainstreaming” climate change adaptation within and across the federal government. They recommend three key components to create a new national adaptation program in the United States:

• A Strategic Planning Initiative to provide the overarching goals, objectives, and priorities for the program. 
• A National Climate Service to provide stakeholders with much needed information on climate change impacts and adaptation options.
• An Adaptation Research Program to ensure that appropriate emphasis is placed on adaptation research as part of the larger federal climate research effort.

Additional Adaptation Content

• Adaptation Workshop - July 27, 2010
  Federal Government Leadership: Mainstreaming Adaptation to Climate Change
• Climate Compass Blog Post: Mainstreaming Climate Change Adaptation Across the Federal Government
• ClimateWire: Pew Center Study Calls for a National Plan to Coordinate Adaptation to Climate (subscription required)
• Adaptation Resources Page

To order a FREE copy of this or any other Pew Center report, please email reportorder@c2es.org with your name, mailing address, and requested report title(s).

Adaptation to Climate Change: International Policy Options

Prepared for the Pew Center on Global Climate Change
November 2006

By:
Ian Burton, University of Toronto
Elliot Diringer, Pew Center on Global Climate Change
Joel Smith, Stratus Consulting Inc.

This report examines options for future international efforts to help vulnerable countries adapt to the impacts of climate change both within and outside the climate framework. Options outlined in the report include stronger funding and action under the UN Framework Convention on Climate Change, mandatory climate risk assessments for multilateral development finance, and donor country support for climate "insurance" in vulnerable countries.

Press release

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Introduction

From its inception, the international climate effort has focused predominantly on mitigation—reducing greenhouse gas (GHG) emissions to prevent dangerous climate change. The next stage of the international effort must deal squarely with adaptation—coping with those impacts that cannot be avoided. This is both a matter of need, as climate change is now underway, and a matter of equity, as its impacts fall disproportionately on those least able to bear them. It also may be a condition for further progress on mitigation. Indeed, substantial new mitigation commitments post-2012 may be politically feasible only if accompanied by stronger support for adaptation.

Ambitious mitigation efforts can lessen, but not prevent, future climate change. While steep reductions in emissions could stabilize atmospheric GHG concentrations at lower levels than under “business as usual,” they likely would be well above current, let alone pre-industrial, levels.² With higher concentrations will come further rises in temperatures and sea level, changes in precipitation, and more extreme weather. The early impacts of climate change already are being felt worldwide.³ Future impacts will affect a broad array of human and natural systems, with consequences for human health, food and fiber production, water supplies, and many other areas vital to economic and social well being. While certain impacts may in the nearer term prove beneficial to some, in the long term, the effects will be largely detrimental.⁴

Anticipating and adapting to these impacts in order to minimize their human and environmental toll is a significant challenge for all nations. Meeting it requires action at multiple levels, from the local to the international, within both public and private spheres. This paper explores one critical dimension of this multifaceted challenge—how adaptation can be best promoted and facilitated through future multilateral efforts.

Among the many issues confronting governments, two are especially daunting. The first is equity and its relation to cost. Difficult questions of fairness suffuse the climate debate but are particularly stark in the case of adaptation: those most vulnerable to climate change are the ones least responsible for it. Stronger international adaptation efforts—whatever form they might take, and whether understood as assistance or as compensation—will be possible, let alone effective, only insofar as affluent countries are prepared to commit resources. This is a question not of policy design but, rather, of negotiation and political will. Second, reliable information and relevant experience are in short supply. Relative to mitigation, the adaptation challenge is much less well understood—needs as well as solutions. A high priority in the near term is strengthening the knowledge base with better data and modeling to refine projections of future impacts, and with early insights from the field on the most effective responses.

It is at the same time essential to begin considering how future international efforts can best be structured. This paper examines underlying issues and lays out an array of possibilities. To set the issue in context, it looks first at the history and evolving nature of human adaptation to climate. It then highlights key issues in the design of adaptation policy, and summarizes and assesses international adaptation efforts to date. Finally, the paper outlines three broad and potentially complementary approaches to future international efforts:

• Adaptation Under the UNFCCC—Initiating new steps under the UN Framework Convention on Climate Change (UNFCCC) to facilitate comprehensive national adaptation strategies and to provide reliable assistance for high-priority implementation projects.
• Integration with Development—Integrating adaptation across the full range of development-related assistance through measures such as mandatory climate risk assessments for projects financed with bilateral or multilateral support.
• Climate “Insurance”—Committing stable funding for an international response fund or to support insurance-type approaches covering climate-related losses and promoting proactive adaptation in vulnerable countries.

1. This report was prepared initially as input to the Climate Dialogue at Pocantico convened by the PewCenterin 2004-5, and in its final form reflects contributions from the dialogue. The Pocantico dialogue brought together 25 senior policymakers and stakeholders from 15 countries to recommend options for advancing the international climate change effort beyond 2012. The group’s report is available at: /global-warming-in-depth/all_reports/climate_dialogue_at_ pocantico/index.cfm.

2. Metz et al. (2001).

3. Parmesan, C. and G. Yohe (2003); Root, T. L. et al. (2003); Stott et al. (2004).

4. McCarthy et al. (2001).

Coping with Global Climate Change: The Role of Adaptation in the United States

Prepared for the Pew Center on Global Climate Change
June 2004

By:
William Easterling of Pennsylvania State University
Brian Hurd of New Mexico State University
Joel Smith of Stratus Consulting Inc.


Press Release

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Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Throughout the next century and beyond, global climate change will have significant effects on both important economic sectors and natural resources across the United States.   Global temperatures are projected to increase 2.5-10.4^oF by 2100, and at least some of this warming is now unavoidable.   Although the natural streams, wetlands, and biodiversity of the United States have a limited capacity to adapt to a changing climate, those systems that are managed by humans, such as agriculture, water resources, and coastal development can be handled in ways to reduce the severity of adverse impacts. 

Adaptation and Global Climate Change discusses how the United States might cope with anticipated climate change impacts in the coming decades.   This report provides a review of the role of adaptation in addressing climate change, the options available for increasing our ability to adapt, and the extent to which adaptation can reduce the consequences of climate change to the U.S. economy and natural resources.  Report authors Bill Easterling, Brian Hurd, and Joel Smith find:

• Adaptation is an important complement to greenhouse gas mitigation policies. Reducing greenhouse gas emissions is the only effective mechanism for preventing adverse impacts of climate change.  However, given that additional future climate change is now inevitable regardless of mitigation efforts, adaptation is an essential strategy for reducing the severity and cost of climate change impacts.
   
• Adapting to climate change will not be a smooth or cost-free endeavor.  Although the United States has diverse options and resources for adapting to the adverse effects of climate change, changes will be made in an atmosphere of uncertainty.  Substantial investments and adjustments will need to be made even with imperfect information or foresight, and successful adaptation will become even more challenging with more rapid rates or greater degrees of warming.
   
• Managed systems will fare better than natural systems and some regions will face greater obstacles than others. Even if there are some successes in adapting to climate change at the national level, there will still be regional and sectoral losers.  In particular, there is limited ability for humans to improve the adaptive capacity of natural ecosystems, which are not as easily managed and which face degradation from multiple stresses.
   
• Proactive approaches to adaptation are more likely to avoid or reduce damages than reactive responses.   Anticipatory planning among government institutions and important economic sectors will enhance the resilience to the effects of climate change.  Government at all levels should consider the implications of climate change when making investments in long-lived infrastructure.

The authors and the Pew Center gratefully acknowledge the input of Drs. Gary Yohe and Paul Kirshen on this report.

Executive Summary

Climate change resulting from increased greenhouse gas concentrations has the potential to harm societies and ecosystems. In particular, agriculture, forestry, water resources, human health, coastal settlements, and natural ecosystems will need to adapt to a changing climate or face diminished functions. Reductions in emissions of greenhouse gases and their concentration in the atmosphere will tend to reduce the degree and likelihood that significantly adverse conditions will result. Consideration of actions—e.g., mitigation policy—that can reduce this likelihood is reasonable and prudent, and has generally been the primary focus of public attention and policy efforts on climate change. However, recognition is increasing that the combination of continued increases in emissions and the inertia of the climate system means that some degree of climate change is inevitable. Even if extreme measures could be instantly taken to curtail global emissions, the momentum of the earth’s climate is such that warming cannot be completely avoided. Although essential for limiting the extent, and indeed the probability, of rapid and severe climate change, mitigation is not, and this paper argues, should not be, the only protective action in society’s arsenal of responses.

Adaptation actions and strategies present a complementary approach to mitigation. While mitigation can be viewed as reducing the likelihood of adverse conditions, adaptation can be viewed as reducing the severity of many impacts if adverse conditions prevail. That is, adaptation reduces the level of damages that might have otherwise occurred. However, adaptation is a risk-management strategy that is not free of cost nor foolproof, and the worthiness of any specific actions must therefore carefully weigh the expected value of the avoided damages against the real costs of implementing the adaptation strategy.

Adaptation to environmental change is a fundamental human trait and is not a new concept. Throughout the ages, human societies have shown a strong capacity for adapting to different climates and environmental changes, although not always successfully. As evidenced by the widespread and climatically diverse location of human settlements throughout the world, humans have learned how to thrive in a wide variety of climate regimes, ranging from cold to hot and from humid to dry. The resilience and flexibility exhibited in the patterns of human settlements evidence an inherent desire and some measure of capacity to adapt.

For human systems, the success of adaptation depends critically on the availability of necessary resources, not only financial and natural resources, but also knowledge, technical capability, and institutional resources. The types and levels of required resources, in turn, depend fundamentally on the nature and abruptness of the actual or anticipated environmental change and the range of considered responses.

The processes of adaptation to climate change in both human and natural systems are highly complex and dynamic, often entailing many feedbacks and dependencies on existing local and temporal conditions. The uncertainties introduced by the complexity, scale and limited experience with respect to anthropogenic climate change explains the limited level of applied research conducted thus far on adaptation, the reliance on mechanistic assumptions, and widespread use of scenarios and historical analogues. In addition, many social, economic, technological and environmental trends will critically shape the future ability of societal systems to adapt to climate change. While such factors as increased population and wealth will likely increase the potential level of material assets that are exposed to the risks of climate change, greater wealth and improved technology also extend the resources and perhaps the capabilities to adapt to climate change. These trends must be taken into account when evaluating the nature and scale of future adaptive responses and the likelihood that they will succeed.

The implications of climate change are more dire for natural systems, because it will be difficult for many species to change behavior or migrate in response to climate change. While biological systems might accommodate minor (or slowly occurring) perturbations in a smooth continuous fashion, even minor changes in climate may be disruptive for many ecosystems and individual species. In addition, many of the world’s species are currently stressed by a variety of factors including urban development, pollution, invasive species, and fractured (or isolated) habitats. Such conditions, coupled with the relatively rapid rate of anticipated climate change, are likely to challenge many species’ resiliency and chances for successful adaptation.

Key insights and findings on adaptation and its potential for success are summarized below:

1. Adaptation and mitigation are necessary and complementary for a comprehensive and coordinated strategy that addresses the problem of global climate change. By lessening the severity of possible damages, adaptation is a key defensive measure. Adaptation is particularly important given the mounting evidence that some degree of climate change is inevitable. Recognizing a role for adaptation does not, however, diminish or detract from the importance of mitigation in reducing the rate and likelihood of significant climate change.
    
2. The literature indicates that U.S. society can on the whole adapt with either net gains or some costs if warming occurs at the lower end of the projected range of magnitude, assuming no change in climate variability and generally making optimistic assumptions about adaptation. However, with a much larger magnitude of warming, even making relatively optimistic assumptions about adaptation, many sectors would experience net losses and higher costs. The thresholds in terms of magnitudes or rates of change (including possible non-linear responses) in climate that will pose difficulty for adaptation are uncertain. In addition, it is uncertain how much of an increase in frequency, intensity, or persistence of extreme weather events the United States can tolerate.
    
3. To say that society as a whole “can adapt“ does not mean that regions and peoples will not suffer losses. For example, while the agricultural sector as a whole may successfully adapt, some regions may gain and others may lose. Agriculture in many northern regions is expected to adapt to climate change by taking advantage of changing climatic conditions to expand production, but agriculture in many southern regions is expected to contract with warmer, drier temperatures. Individual farmers not benefiting from adaptation may lose their livelihood.  In addition, other individuals or populations in these and other regions can be at risk, because they could be adversely affected by climate change and lack the capacity to adapt.  This is particularly true of relatively low-income individuals and groups whose livelihoods are depending on resources at risk by climate change.
    
4. Adaptation is not likely to be a smooth process or free of costs. While studies and history show that society can on the whole adapt to a moderate amount of warming, it is reasonable to expect that mistakes will be made and costs will be incurred along the way. People are neither so foolish as to continue doing what they have always done in the face of climate change, nor so omniscient as to perfectly understand what will need to be done and to carry it out most efficiently. In reality, we are more likely to muddle through, taking adaptive actions as necessary, but often not doing what may be needed for optimal or ideal adaptation. Additionally, adaptation is an on-going process rather than a one-shot instantaneous occurrence.  Compounding society’s shortcomings, a more rapid, variable, or generally unpredictable climate change would add further challenges to adaptation.
    
5. Effects on ecosystems, and on species diversity in particular, are expected to be negative at all but perhaps the lowest magnitudes of climate change because of the limited ability of natural systems to adapt. Although biological systems have an inherent capacity to adapt to changes in environmental conditions, given the rapid rate of projected climate change, adaptive capacity is likely to be exceeded for many species. Furthermore, the ability of ecosystems to adapt to climate change is severely limited by the effects of urbanization, barriers to migration paths, and fragmentation of ecosystems, all of which have already critically stressed ecosystems independent of climate change itself.
    
6. Institutional design and structure can heighten or diminish society’s exposure to climate risks. Long-standing institutions, such as disaster relief payments and insurance programs, affect adaptive capacity. Coastal zoning, land-use planning, and building codes are all examples of institutions that can contribute to (or detract from) the capacity to withstand climate changes in efficient and effective ways.
    
7. Proactive adaptation can reduce U.S. vulnerability to climate change. Proactive adaptation can improve capacities to cope with climate change by taking climate change into account in long-term decision-making, removing disincentives for changing behavior in response to climate change (such as removing subsidies for maladaptive activities), and introducing incentives to modify behavior in response to climate change (such as the use of market-based mechanisms to promote adaptive responses). Furthermore, improving and strengthening human capital through education, outreach, and extension services improves decision-making capacity at every level and increases the collective capacity to adapt.

Conclusions

As the climate-change research and policy communities fully confront the challenges of understanding and managing adaptation to climate change, the issues framed in this report provide important insight concerning the information needed to make appropriate policy choices regarding adaptation. The following conclusions provide initial guidance to those communities:

1. Adaptation and mitigation are necessary and complementary for a comprehensive and coordinated strategy that addresses the problem of global climate change. By lessening the severity of possible damages, adaptation is a key defensive measure. Adaptation is particularly important given the mounting evidence that some degree of climate change is inevitable. Recognizing a role for adaptation does not, however, diminish or detract from the importance of mitigation in reducing the rate and likelihood of significant climate change.
    
2. The literature indicates that U.S. society can on the whole adapt with either net gains or some costs if warming occurs at the lower end of the projected range of magnitude, assuming no change in climate variability and generally making optimistic assumptions about adaptation. However, with a much larger magnitude of warming, even making relatively optimistic assumptions about adaptation, many sectors would experience net losses and higher costs. The thresholds in terms of magnitudes or rates of change (including possible non-linear responses) in climate that will pose difficulty for adaptation are uncertain. In addition, it is uncertain how much of an increase in frequency, intensity, or persistence of extreme weather events the United States can tolerate.
    
3. To say that society as a whole “can adapt“ does not mean that regions and peoples will not suffer losses. For example, while the agricultural sector as a whole may successfully adapt, some regions may gain and others may lose. Agriculture in many northern regions is expected to adapt to climate change by taking advantage of changing climatic conditions to expand production, but agriculture in many southern regions is expected to contract with warmer, drier temperatures. Individual farmers not benefiting from adaptation may lose their livelihood. In addition, other individuals or populations in these and other regions can be at risk, because they could be adversely affected by climate change and lack the capacity to adapt.  This is particularly true of relatively low-income individuals and groups whose livelihoods are depending on resources at risk by climate change.
    
4. Adaptation is not likely to be a smooth process or free of costs. While studies and history show that society can on the whole adapt to a moderate amount of warming, it is reasonable to expect that mistakes will be made and costs will be incurred along the way. People are neither so foolish as to continue doing what they have always done in the face of climate change, nor so omniscient as to perfectly understand what will need to be done and to carry it out most efficiently. In reality, we are more likely to muddle through, taking adaptive actions as necessary, but often not doing what may be needed for optimal or ideal adaptation. Additionally, adaptation is an on-going process rather than a one-shot instantaneous occurrence.  Compounding society’s shortcomings, a more rapid, variable, or generally unpredictable climate change would add further challenges to adaptation.
    
5. Effects on ecosystems, and on species diversity in particular, are expected to be negative at all but perhaps the lowest magnitudes of climate change because of the limited ability of natural systems to adapt. Although biological systems have an inherent capacity to adapt to changes in environmental conditions, given the rapid rate of projected climate change, adaptive capacity is likely to be exceeded for many species. Furthermore, the ability of ecosystems to adapt to climate change is severely limited by the effects of urbanization, barriers to migration paths, and fragmentation of ecosystems, all of which have already critically stressed ecosystems independent of climate change itself.
    
6. Institutional design and structure can heighten or diminish society’s exposure to climate risks. Long-standing institutions, such as disaster relief payments and insurance programs, affect adaptive capacity. Coastal zoning, land-use planning, and building codes are all examples of institutions that can contribute to (or detract from) the capacity to withstand climate changes in efficient and effective ways. 
    
7. Proactive adaptation can reduce U.S. vulnerability to climate change. Proactive adaptation can improve capacities to cope with climate change by taking climate change into account in long-term decision-making, removing disincentives for changing behavior in response to climate change (such as removing subsidies for maladaptive activities), and introducing incentives to modify behavior in response to climate change (such as the use of market-based mechanisms to promote adaptive responses). Furthermore, improving and strengthening human capital through education, outreach, and extension services improves decision-making capacity at every level and increases the collective capacity to adapt.

About the Authors

Dr. William E. Easterling
Dr. William E. Easterling is the Director of the Institutes of Environment and a professor of geography and agronomy at Pennsylvania State University.   Prior to joining the faculty at Penn State, Dr. Easterling held appointments in the Department of Agricultural Meteorology at the University of Nebraska (1991-1997), Resources for the Future, Inc. in Washington, DC (1987-1991), and the Illinois State Water Survey at the University of Illinois (1984-1987).  He received his doctorate in geography from the University of North Carolina at Chapel Hill.  Dr. Easterling's research concerns the interactions of human activities with their climatic and biotic environment, particularly the potential effects of climate changes from greenhouse warming on agroecosystem productivity and adaptation in both developed and developing countries. He also serves or has served on numerous national and international scientific advisory committees and assessment projects, including those of the National Research Council, the National Science Foundation, the National Aeronautics and Space Administration, the National Oceanic and Atmospheric Administration, and the U. S. Department of Energy. He served as the Acting Director of the Department of Energy's National Institute for Global Environmental Change (1996-1998), and he was a convening lead author for the Third Assessment Report of the United Nations/World Meteorological Organization's Intergovernmental Panel on Climate Change. In the winter of 2003, he co-chaired newly elected Pennsylvania Governor Ed Rendell's Transition Committee on Conservation and Natural Resources and was elected to serve as the Chair of the Penn State University Research Council for 2003-2004.

Brian H. Hurd, New Mexico State University
Brian H. Hurd is an Assistant Professor in the Department of Agricultural Economics and Agricultural Business at New Mexico State University. Dr. Hurd earned his PhD and MS degrees in Agricultural Economics from the University of California, Davis, and holds a BA from the University of Colorado, Boulder.

Dr. Hurd is the author of numerous articles, book chapters and conference presentations on natural and environmental resource economics, water resource economics, and climate change vulnerability and adaptation. He is a delegate to the Universities Council on Water Resources (UCOWR), and is a member of the American Agricultural Economics Association, the Association of Environmental and Resource Economists, the American Water Resources Association, and the Western Agricultural Economics Association. 

Joel B. Smith, Stratus Consulting Inc.
Joel B. Smith is the Vice President of Stratus Consulting Inc. Mr. Smith received a BA from Williams College, and received an MPP from the University of Michigan.

Mr. Smith has examined climate change impacts and adaptation issues for the U.S. Country Studies Program, the U.S. Environmental Protection Agency, the U.S. Department of Energy, the U.S. Agency for International Development, the Office of Technology Assessment, the Electric Power Research Institute, the World Bank, the Global Environment Facility, the United Nations Environment Programme, and the International Institute for Applied Systems Analysis.

Before joining Stratus Consulting, Mr. Smith was the deputy director of the U.S. EPA's Climate Change Division. He was a coeditor of EPA's Report to Congress: The Potential Effects of Global Climate Change on the United States, published in 1989; As Climate Changes: International Impacts and Implications, published by Cambridge University Press in 1995; Adaptation to Climate Change: Assessments and Issues, published by Springer-Verlag in 1996; and Climate Change, Adaptive Capacity and Development published by Imperial College Press in 2003. Mr. Smith worked for the EPA from 1984 to 1992. Besides working on climate change issues, he also served as an analyst examining oceans and water regulations, and was a special assistant to the Assistant Administrator for the Office of Policy, Planning and Evaluation.

A Synthesis of Potential Climate Change Impacts on the U.S.

Prepared for the Pew Center on Global Climate Change
April 2004

By Joel B. Smith, Stratus Consulting, Inc.


Press Release

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Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Greenhouse gas emissions—primarily from human activities such as the burning of fossil fuels— are causing changes in the global climate. Global temperatures increased approximately 1°F over the 20th century, and additional warming of 2.5-10.5°F is projected over the next century. The consequences of this warming for the United States will be significant. Natural resources and wildlife are dependent upon climate, as are the economy and human health.

Since 1998, the Pew Center has been chronicling the projected impacts of climate change on important economic sectors, human health, and natural resources. A Synthesis of Potential Climate Change Impacts on the United States by Joel B. Smith of Stratus Consulting Inc. is the eleventh in a series of reports examining the potential impacts of climate change on the U.S. environment. This report provides a synthesis of prior Pew Center reports regarding climate change impacts across a number of sectors and regions. This culmination of our Environmental Impacts series is being released with a companion report in our Economics series entitled U.S. Market Consequences of Global Climate Change, which provides an in-depth analysis of the market implications of climate change for the U.S. economy. This synthesis reveals:

• Natural systems are more vulnerable to climate change than societal systems. Species and ecosystems have limited ability to adapt to climate change, and as a consequence, U.S. biodiversity is likely to suffer. Managed sectors such as agriculture and forestry may avoid or reduce some adverse effects of climate change, but this adaptation will not be perfect or cost-free.

• Some U.S. regions are more vulnerable than others to climate change. The southern United States appears more vulnerable to the adverse effects of climate change than the North, due in large part to its low-lying coastal areas and the sensitivity of southern agriculture and forestry to warmer and dryer conditions. In the North, these sectors may benefit from longer growing seasons, but these benefits may not be sustained at higher magnitudes of warming. Warming may also reduce winter energy costs in the North, but it will increase cooling costs and the risk of heat-related illness and death in northern cities.

• Economic studies suggest that the market consequences of low-to-moderate warming will be approximately ±1 percent of U.S. gross domestic product (GDP). However, studies also indicate that any net economic benefit of climate change peaks at relatively low levels of warming, beyond which benefits decline and damages begin to accrue.

• The rate and magnitude of future climate change will be important. Gradual, moderate changes in climate would provide some opportunity for both natural and societal systems to adapt. In contrast, rapid or large changes in climate would increase the risk of large-scale, irreversible disruption of Earth’s environment, such as a shutdown of the thermohaline circulation or the collapse of the West Antarctic ice sheet.

Finally, while this series examines the impacts of climate change on the United States, we are mindful that other parts of the world will experience more severe consequences due to their location, physical characteristics, or economic limitations that impair their ability to adapt.

The author and the Pew Center gratefully acknowledge the input of Drs. Anthony Janetos, Neil Leary, Robert Mendelsohn, Lou Pitelka, Victor Kennedy, Stephen Schneider, and Roger Sedjo on this report.

Executive Summary

Since the 18th century, widespread deforestation and a steady increase in the use of fossil fuels have caused substantial concentrations of carbon dioxide and other greenhouse gases to accumulate in the atmosphere. The warming effect of these gases has caused the global climate to change. Over the past century, average global surface air temperatures increased by 0.6°C (1.1°F). This global warming will continue well into the future, and is likely to accelerate, as long as greenhouse gas concentrations in the atmosphere continue to rise. Although the exact magnitude and rate of future climate change remain uncertain, it will undoubtedly have far-reaching consequences for the United States, its natural resources, and economy.

This report builds on the Environmental Impacts Series published by the Pew Center on Global Climate Change, which reviews the current state of knowledge regarding how climate change will affect a number of economic and natural resource sectors in the United States. Reports in the series have included assessments of how climate change will affect water resources; agriculture and forestry; human health; and terrestrial, aquatic, and marine ecosystems. This report also draws on recent assessments of the potential impacts of climate change on the United States, particularly the U.S. National Assessment and reports prepared by the United Nations Intergovernmental Panel on Climate Change. Recent published literature regarding the implications of climate change for the U.S. economy is also discussed.

While the research completed to date indicates there are substantial uncertainties regarding exactly how climate will change and how it will affect society and ecosystems, it is possible to draw some conclusions about the vulnerability of the United States as a whole and the relative vulnerability of different regions, economic sectors, and natural ecosystems.

1. Natural ecosystems appear to be quite vulnerable to climate change. Climate change threatens to result in the loss of many coral reefs, coastal wetlands, endangered species (particularly those with limited range and mobility), cool- and cold-water fish, and boreal and alpine forest species. In addition, many species associated with particular regions, such as maple trees in New England, may not persevere in their current locations. In general, species are expected to attempt to migrate to higher latitudes or altitudes. This threat to natural ecosystems is distinctly more severe because development has reduced species populations, fragmented ecosystems and placed them under stress from pollution, and introduced barriers to migration, such as communities, farms, roads, and dams. Thus, biodiversity in the United States is likely to be reduced by climate change.

2. A number of sectors of the U.S. economy have a high sensitivity to climate change. Agriculture will be directly affected by changes in temperature and precipitation, and by ensuing effects on the distribution of pests and diseases and availability of water supplies for irrigation. Growth of forests will be sensitive to changes in climate, pests, and disease. Low-lying coastal areas will be at risk from inundation by rising seas. In addition, coastal communities, particularly along the Gulf and East coasts, will face increased risk of inundation, beach erosion, and property damage should the intensity or frequency of coastal storms and hurricanes rise. Human health in the United States will be affected by increased risk of heat stress, decreased risk of some cold weather mortality (although this has not been quantified), potential increases in transmission of infectious diseases, and changes in extreme weather events such as floods. The nation’s water resources will be affected by changes in supply resulting from altered precipitation patterns, earlier snowmelt, and increased evaporation. The risks of drought and floods are likely to increase in some areas. In addition, demand for water is likely to change, and may increase in many locations.

3. The capacity of the U.S. economy as a whole to adapt to a limited amount of climate change, with generally small impacts, appears to be quite high. The country’s high per capita income, relatively low population density, stable institutions, research base, and health care system give the United States a strong capacity to adapt to climate change. Thus, the country has a relatively large capacity to absorb its adverse effects. This does not mean there will be no cost for adaptation. Indeed, changing water resources management and agricultural practices and protecting coastal areas over this century could cost hundreds of billions of dollars. But, relative to the U.S. economy, these adaptation costs appear to be small and can most likely be absorbed. Finally, the country’s large size and the population’s mobility give it advantages in adapting to climate change. The lower 48 states span more than 20 degrees of latitude in the temperate climate zone, so while some southern parts of the country are at relatively higher risk from climate change, more northern areas are at less risk or may have many benefits. In addition, the American people are very mobile: in the 20th century there were large migrations to the North (early in the century), the West (throughout the century), and the South (later in the century). In contrast, many developing countries may experience adverse effects from climate change largely because their capacity to adapt to its impacts is limited. Indeed, it is not appropriate to extrapolate the findings for the United States to other countries.

4. Although the nation as a whole has a high capacity to adapt, sectors differ in their vulnerability. Sectors that can change the fastest, such as agriculture, are likely to be able to adapt best to climate change. Sectors with long-lived infrastructure and investments, such as water resources and coastal resources, may have more difficulty adapting and could experience some adverse impacts. However, their ability to adapt to a limited amount of climate change in the long run appears to be high. As noted above, natural ecosystems have a much more limited capacity to adapt to climate change compared to societal sectors, which is exacerbated by development and other human stressors.

5.  Different regions of the United States vary in their vulnerability to climate change. The southern United States is, on the whole, more vulnerable than the northern United States. The Southeast and southern Great Plains appear to be the most vulnerable regions because of their low-lying coasts, the potential loss in competitiveness of the agriculture and forest sectors (favorable climate zones for production will shift north), the increased risk of spread of infectious disease (although a strong public health system is likely to contain any potential increase), and especially the potential for reduced water supplies and increased demand for water. This would affect the availability of water for agriculture and instream uses such as protection of aquatic ecosystems. In contrast, northern areas could see mixed effects. While their low-lying coastal areas are at risk from sea-level rise and they (like the rest of the country) would have reduced biodiversity, northern areas could economically benefit from increased agricultural and forestry production and reduced energy costs. As noted below, these economic gains are transient and will not necessarily continue as temperatures keep rising.

6.  Even within regions that may have net economic benefits, individual communities and people could be adversely affected. Some populations are at particular risk because their location or vocation exposes them to changes in climate, and their low income constrains their ability to adapt. For example, the elderly poor in northern inner cities are at risk of increased heat stress during more extreme heat waves and generally have limited means of reducing the risk with air conditioning. In addition, many Native American communities may be at risk because they are heavily dependent on natural resources that will be affected by climate change, lack the financial resources to cope, and are not able to easily move to new locations.

7.  Studies of the economic impacts of climate change indicate that impacts for a few degrees of warming will be less than ±1 percent of gross domestic product (GDP). These studies attempt to incorporate major market and nonmarket (e.g., biodiversity and quality of life) impacts and assume a gradual change in climate and no change in variability. The direction of impacts (i.e., positive or negative) reported in various economic analyses differs, particularly depending on when the studies were conducted. Economic studies based on impact assessments conducted during the late 1980s and early 1990s tend to show damages of about one percent of GDP. More recent studies that consider new findings on the biophysical impacts of climate change and fully account for the potential for adaptation yield different results. These economic studies suggest that for up to 2-4°C (4-7°F) of warming, there could be net economic benefits of less than one percent of GDP. It is possible that because of factors not considered, such as change in variability or the magnification of impacts across related sectors, or less efficient adaptation than assumed in many recent studies, economic impacts could be more negative than these studies estimate. v A synthesis of potential U.S. climate change impacts A synthesis of potential U.S. climate change impacts.

8.  Economic impacts studies indicate that while there could be benefits, which peak at a few degrees of warming, there would be damages at higher levels of warming.Economic studies indicate that even in those sectors, such as agriculture, estimated to benefit from a small magnitude of warming, benefits peak and subsequently decline. This is because beyond certain increases in temperatures, crop yields decline or the “carbon fertilization” effect, which enables plants to grow more and use less water, saturates at higher carbon dioxide concentrations. In addition, other transient benefits such as reduced energy demand eventually become reversed as costs for cooling rise and savings from less heating are reduced. This is even true for regions such as the northern United States, which may experience economic benefits from a warming of less than several degrees, but losses beyond that. Economic studies suggest that national benefits peak at approximately a 1-2°C (2-4°F) increase in mean temperature. Beyond this, benefits decline until net economic damages occur at a warming of approximately 2-4°C (4-7°F) and become progressively worse with further increases in temperature. Significant uncertainty exists about the level of increased temperature that leads to damages and the magnitude of damages beyond that point.

9.  The rate and path of climate change matter. A gradual and monotonic change in climate (e.g., steady increases or decreases in precipitation) will be much easier to adapt to than rapid changes in climate or increased interannual or interdecadal climate variability. In a slowly and steadily changing climate, such adaptations as replacing infrastructure and introducing new technologies can be made gradually. A faster change in climate may necessitate more rapid than normal investments in infrastructure, technology, and other adaptations. Additional risk comes from changes in interannual or interdecadal variability.

10.  Increased warming heightens the risk of triggering large-scale changes to the climate system. Substantial increases in global mean temperature can set off large-scale changes to the earth’s climate system such as a shutdown of the thermohaline circulation (i.e., the Gulf Stream) or melting of the West Antarctic ice sheet. The thresholds are uncertain (and for some of these events may be quite high), the timeframes of the consequences of such events may take centuries to be fully realized, and the consequences are not well understood. However, it is possible that warming in the 21st century could trigger such events. Once started, they may be extremely difficult, if not impossible, to reverse. The consequences of such events have not for the most part, been studied, but could be substantial.

Conclusion

In spite of the uncertainties about climate change, we can, based on the Pew Center on Global Climate Change report series and other literature, draw some conclusions about the relative vulnerability of sectors and regions. As noted above, we are unable to predict the exact effects of climate change, but we are improving our understanding of the sensitivity of various sectors to climate change. Thus, these conclusions should be treated as preliminary.

1) Natural ecosystems appear to be quite vulnerable to climate change. Many natural resources are currently under stress, and climate change could impose additional stress. Climate change threatens to result in the loss of many coral reefs, coastal wetlands, endangered species (particularly those with limited range and mobility), cool- and cold-water fish, boreal species, and alpine species. This threat to natural ecosystems is distinctly more severe because development has reduced species populations, fragmented ecosystems and placed them under stress from pollution, and introduced barriers to migration, such as communities, farms, roads, and dams.

2) A number of sectors in the United States have a high sensitivity to climate change. Climate change could inundate many low-lying coastal areas, put urban areas at risk from increased storms and hurricanes, substantially change runoff in many basins, significantly change crop yields, and result in large geographic shifts and changes in the productivity of terrestrial and aquatic species.

3) The capacity of the U.S. economy as a whole to adapt to a limited amount of climate change, with generally small impacts, appears to be quite high. The country’s high per capita income, relatively low population density, research base, institutions, and health care system give the United States a strong capacity to adapt to climate change. There will be costs for adaptation, but relative to the U.S. economy, these costs appear to be small and can most likely be absorbed. Finally, the country’s large size and the population’s mobility give it advantages in adapting to climate change.

4) Although the nation as a whole has a high capacity to adapt, sectors differ in their vulnerability. Sectors that can change the fastest, such as agriculture, are likely to be best able to adapt to climate change. Sectors with long-lived infrastructure and investments, such as water resources and coastal resources, may have more difficulty adapting and could experience some adverse impacts. However, their ability to adapt to climate change in the long run appears to be high. In contrast, natural ecosystems have a much more limited capacity to adapt to climate change compared to societal sectors.

5) The southern United States is, on the whole, more vulnerable to climate change than the northern United States. Regions such as the Southeast and Southern Great Plains appear to be more vulnerable to climate change than the nation as a whole. In some regions, specific sectors, such as water resources in the Southwest, are at particular risk from climate change.

6) Even within regions that may have net economic benefits, individual communities and people could be adversely affected. Those with limited financial resources and mobility may be at greatest risk to climate change. The urban poor appear to have the highest risk from increased heat stress. Poor farmers may be most vulnerable to changes in agricultural conditions. Poor and isolated populations, such as Native Americans, may be at risk should climate change substantially affect the natural resources on which they depend.

7) Studies of the economic impacts of climate change indicate that impacts for a few degrees of warming will be less than ±1 percent of gross domestic product (GDP).These studies tend to incorporate both market and nonmarket (e.g., biodiversity and quality of life) impacts and, as noted above, assume a gradual change in climate and no change in variability. Economic studies based on impact assessments conducted during the late 1980s and early 1990s tend to show damages of about 1 percent of GDP. More recent studies that consider new findings on the biophysical impacts of climate change and fully account for the potential for adaptation yield different results. These economic studies suggest that for up to 2-4°C (4-7°F) of warming, there could be net economic benefits of less than 1 percent of GDP. It is possible that because of factors not considered, economic impacts could be more negative than these studies estimate.

8) Economic impacts studies indicate that while there could be benefits from climate change, which peak at a few degrees of warming, there would be damages at higher levels of warming. Economic studies indicate that even in those sectors, such as agriculture, estimated to benefit from a small magnitude of warming, these benefits peak and subsequently decline. This is because beyond certain increases in temperatures, crop yields decline or the “carbon fertilization” effect, which enables plants to grow more and use less water, saturates at higher CO2 concentrations. In addition, other transient benefits such as reduced energy demand eventually become reversed as costs for cooling rise and savings from less heating are reduced. This is even true for regions such as the northern United States, which may experience economic benefits from a warming of less than several degrees, but losses beyond that. Economic studies suggest that benefits peak at approximately a 1-2°C (2-4°F) increase in mean temperature. Beyond this, benefits decline until net economic damages occur at a warming of approximately 2-4°C (4-7°F) and become progressively worse with further increases in temperature. Significant uncertainty exists about the level of increased temperature that leads to damages and the magnitude of damages beyond that point.

9) The rate and path of climate change matter. A gradual and monotonic change in climate (e.g., steady increases or decreases in precipitation) will be much easier to adapt to than rapid changes in climate or increased interannual or interdecadal climate variability. In a slowly and steadily changing climate, such adaptations as replacing infrastructure and introducing new technologies can be made gradually. A more rapid change in climate may necessitate more rapid than normal investments in infrastructure, technology, and other adaptations. These investments could be costly.

10) Increased warming heightens the risk of triggering large-scale changes to the climate system. Substantial increases in global mean temperature could set off large-scale changes to the earth’s system such as shutdown of the thermohaline circulation (i.e., the Gulf Stream) or melting of the West Antarctic ice sheet. The thresholds are uncertain (and for some of these events may be quite high), the time frames of the consequences of such events may take centuries to be fully realized, and the consequences are not currently well understood. However, it is possible that warming in the 21st century could trigger such events. Once started, they may be extremely difficult, if not impossible, to reverse.

U.S. Market Consequences of Global Climate Change

Prepared for the Pew Center on Global Climate Change
April 2004

By:
Dale W. Jorgenson, Harvard University
Richard J. Goettle, Northeastern University
Brian H. Hurd, New Mexico State University
Joel B. Smith, et al, Stratus Consulting, Inc.


Press Release

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Download Appendix A (pdf)
Download Appendix B (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Over the next century, global climate change is likely to have substantial consequences for the economy of the United States and the welfare of its citizens. As scientists work to narrow remaining uncertainties about the magnitude and timing of future warming, it is becoming increasingly important that we improve our understanding of the likely implications for human and natural systems.

In this report, a team of authors led by Dale Jorgenson of Harvard University developed an integrated assessment of the potential impacts of climate change on the U.S. market economy through the year 2100. The analysis combines information about likely climate impacts in specific market sectors with a sophisticated computable general equilibrium model of the U.S. economy to estimate effects on national measures of productivity, investment, consumption and leisure. To account for uncertainties— both in the trajectory of future climate change and in the ability of different sectors to adapt—a variety of scenarios were modeled to characterize a range of possible outcomes.

The results indicate that climate change could impose considerable, lasting costs or produce smaller, temporary benefits for the U.S. market economy in coming decades. Importantly, potential costs under pessimistic assumptions are larger and persist longer than potential benefits achieved under optimistic assumptions. Because of “threshold effects” in key sectors like agriculture, initial benefits from a moderate amount of warming begin to diminish and eventually reverse as temperatures continue to rise toward the end of the century and beyond. These findings suggest that near-term action to limit the pace and scale of future climate change would be warranted not only because the potential damages outweigh potential benefits (which are transient in any case), but because early intervention would reduce the long-term damage under either set of assumptions, and reduce the need for more costly measures if pessimistic scenarios materialize.

This study makes an important contribution to our current understanding of the potential impacts of climate change, but it represents at best a partial assessment of the full range of those impacts. Certain market sectors (e.g., tourism) and a variety of indirect effects (e.g., climate change induced healthcare expenditures) could not be included because of a lack of data. Even more significantly, the analysis does not account for critical non-market impacts such as changes in species distributions, reductions in biodiversity or loss of ecosystem goods and services. These types of effects are described in a companion Pew Center report—A Synthesis of Potential Impacts of Climate Change on the United States—but remain extremely difficult to value in economic terms. Their inclusion in a more complete evaluation of both market and non-market impacts would almost certainly offset any temporary market benefits and add to the negative impacts, thereby underscoring the case for mitigative action.

The Pew Center and the authors are grateful to Henry Jacoby and Billy Pizer for helpful comments on previous drafts of this report.

Executive Summary

The continued accumulation of heat-trapping gases in the atmosphere is projected to have far reaching consequences for earth’s climate in coming decades. For example, in 2001, the Intergovernmental Panel on Climate Change (IPCC) predicted that average global temperatures could rise anywhere from 1.4^oC to 5.8^oC (2.5-10.4^oF) over the 21^stcentury, with warming for the United States as much as 30 percent higher. Climatic shifts of this magnitude would affect human and natural systems in many ways. Therefore, quantifying these impacts and their likely costs remains a critical challenge in the formulation of appropriate policy responses.

This study aims to advance understanding of the potential consequences of global climate change by examining the overall effect on the U.S. economy of predicted impacts in key market activities that are likely to be particularly sensitive to future climate trends. These activities include crop agriculture and forestry, energy services related to heating and cooling, commercial water supply, and the protection of property and assets in coastal regions. Also considered are the effects on livestock and commercial fisheries and the costs related to increased storm, flood and hurricane activity. Finally, the analysis accounts for population-based changes in labor supply and consumer demand due to climate-induced mortality and morbidity. Impacts in each of these areas were modeled to estimate their aggregate effect on national measures of economic performance and welfare, including gross domestic product (GDP), consumption, investment, labor supply, capital stock and leisure.

At present, our knowledge of the direct or indirect impacts of climate change on a broad range of economic activities is incomplete. Accordingly, there are important sectors and activities—such as tourism—that are omitted from this effort. Similarly, there is little information concerning possible interactions among the benefits and costs in different sectors. For example, the impacts on crop and livestock agriculture may have consequences for human health. Given the absence of reliable insights into such externalities or spillovers, these effects are also excluded from consideration. These limitations suggest that the results of this analysis are likely to understate the potential market impacts of climate change.

More importantly, this analysis does not consider the non-market impacts of climate change such as changes in species distributions, reductions in biodiversity, or losses of ecosystem goods and services. These considerations are essential to a complete evaluation of the consequences of climate change but are very difficult to value in economic terms. A companion report, A Synthesis of Potential Impacts of Climate Change on the United States, provides more detail on the relative vulnerability of different U.S. regions to both the market and non-market impacts of climate change.

To capture the range of market consequences potentially associated with climate change in the United States and to address the considerable uncertainties that exist, several distinct scenarios were developed for this analysis. Each incorporates different assumptions about the magnitude of climate change over the next century and about the direction and extent of likely impacts in the market sectors analyzed. Specifically, three different levels of climate change (low, central and high) were considered in combination with two sets of market outcomes (optimistic and pessimistic) for a total of six primary scenarios. In terms of climate, the low, central and high scenarios encompass projected increases in average temperature ranging from 1.7^oC to 5.3^oC (3.1-9.5^oF) by 2100, together with precipitation increases ranging from 2.1 to 6.6 percent and sea-level rise ranging from 17.2 to 98.9 cm (7-40 inches) over the same period. In terms of impacts, the optimistic and pessimistic  scenarios reflect a spectrum of outcomes from the available literature concerning the sensitivity of each sector to climatic shifts and its ability to adapt. As one would expect, the optimistic scenarios generally project either smaller damages or greater benefits for a given amount of climate change compared to the pessimistic scenarios.

Because several of the market sectors included here are especially sensitive to changes in precipitation, two additional scenarios were analyzed. The first assumes the high degree of temperature change combined with lower precipitation (“high and drier”) while the second assumes the low level of temperature change combined with higher precipitation (“low and wetter”).

By introducing the sector-specific damages (or benefits) associated with each of these scenarios into a computable general equilibrium model that simulates the complex interactions of the U.S. economy as a whole, the combined effect of climate impacts across multiple sectors could be assessed in an integrated fashion. Detailed results are described in the body of this report, but five principal conclusions emerge:

1) Based on the market sectors and range of impacts considered for this analysis, projected climate change has the potential to impose considerable costs or produce temporary benefits for the U.S. economy over the 21st century, depending on the extent to which pessimistic or optimistic outcomes prevail. Under pessimistic assumptions, real U.S. GDP in the low climate change scenario is 0.6 percent lower in 2100 relative to a baseline that assumes no change in climate; in the high climate change scenario, the predicted reduction in real GDP is 1.9 percent. Under the additional “high and drier” climate scenario, however, real GDP is reduced more dramatically—by as much as 3.0 percent by 2100 relative to baseline conditions. Furthermore, under pessimistic assumptions negative impacts on GDP grow progressively larger over time, regardless of the climate scenario. In contrast, under optimistic assumptions real U.S. GDP by 2100 is 0.7 to 1.0 percent higher than baseline conditions across the low, central and high climate scenarios, but these benefits eventually diminish over time. Nevertheless, to the extent that responses in certain key sectors conform to the optimistic scenarios, there is a distinct possibility that some degree of climate change can provide modest overall benefits to the U.S. economy during the 21st century.

2) Due to threshold effects in certain key sectors, the economic benefits simulated for the 21st century under optimistic assumptions are not sustainable and economic damages are inevitable. In contrast to the pessimistic scenarios which show increasingly negative impacts on the economy as temperatures rise, the economic benefits associated with optimistic scenarios ultimately peak or reach a maximum. Specifically, the agriculture and energy sectors initially experience significant cost reductions, but only so long as climate change remains below critical levels. Once temperature and other key climate parameters reach certain thresholds, however, benefits peak and begin to decline—eventually becoming damages. Different thresholds apply in different sectors and the time required to reach them depends on the rate at which warming occurs. In the high climate change scenario, the trend toward economic benefits under optimistic assumptions slows and peaks around mid-century, whereas, in the central climate case, this transition appears toward century’s end. In the optimistic, low climate change scenario, benefits continue to accrue throughout the 21st century. Nevertheless, the existence of these thresholds means that continued climate change—even if it proceeds slowly—eventually reverses market outcomes so that predicted economic benefits are only transient and temporary.

3) The effects of climate change on U.S. agriculture dominate the other market impacts considered in this analysis. Currently, the agriculture, forestry and fisheries industries represent about 2.0 percent of total U.S. industrial output and about 3.5 percent of real GDP. However, agriculture accounts for a much larger share of the overall climate-related economic impact estimated in this analysis. For example, across the low, central and high climate change scenarios, field crop and forestry impacts account for over 70 percent of the total predicted effect of climate change on real GDP under optimistic assumptions and almost 80 percent of the total GDP effect under pessimistic assumptions. These figures rise to 75 and 85 percent, respectively, if one includes climate effects on livestock and commercial fisheries. Clearly, significant impacts in relatively small sectors can exert a disproportionate influence on the overall economic consequences of a given climate change.

4) For the economy, wetter is better. All else being equal, more precipitation is better for agriculture —and hence better for the economy—than less precipitation. Not surprisingly, reductions in precipitation are costlier at higher temperatures than at lower temperatures and the negative impacts of drier climate conditions are greater under pessimistic assumptions than they are under optimistic assumptions. These results are driven by model assumptions about the relationship between agricultural output and different levels of precipitation; they do not consider regional or seasonal variability nor do they account for possible changes in the incidence of extreme events such as drought and flooding. To date, variations in precipitation have not been routinely incorporated in assessments of the agricultural impacts of climate change; nevertheless, they are potentially quite important and could  significantly affect actual benefits or damages associated with climate change in this sector of the economy. Therefore, in future assessments, more attention should be paid to the specific effects of precipitation under different climate scenarios.

5) Changes in human mortality and morbidity are small but important determinants of the modeled impacts of climate change for the U.S. economy as a whole. An increase in climate-induced mortality or illness reduces the population of workers and consumers available to participate in the market economy, in turn leading to a loss of real GDP. In this analysis, mortality and morbidity effects alone account for 13 to 16 percent of the aggregate predicted effect of climate change on the economic welfare of U.S. households. Failure to include such effects therefore understates the potential market impacts of climate change as well as the likely benefits of climate-mitigating policies. Furthermore, the economic consequences of the mortality and morbidity effects arising from a given change in temperature are at the low end of mortality valuations found in the reported literature. Hence, the contribution of health effects to the aggregate market impacts of climate change could be even higher than these results suggest.

Taken together, these findings have important implications for current policy debates and for ongoing efforts to further refine our understanding of the likely impacts of global climate change. From a policy standpoint their primary relevance lies in the extent to which they support (or diminish) the case for intervention to avoid or mitigate the impacts being evaluated. Specifically, does the analysis suggest that the likely consequences of future climate change will be sufficiently negative as to warrant near-term actions aimed at reducing greenhouse gas emissions? This question is all the more difficult to answer because the benefits of policy intervention tend to accrue slowly, over a long period of time, while the costs of mitigative action must be borne in the near term.

On the one hand, the results of this analysis clearly point to the possibility that climate change could produce measurable negative impacts on the U.S. economy within this century that might justify anticipatory policy responses. On the other hand, the fact that some of the scenarios analyzed produce positive, albeit temporary, benefits for the U.S. economy in the same timeframe might seem to weigh in favor of forgoing, or at least delaying, such actions.

A number of nuances in these results—together with several larger considerations related to limitations inherent in the study’s design—argue against the latter conclusion. Within the scope of this analysis, perhaps the most important point is the fact that most, if not all, potentially positive impacts of climate change under optimistic assumptions are likely to be transient and unsustainable over the long run in the face of steadily rising temperatures. If, on the other hand, pessimistic assumptions prove to be more correct, the economic impacts of climate change are not only immediately negative, but worsen steadily over time. Thus, the potential for temporary economic benefits must be balanced against the potential for immediate and lasting economic damages.

A second important point is that the modeling results reveal asymmetries in the magnitude of potential benefits versus potential damages. Specifically, the economic losses estimated under pessimistic assumptions are generally larger than the transient benefits gained under optimistic assumptions in all but the low climate change scenarios. Moreover, the asymmetry becomes more pronounced with rising temperatures as certain types of costs—such as those associated with extreme weather events—increasingly offset possible benefits to other sectors of the economy.

A further caution relates to the partial and incomplete nature of the analysis itself. This effort was limited from the outset to considering only market impacts of global climate change within the United States. As has already been noted, it was not possible to include all potentially climate-sensitive market sectors in the analysis; nor was it possible to account for all externalities or spillover effects. Moreover, the results of this analysis are not likely to be representative of other parts of the world, especially for those countries whose overall economic well-being is more closely tied to sectors like agriculture. For these countries, the potential damages associated with future climate change could be a much larger proportion of GDP than in the United States and the downside risks under pessimistic assumptions—especially in regions where climate change is likely to cause increasingly warmer and drier conditions—could be far more substantial.

Even more significant, in terms of drawing policy conclusions from these results, is the fact that the underlying analysis does not address a host of potential non-market impacts associated with climate change. These include shifts in species distribution, reductions in biodiversity, losses of ecosystem goods and services and changes in human and natural habitats. Such impacts—many of which are explored in other Pew Center reports—are probably of great concern to the public and could carry substantial weight in future policy deliberations. They are, however, extremely difficult to value in economic terms. To the extent that they have been assessed—even qualitatively—the results suggest that climate-related impacts on natural systems are far more likely, on the whole, to be negative rather than positive. As such they would tend to add to any negative market impacts associated with future climate change, while offsetting potential market benefits of the kind simulated in this study under optimistic assumptions.

In sum, the disparity in results between optimistic and pessimistic scenarios—and the likelihood that a consideration of non-market impacts would tend to exacerbate this disparity—highlights the continuing uncertainty associated with quantifying climate change impacts. The fact that the economic losses associated with pessimistic scenarios are both larger and more continuous than the transient benefits gained under optimistic scenarios would seem, by itself, to provide some support for cautionary action on climate change. In fact, such action—by slowing the pace and magnitude of temperature increases in the U.S. market consequences of global climate change coming decades—actually could forestall any damages or even improve the odds that optimistic rather than pessimistic outcomes prevail. If, on the other hand, worst-case scenarios appear more likely over time and ultimately justify more dramatic intervention, early efforts to achieve moderate near-term emissions reductions may help avoid the need for more costly measures later on. Meanwhile, high priority should be given to improving and integrating future assessments of market and non-market outcomes and to refining our understanding of the probabilities associated with varying degrees of climate change and the positive or negative responses that follow.