From the inbox:
It dawned on me this morning that I hadn't sent you a copy of our newsletter yet. As promised, your article is our feature. It was definitely well-received by our membership, as I've gotten lots of positive responses. Thanks again for your willingness to contribute to our newsletter!
My article combines a soundoff on jobs and energy policy, combined with a summary of the NC coastal climate change study. Here is the article, in entirety (and here is the newsletter [pdf], just in case you don't believe the NCAEM really used it).
Measuring the Impact of Climate Change on North Carolina Coastal Resources
John Whitehead, Appalachian State University
Introduction
Current scientific research shows that the global sea level is expected to rise significantly over the next century. The relatively dense development and abundant economic activity along much of the U.S. coastline is vulnerable to risk of coastal flooding, shoreline erosion and storm damages.
During the summer of 2006, researchers at Appalachian State University, Duke University, East Carolina University and the University of North Carolina at Wilmington were asked to consider conducting a study focusing on the economic impacts of climate change in coastal North Carolina.* Funding came from the National Commission on Energy Policy, a bi-partisan research institute in Washington, DC. Our efforts resulted in a 100 page peer-reviewed report, a press conference, an interview on NC NOW, a presentation to the NC Legislative Commission on Climate Change and a mention as one of the reasons for the support of Senator Dole in her recent backing of major federal climate change legislation. This activity is summarized at the website http://econ.appstate.edu/climate.
In this study we examine the impacts of climate change on North Carolina coastal resources. We consider three important areas of the coastal economy: the impacts of sea-level rise on the coastal real estate market, the impacts of sea-level rise on coastal recreation and tourism and the impacts of tropical storms and hurricanes on business activity.
This sort of research is especially important in the current recessionary economic climate. Both sides of the climate change debate argue that jobs are the real issue. Climate change policy advocates point to the potential for increases in green energy jobs. Opponents argue that climate change policy will cost the U.S. economy jobs. Both sides are missing the point.
The real issue is the role that economic plays in providing jobs in an efficient macroeconomy. Climate change policy that raises costs of production to business firms will produce a net loss of jobs in an economy. All credible microeconomic models show this effect. However, this is likely to be a small impact and short term.
Consider the renewable energy credit that has recently been debated in Washington. How does a renewable energy subsidy raise the cost of production? For producers of renewable energy, obviously, the subsidy seems to reduce the direct costs of production by covering the additional cost of increasing output. But, note, as output rises, the additional costs of production of additional output rises (i.e., the supply curve from ECON 101 slopes upwards). The subsidy pushes jobs into an expensive sector of the economy (green energy) and away from a cheap sector (brown energy). The U.S. economy gains green jobs and loses brown jobs. Since green jobs are expensive and brown jobs are cheap, the net effect is a net loss of jobs.
But, this isn't the important issue. In the long run the number of jobs is little changed. Larger forces, such as technology, innovation, worker health and education, keeps a dynamic economy humming along. In the long run, climate change policy moves the economy towards the green sector, we gain green jobs, lose brown jobs but we remain at full employment.
Jobs aren't the issue, although the word is salient to politicians and voters. The real issue is the efficiency of environmental policy. The benefits and costs of a cleaner environment is what matters. If the benefits of a cleaner environment exceeds the costs, then the environmental policy is a good (i.e., efficient) idea. And vice versa. Jobs aren't part of the benefit and cost calculations.
Below is a summary of our study that helps to identify some of the benefits of climate change policy (or the costs or inaction). Focusing on the benefits is especially important because the costs of climate change policy are fairly well known. The costs can be measured with observable parts of the economy: market prices, etc. The benefits of climate change policy often occur outside of markets or only indirectly by market prices. Often, when the costs of environmental policy are well known and the benefits are less well known, the costs are given more weight and there is a policy bias towards not doing enough to protect the environment. We hope this study fills one of these knowledge gaps.
Economic Impacts of Climate Change in Coastal North Carolina
Real Estate Markets
In the first of three economic components of this study we estimated the impacts of sea level rise on coastal real estate markets in New Hanover, Dare, Carteret and Bertie County of North Carolina. The study area represents a cross-section of the North Carolina coastline in geographical distribution and economic development. A simulation approach based on a property value model is developed to estimate the impacts of sea level rise on property values.
Inundation and storm impacts were assessed for four coastal counties ranging from high-development to rural-economies and with shoreline dominated by estuarine to marine environments. We used high-resolution topographic data to provide accurate inundation maps in order to identify all property that would be lost under different sea level rise scenarios assuming no adaptation. The sea level rise scenarios were adjusted upward for regional subsidence and range from an 11 centimeters (cm) increase in sea levels by 2030 to an 81 cm increase by 2080. Additional geospatial attributes that described the distance of a property to shoreline and elevation are also generated and entered into a database of corresponding tax values.
Data on property values came from the county tax offices which maintain property parcel records that contain assessed values of property as well as lot size, total square footage, the year the structure was built, and other structural characteristics of the property. Other spatial amenities such as property elevation, ocean and sound/estuarine frontage and distance to shoreline are obtained using Geographic Information System data.
We estimated the loss of property values due to sea level rise using a simulation approach based on the property value model for the four counties. The results indicate that the impacts of sea level rise on coastal property values vary across the North Carolina coastline. Without discounting, the residential property value loss in Dare County ranges from 2% of the total residential property value to 12%. The loss in Carteret County ranges from less than 1% to almost 3%. New Hanover and Bertie counties show relatively small impacts with less than one percent loss in residential property value.
Considering the four coastal counties, including the three most populous on the North Carolina coast, the present value of lost residential property value in 2080 is $3.2 billion discounted at a 2% annual rate. The present value of lost nonresidential property value in 2080 is $3.7 billion discounted at a 2% annual rate.
Recreation and Tourism
In the second economic component of this study we estimated the impacts of sea level rise on coastal recreation and tourism. We estimate the effects of sea-level rise on beach recreation at the southern North Carolina Beaches and recreational fishing that takes place on the entire coast. We use two sets of recreation data and a statistical method that estimates the demand for recreation.
To estimate the recreational impacts of sea level rise we first calculated current erosion rates for beaches and fishing locations and modeled projected beach widths. Projected increases in erosion were estimated qualitatively for the years 2030 and 2080 by a local expert. These erosion rates were then mapped spatially to describe changes in minimum and maximum beach width assuming no nourishment or barrier island migration.
We estimate that the lost recreation value of climate change-induced sea level rise to beach goers is $93 million in 2030 and $223 million in 2080 for the southern North Carolina beaches. Beach trip spending by non-local North Carolina residents would also change significantly with climate change-induced sea level rise. Spending by those who only take day trips would fall by between 2% and 16% in 2030 and between 23% and 48% in 2080 compared to 2004.Turning to recreational fishing, the aggregate annual lost recreational value of sea level rise to shore anglers in all of North Carolina would be $14 million in 2030 and $17 million in 2080. This is 3% in 2030 and 3.5% in 2080 of the 2004 baseline values. Angler spending would not change significantly as shore anglers would likely move to other beaches or piers and bridges in response to sea level rise.
The coastal recreation and tourism analysis indicates that there are substantial losses from reduced opportunities of beach trips and fishing trips. The present value of the lost recreation benefits due to sea level rise would be $3.5 billion when discounted at a 2% rate for the southern North Carolina beaches. The present value of the lost recreational fishing benefits due to sea level rise would be $430 million using a 2% discount rate.
Business and Industry
In the third component of this study we estimate the impacts of increased storm severity on business and industry, including agriculture, forestry, commercial fisheries and general “business interruption.” These are the primary categories of impacts on business and industry for low-intensity hurricane strikes, and changes among low-intensity hurricane categories are identified in this study as the most likely results of climate change. Estimates of business interruption impacts on economic output are presented by county for three climate change scenarios.
Storm impacts are assessed by investigating projected climate-related increases in storm intensity along a hurricane track that made landfall in 1996. The percent increase in wind speed due to increased sea surface temperature is estimated using a standard Global Climate Model. The wind speeds are mapped spatially using a hurricane wind speed model. Maximum wind speeds and wind gusts were averaged by county and used in an economic model to estimate potential business impacts.
The impacts of increased storm severity on economic output due to business interruption from 2030-2080 vary across county and climate change scenario, ranging from negligible impacts for Bertie County to $946 million for New Hanover County. These results show the incremental losses due to climate change that could result from a storm strike similar to hurricane Fran, a well-known category 3 storm that struck North Carolina in 1996. County-level estimates vary due to differences in population, industry structure, distance to the coast, and prior hurricane damage history.
The economic impacts of severe storms on the North Carolina agricultural sector are significant. Based on agricultural damage statistics for hurricanes affecting North Carolina between 1996 and 2006, we find that a tropical storm or category 1 hurricane strike causes $30-$50 million in total statewide agricultural damage, a category 2 storm in the ballpark of $200 million, and a category 3 storm on the order of $800 million. Increases in hurricane intensity due to climate change could have substantial impacts on agriculture in North Carolina.
Based on the limited data from Hurricane Fran (category 3) and Hurricane Isabel (category 2), the incremental forest damage associated with an increase in hurricane severity from category 2 to category 3 is substantial, on the order of 150% per storm event, or about $900 million.
Consistent time series data on the damages to commercial fishing operations caused by tropical storms and hurricanes do not currently exist for North Carolina. However, two recent case studies indicate that commercial fisheries suffer economic losses primarily in the form of damaged fishing gear and reductions in the number of safe fishing days. In addition, there is some evidence that the populations of some target species may fall following hurricanes, further reducing the profitability of fishing.
Conclusions
Much of the current debate about job creation and climate change policy misses the point. The U.S. macroeconomic labor market is healthy and can weather the climate change policy storms. Most economists are more interested in the microeconomic impacts of climate change policy. What are the benefits and costs? In our study we show that the economic impacts of climate change on North Carolina coastal resources are substantial and wide-ranging. More of this type of study is needed in order to effectively compare the benefits of climate change policy to the costs.
*The other researchers are Okmyung Bin (East Carolina University), Chris Dumas (University of North Carolina at Wilmington), Ben Poulter (Potsdam Institute for Climate Impact Research, Germany).
