Friday, November 17, 2006

Climate Change article: Sea level changes and tourism

A working paper called Economy-Wide Estimates of the Implications of Climate Change: A Joint Analysis for Sea Level Rise and Tourism by ANDREA BIGANO, FRANCESCO BOSELLO, ROBERTO ROSON and RICHARD S.J. TOL has just been released.

Climate change impacts on human life have well defined and different origins, nevertheless in the determination of their final effects, especially those involving social-economic responses, interactions among impacts are likely to play an important role. This paper is one of the first attempts to disentangle and highlight the role of these interactions. It focuses on the economic assessment of two specific climate change impacts: sea-level rise and changes in tourism flows. By using a CGE model the two impacts categories are first analyzed separately and then jointly. Comparing the results it is shown that, even though qualitatively joint effects follow the outcomes of the disjoint exercises, quantitatively impact interaction do play a significant role. Moreover it has been also possible to disentangle the relative contribution of each single impact category to the final result. In the case under scrutiny demand shocks induced by changes in tourism flows outweigh the supply side shock induced by the loss of coastal land.

The paper uses a modified CGE model. The conclusions suggest that while developing countries appear to lose the most land, Western Europe, Japan and Korea gain from increases in tourism.

As far as single impacts are concerned, the main outcome is that final effects on GDP are quite limited, unambiguously negative in the case of sea level rise, with slight gains for Western Europe, Japan and Korea, in the case of tourism. Distributional effects are more interesting. In the case of sea level rise, developing countries are the more penalized: higher dependence on land, difficulty in substituting the land lost with other production factors and capital outflows driven by reduced rate of returns explain the result. In the case of tourism, the
effects on regional economies are consistent with the shocks on tourism demand. This general pattern is reinforced by the changes in income flows used to capture the changes in expenditures of international tourists, which tend, for most variables, to overshadow the impact of general equilibrium adjustments. This notwithstanding, demand re-composition do play a role, and occasionally general equilibrium effects are large enough to result in regional impacts which contrast with the general pattern just described. Again, developing countries are more severely affected; in this case this is not due to the dependence from a vulnerable sector, but, more directly, to the magnitude of the negative shocks imposed on their economies.

Given the recent Stern report and headlines in the all the papers that we are all doomed unless we act now it still strikes me as rather odd that academic papers are being written stating, "don't worry about climate change as we will get more tourists to compensate".

How silver does a lining have to be to qualify?

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