2010. 03. 11.

Economic Analysis of

climate change in Korea

Yeora Chae

Korea Environment Institute

2

Project Scope

� Spatial range : South Korea

� Time range : by 2050/2100

� Study fields :

� Agriculture, Forest, Sea level, Disaster, Health impact assessment of climate change

� Cost estimates of CO2 emissions reductions on energy section

3

Objectives

Estimate of Integrated Economic Impact

Estimate of Economic

impacts of Climate Change

Damage

Analysis of GHG reduction cost

and the ripple effect

using CGE Model

Cost-benefit integrated model analysis

Analysis of Climate change Scenarios of Korea

4

Analysis of Climate Change Scenarios

� Analysis of International GHGs Regulations Negotiation and GHGs Emission Scenario

� Analysis of Climate Change Scenarios of Korea

� Outlook for Domestic GHGs Emission Control

Scenarios

5

Estimate of Economic Adverse Impacts of Climate Change

AgricultureAgriculture

• Identify the relationship between climate factors and forest distribution

ForestForest

• Understand physical change status of coast of Korea

Sea levelSea level

• Current knowledge on the economic costs estimation methodology

DisasterDisaster

• Literature review of health impact of climate change

HealthHealth

• Literature review for climate change impact assessment

• Temperature damage function presumption of major crop plants

• Estimate forest distribution of South Korea by 2100

• Estimate excess mortality of climate change (fierce heat, O3 etc.)

� Analyze economic mechanisms of climate change of South Korea

� Establish damage function of climate change by sector

Estimate cost function of climate change

• Estimate protection cost

• Establish coastal change scenario • Analyze

possibility of disaster of Korea

6

� The ripple effects analysis and Cost function estimate of

Domestic policy to reduce GHGs emission

� Economic impact assessment of the change of

energy/resources supply-and-demand structure

(international/domestic)

� Analysis of impacts to trade of GHGs regulations

Analysis of GHG reduction cost and the ripple effects using CGE Model

7

� PAGE model modeling using the economic impact

function and reduction cost function

� Cost estimates of damage and response cost each

scenarios

� Uncertainty assessment of cost estimates

Cost-benefit integrated model analysis

Climate change in Korea

� Climate change scenario

8Temperature change:

Average temperature would increase 4� in

2071~2100 compared to 1971-2000

Precipitation change

Average Precipitation would increase 17%

in 2071~2100 compared to 1971-2000

9Rice yield change by

temperature

(kg/ha)

2080s ▼16.5 %

• Rice yield change in jeonnam: compared to1971~2000 average rice yield

2001 ▼0.74%

Rice yield= -159.5*temperature + 5330.7 (R2=0.9769)

Agriculture: Rice yield change

100

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1971~2000 2030 2050 2070 2100

면적(천ha)

연도(년)

침엽수 활엽수 혼합림Present

2100

Forest distribution change

Forest : Distribution change

11 11

Wet area 0.2m 0.4m 0.6m 0.8m 1.0m

Flooded

area

(km2)

2,368 65.15 241.93 393.44 608.86 854.16

Coastal area

Flooded area by sea level riseFlooded area by sea level riseFlooded area by sea level riseFlooded area by sea level rise

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Damage by sea level rise and temperature change

습지지역건조지역

0.2m 상승 0.4m 상승 0.6m 상승

152,254 242,333

242 393

침수인구(명)

침수면적(km2)

- 41,625

2,368 65

0.8m 상승 1m 상승

373,003 516,976

609 854

Coastal area

13

Year

No. of days daily average temperature above 28.1 °°°°C 이상인이상인이상인이상인 (Seoul)

Mortality change by heat wave평균평균평균평균 95% 하한95% 하한95% 하한95% 하한 95% 상한95% 상한95% 상한95% 상한2010 ~ 2040 67 56 792041 ~ 2070 212 176 2492071 ~ 2100 378 312 446Ye a rYe a rYe a rYe a r 여름철 초과 사망여름철 초과 사망여름철 초과 사망여름철 초과 사망

Ye a rYe a rYe a rYe a r2010 ~ 20402041 ~ 20702071 ~ 2100

270571787

평균 28.1평균 28.1평균 28.1평균 28.1℃℃℃℃ 이상인 날 수 이상인 날 수 이상인 날 수 이상인 날 수

▷28.1▷이상이상이상이상일수일수일수일수 : 평균평균평균평균 10-15일일일일 , 초과사망자수초과사망자수초과사망자수초과사망자수 : 평균평균평균평균 100명명명명이하이하이하이하(’94년년년년이상이상이상이상고온고온고온고온시시시시 28.1▷이상이상이상이상일수일수일수일수 33일일일일, 초과사망자초과사망자초과사망자초과사망자 800명명명명이상이상이상이상)

Health : Mortality change by heat wave

14

� Agriculture

� Coastal area

� Human health

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

1 2 3 4온도변화 (℃)

GDP l

oss (

%)

농업해안건강

Climate change damage

15

� GDP loss by scenario(BAU %)

0.00%0.10%0.20%0.30%0.40%0.50%0.60%0.70%0.80%

0% 5% 10% 15% 20% 25% 30%이산화탄소 감축비율GDP 감소비율 2020_No-Trade2020_Trade2030_No-Trade2030_Trade

CO2 mitigation cost: CGE model result : GDP loss

PAGE model (Policy Analysis of GHG Emission)

� Uses relatively simple equations to approximate complex climatic changes in a minimal number of computations

� Probabilistic sampling of the input parameters in order to build up an approximate probability distribution for each model output

� Output includes temperature change, climate change damage, adaptive cost, and preventative cost at a regional level for a given CO2 and SO2 emission scenario

� Incorporate 5 reasons to concern about climate change impacts

•Eight world regions.

•The major greenhouse gases.

•Economic and non-economic impacts.

•Time horizon of 2200.

•Probabilistic calculations.

Scope of the PAGE model

Inputs to the PAGE model

� Emissions of greenhouse gases� Sensitivity of the climate system� Cooling effect of sulphates� Impact as a function of temperature change� Discount rates

GHG EmissionGHG Emission

Socio economic factor : GDP, PopulationSocio economic factor : GDP, Population

Ambient GHG Concentration (Carbon Cycle)Ambient GHG Concentration (Carbon Cycle)

Valuation (Economics, Sociology, Ethics)Valuation (Economics, Sociology, Ethics)

Impact Analysis (Economics, Sociology, Ethics)Impact Analysis (Economics, Sociology, Ethics)

Temperature Change: Climate Modeling (Meteorology, Oceanography)Temperature Change: Climate Modeling (Meteorology, Oceanography)

Damage Damage

Mitigation Policy: Mitigation Cost Mitigation Policy: Mitigation Cost

Adaptation Policy: Adaptation CostAdaptation Policy: Adaptation Cost

Cost Cost

PAGE modelPAGE modelPAGE modelPAGE model ---- structurestructurestructurestructure

19

Climate change damage calculation in Climate change damage calculation in Climate change damage calculation in Climate change damage calculation in PAGEPAGEPAGEPAGE

HealthHealth ForestForestAgricultureAgriculture Coastal areaCoastal area

EconomicEconomic Non-economicNon-economic

20

Climate change damage by 2.5oC temperature increase

21

Climate change damage by 2.5oC temperature increase

지역지역지역지역 총계총계총계총계 농업농업농업농업 다른다른다른다른취약한취약한취약한취약한Market

해안해안해안해안 건강건강건강건강 Non-Market

Time Use재해재해재해재해 이민이민이민이민

대한민국대한민국대한민국대한민국 0.027 1.485 0.155

미국미국미국미국 0.45 0.06 0 0.11 0.02 -0.28 0.44 0.1

중국중국중국중국 0.22 -0.37 0.13 0.07 0.09 -0.26 0.52 0.05

일본일본일본일본 0.5 -0.46 0 0.56 0.02 -0.31 0.45 0.25

EU 2.83 0.49 0 0.6 0.02 -0.43 1.91 0.25

러시아러시아러시아러시아 -0.65 -0.69 -0.37 0.09 0.02 -0.75 0.99 0.05

인도인도인도인도 4.93 1.08 0.4 0.09 0.69 0.3 2.27 0.1

다른다른다른다른고소득고소득고소득고소득지역지역지역지역 -0.39 -0.95 -0.31 0.16 0.02 -0.35 0.94 0.1

OPEC 고소득지역고소득지역고소득지역고소득지역 1.95 0 0.91 0.06 0.23 0.24 0.46 0.05

동유럽동유럽동유럽동유럽 0.71 0.46 0 0.01 0.02 -0.36 0.47 0.1

중산층중산층중산층중산층 2.44 1.13 0.41 0.04 0.32 -0.04 0.47 0.1

저저저저-중소득중소득중소득중소득지역지역지역지역 1.81 0.04 0.29 0.09 0.32 -0.04 1.01 0.1

아프리카아프리카아프리카아프리카 3.91 0.05 0.09 0.02 3 0.25 0.39 0.1

저소득지역저소득지역저소득지역저소득지역 2.64 0.04 0.46 0.09 0.66 0.2 1.09 0.1

전세계전세계전세계전세계산출산출산출산출가중치가중치가중치가중치 1.5 0.13 0.05 0.32 0.1 -0.29 0.17 1.02

인구가중치인구가중치인구가중치인구가중치 2.19 0.17 0.23 0.12 0.56 -0.03 0.1 1.0522

impact function exponentimpact function exponentimpact function exponentimpact function exponent 1.766666667 1 1.3 3Economic impactEconomic impactEconomic impactEconomic impact 0.5 -0.1 0.6 1 %GDP loss for 2.5℃NonNonNonNon----econ impactecon impactecon impactecon impact 0.733333333 0 0.7 1.5 %GDP loss for 2.5℃Loss if discontinuity occursLoss if discontinuity occursLoss if discontinuity occursLoss if discontinuity occurs 11.66666667 5 10 20 %GDPEE weights factorEE weights factorEE weights factorEE weights factor -0.35 -1 -0.25 0.2US weights factorUS weights factorUS weights factorUS weights factor 0.25 0 0.25 0.5Korea weights factorKorea weights factorKorea weights factorKorea weights factor 0.366666667 0 0.1 1IA (inc CA) weights factorIA (inc CA) weights factorIA (inc CA) weights factorIA (inc CA) weights factor 2.5 1.5 2 4AF weights factorAF weights factorAF weights factorAF weights factor 1.833333333 1 1.5 3LA weights factorLA weights factorLA weights factorLA weights factor 1.833333333 1 1.5 3OT weights factorOT weights factorOT weights factorOT weights factor 0.25 0 0.25 0.5

Climate change damage calculation in PAGE model

23

CW CW CW CW (% of 1990 emissions)(% of 1990 emissions)(% of 1990 emissions)(% of 1990 emissions) 30 50 100C1 C1 C1 C1 ($million/Mt CO($million/Mt CO($million/Mt CO($million/Mt CO2222)))) 8.43 17.25 31.46 C2 C2 C2 C2 ($million/Mt CO($million/Mt CO($million/Mt CO($million/Mt CO2222)))) 17.25 29.24 91.83

Climate change damage calculation in PAGE model

24

� discount rate =discount rate =discount rate =discount rate =Pure time preference rate + equity weight*growth rate of GDP per capita

� Stern Review: Stern Review: Stern Review: Stern Review: ptp rate= 0.1

� Nordhaus:Nordhaus:Nordhaus:Nordhaus:social discount rate= 3%

� This study:This study:This study:This study:ptp rate = triangle distributiom (0.1,1,2)

Discount rate in PAGE model

25

26CO2 emission in Korea Temperature change

� Climate change damage and GHG mitigation cost� A1B

� 450 ppm stabilization scenario

PAGE Model result

27Climate change damage GHG mitigation cost

PAGE Model result� Climate change damage and GHG mitigation cost

2828

Uncertainty and sensitivity analysis of climate change damage

PAGE Model result

Pdf of cumulative climate change damage

Sensitivity analysis

29

Uncertainty and sensitivity analysis of GHG mitigation cost

Pdf of cumulative GHG mitigation cost

Sensitivity analysis

PAGE Model result

30Pdf of damage & control cost Pdf of net benefit

5%5%5%5%p e rc e nt ilep e rc e nt ilep e rc e nt ilep e rc e nt ile m e a nm e a nm e a nm e a n 95%95%95%95%

p e rc e n t ilep e rc e n t ilep e rc e n t ilep e rc e n t ile5%5%5%5%

p e rc e n t ilep e rc e n t ilep e rc e n t ilep e rc e n t ile m e a nm e a nm e a nm e a n 95%95%95%95%p e rc e n tilep e rc e n tilep e rc e n tilep e rc e n tile

A1B - 33,169 819,408 9,409,995Ag gre ssive

Po lic y - 20,059 448,259 434,433 3,056 163,506 696,247

기후변화 누적 피해비용 기후변화 누적 피해비용 기후변화 누적 피해비용 기후변화 누적 피해비용 ((((m ill io nm illio nm illio nm illio n $$$$ )))) 온실가스 누적 저감비용 온실가스 누적 저감비용 온실가스 누적 저감비용 온실가스 누적 저감비용 ((((m ill io nm illio nm illio nm illio n $$$$ ))))시나리오시나리오시나리오시나리오

• pdf of cumulative climate change damage and GHG mitigation

PAGE Model result

Net benefit>0: 82% probability