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8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 1/21
Managing Ecological Resources in a ChangingManaging Ecological Resources in a Changing
Climate: The Role of Economic Values andClimate: The Role of Economic Values and
Uncertainty.Uncertainty.
Robert J. JohnstonRobert J. JohnstonUniversity of Connecticut University of Connecticut
Preparing for Climate Change Impacts on the Northwest Atlantic Marine Preparing for Climate Change Impacts on the Northwest Atlantic Marine Ecosystem. A multi-disciplinary symposium hosted by: Center for Law & Ecosystem. A multi-disciplinary symposium hosted by: Center for Law & Innovation of the University of Maine School of Law, and Gulf of Maine Innovation of the University of Maine School of Law, and Gulf of Maine
Research Institute April 26-27 Research Institute April 26-27
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 2/21
What Can Economics Contribute to Regional Policy
Guidance in the Face of Climate Change?
Review of economic concepts of ecosystem valuesand the role of uncertainty.
How can economic models help prioritize policy
choices? Upshot—you can’t do everything, so how do you
decide what you are going to do?
Economics can provide insight into reactions toclimate change that will provide the greatest long-term social benefits (and public support!).
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 3/21
Economic Valuation Can Inform Environmental
Policy
Environmental management affects components and
processes of natural systems.
– These features of natural systems often represent
ecological goods and services that may have value to
the public.
– Changes in these goods and
services affect human well- being; measurement of these
effects is economic valuation.
http://aquat1.ifas.ufl.edu/
8/15/2019 Climate Change Economics Panel - Johnston
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Economic Values and TradeoffsEconomic Values and Tradeoffs
Appropriate assessment of economic values can helpAppropriate assessment of economic values can help policymakers: policymakers:
– Identify the true social benefits generated byIdentify the true social benefits generated by
ecological stewardship and restoration.ecological stewardship and restoration. – Prioritize environmental policy proposals or actions.Prioritize environmental policy proposals or actions.
– Assess whether the social benefits of particular Assess whether the social benefits of particular policies outweigh the social costs (this is policies outweigh the social costs (this is Benefit-CostBenefit-Cost
AnalysisAn
alysis).).
Economic values do not require money to changeEconomic values do not require money to changehands, nor do they have to be denominated in dollars.hands, nor do they have to be denominated in dollars.
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 5/21
Non-Market Values
A large proportion of the economic value of environmental protection or restoration is made up of non-market values.
Non-market values are effects on individuals’ well- being that are not measurable in markets.
Ignoring non-market values can result in significantunderestimation of social benefits.
These can include use and non-use values. – Use Values: Values related to observable behavior (e.g., recreational,
consumptive, etc.).
– Non-use Values: Values not related to observable behavior (e.g., bequest,
existence values).
8/15/2019 Climate Change Economics Panel - Johnston
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Measuring Non-Market Values
Market values are easily measurable in most cases.
Non-market values are harder, but economists havedeveloped a variety of methods to measure different
aspects of non-market value. – Revealed Preference methods based on observable
behavior (hedonic; travel cost).
– Stated Preference methods based on carefully designedsurveys (stated preference; contingent valuation).
– Others (productivity methods, etc.)
These are NOT economic impacts!
8/15/2019 Climate Change Economics Panel - Johnston
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What About Risk and Uncertainty?
Environmental outcomes often involve risk or uncertainty—these are different.
– Risk: You can at least approximate possible outcomes
and probabilities. – Uncertainty: Outcomes and probabilities are entirely
unknown.
Under true uncertainty, it is difficult to apply
economic models.
Under risk, there are well-defined methods to adjusteconomic values (expected values; option prices).
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 8/21
Climate Change
Climate change presents an exemplar of decisionmaking under risk and/or uncertainty.
To the extent that we can reduce uncertainty to risk,
economic tools can provide significant insightregarding tradeoffs and policy choices.
What are the best plans of action? What will benefitsociety most in the long run?
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 9/21
Responses to Ecosystem Services Threatened by
Global Warming
Option #1: Protect or Conserve (but you can’t preserve everything!)
Option #2: Mitigate, Offset or Replace (but you can’t
replace everything!) Option #3: Triage (preserve or replace the most
valuable).
Economics and economic valuescan help inform these choices.
A tool for decision making…
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 10/21
New England Diadromous Fish Restoration
Provides an Excellent Policy Illustration
Diadromous fish restoration is a major policyinitiative in most New England states.
Example: Red shows RI rivers where migratory fish
used to live before humans arrived. Blue showsrivers where these fish live today.
River Herring (alewife)River Herring (alewife)
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 11/21
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 12/21
Decline of Southern New England River Herring
Between 95-99% decline in many Southern NewEngland fish runs; river herring fishery closed in MA,CT, RI.
Fish passing over Holyoke Dam in MA dropped fromover 630,000 in 1985 to 21 last year (yes, that’stwenty-one fish).
http://www.risaa.org/newsletter/herringclose06.html
8/15/2019 Climate Change Economics Panel - Johnston
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The Cause of Decline is Unknown
Consensus is that decline has nothing to do with fish passage—it’s something happening at estuarineinterface or in the open ocean.
Possibilities include: – By-catch in sea herring
fishery.
– Resurgence of predators.
– Climate change.
http://www.risaa.org/newsletter/herringclose06.html
8/15/2019 Climate Change Economics Panel - Johnston
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What is Going On?What is Going On?
"It's clear striped bass are having an impact," he"It's clear striped bass are having an impact," he
said. "But I'm not convinced it's the main thing.said. "But I'm not convinced it's the main thing.
Something is happening in the Atlantic Ocean andSomething is happening in the Atlantic Ocean and
Long Island Sound, too. We are just not sureLong Island Sound, too. We are just not sureexactly what.“ (R. Gephard, CT DEP, quoted inexactly what.“ (R. Gephard, CT DEP, quoted in
Hartford Courant 4/17/2007).Hartford Courant 4/17/2007).
8/15/2019 Climate Change Economics Panel - Johnston
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What is the Optimal Response?
Place additional resources to try and offset or reversethe decline?
– But restoration activities are costly, and restoration
expenditures may be ineffective at halting the decline. Abandon new restoration efforts?
– But restoration efforts might help to slow the declineor even prevent extinction in some rivers.
From an economic perspective, answer depends on both probabilities and relative values.
8/15/2019 Climate Change Economics Panel - Johnston
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What is the Optimal Response?
You got to know when to hold them, know when tofold them. How much do you bet in a poker game, or do you fold?
It’s hard with cards, and harder with fish, but
economics can provide a guiding framework.
8/15/2019 Climate Change Economics Panel - Johnston
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The Structure of Probability is Critical
Assume that the probability that fish run i will persist( P i) is a function of resources allocated to fish
passage in river i ( X i) and exogenous events beyondthe control of managers (Qi).
What is the probability that you will win if you stayin the game?
P P ii(X (X ii , Q , Qii ) )
The more important isThe more important is X X ii, the, themoremore resources should beresources should beexpended.expended.
The more important isThe more important is QQii, the, thelessless resources should beresources should beexpended.expended.
8/15/2019 Climate Change Economics Panel - Johnston
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Social Value is Also Critical
Expected surplus (or value), ES i, is a function of the probability that fish run i will persist ( P i) and theattributes of the fish run (Y i).
What is the size of the pot? How much is at stake?
ES ES ii(P (P ii(X (X ii , Q , Qii ), Y ), Y ii ) )
The larger is social value comparedThe larger is social value compared
to that of other resources, theto that of other resources, the moremore resources should be expended.resources should be expended.
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 19/21
What Information Is Needed?
In some cases, estimates of market and non-marketvalues are available.
– For example, we are currently conducting a study of
non-market values associated with the restoration of river herring passage and populations.
Estimating probabilities can be more difficult, butnatural scientists are trying to solve the puzzle.
The key is to link appropriate economic andecological information to guide more optimal policyresponses.
8/15/2019 Climate Change Economics Panel - Johnston
http://slidepdf.com/reader/full/climate-change-economics-panel-johnston 20/21
Parallel Choices for Other Resources Threatened by
Climate Change
Funds are not infinite—we cannot protect or restoreeverything.
How should we prioritize our actions? Which cards
do we hold and which do we fold? Given empirical estimates or approximations of
probabilities and values, economics can provideguidance.
This is not the only tool available to managers—butcan help to ensure that policy serves the long-terminterests of society.
8/15/2019 Climate Change Economics Panel - Johnston
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Conclusions
Economics can provide tools to assist managers inconceptualizing and facing tradeoffs related toresources threatened by climate change.
Frameworks are well-developed; what is needed areempirical estimates of probabilities and values.
Even without specific estimates, however, economicscan contribute structural clarity to decisions facing
policymakers. It’s all about choices and tradeoffs…
in a very important card game.