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INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
INTERNATIONAL
TECHNICAL CONFERENCE
ON CLIMATE CHANGE,
AGRICULTURAL TRADE
AND FOOD SECURITY
15 -17 November 2017
FAO Headquarters, Rome Italy
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
THE INTERNATIONAL TRADE
CONSEQUENCES OF CLIMATE CHANGE
Rob Dellink
OECD Environment Directorate
17 November 2017
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
3
CONTEXT OF THE REPORT
Objective: how will climate change damages affect international trade in the coming decades?
Climate change policy
Climate change
Trade policy
International trade
Liberalisation, trade restrictions
Emission changes
Direct and indirect Impacts
Emissions reduction and
adaptation
Policy interaction
(on multiple levels
of governance)
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
4
NEGATIVE DIRECT IMPACTS
(frequent shutdown of ports)
(faster degradation of road and bridge)
(More frequent disturbances)
Climate change will negatively affect most of transport infrastructure. Extreme weather events may lead to..
These can lead to delays, increase the costs of international trade and could lead to a shift in trade patterns.
INTERNATIONAL TECHNICAL CONFERENCE ON
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POTENTIAL TRADE GAINS FROM ARCTIC SHIPPING
Arctic Routes
Conventional Routes
+: Significant cost savings from distance
reduction
(-) Lack of infrastructure
(-) harsh weather conditions
(-) serious threats to ecosystems
Average Distance Reduction:
America – Asia: - 25%
Average Distance Reduction:
Europe – Asia: - 30%
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
• Context: part of the CIRCLE project on costs of inaction
• Other workstreams focus on air pollution and land-water-energy nexus
• Aim: assess the economic consequences of climate change
• Methodology:• Modelling analysis of market damages
• Put into larger context of other major impacts of climate change
6
THE CIRCLE PROJECT
CIRCLE: Costs of Inaction and Resource scarcity: Consequences for Long-term Economic growth
INTERNATIONAL TECHNICAL CONFERENCE ON
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• Collaboration with experts from around the world and use of existing impact studies• Focus of modelling is on economic consequences of market impacts
• Damages calculated in OECD’s multi-sector, multi-region CGE model (ENV-Linkages) to 2060
• Production function approach: link impacts to specific drivers of growth
• Autonomous adaptation takes place via sectoral adjustments and international trade
• Stylised calculations with aggregated model to 2100• Baseline and damages to 2060 harmonised with ENV-Linkages
• Careful attention to other damages• Especially non-market damages can be significant
METHODOLOGY FOR CLIMATE DAMAGES
7
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
8
Agricultural yields and labour productivity are most significantly impacted
by the selected set of market impacts, but not all impacts grow
proportionately
Source: ENV-Linkages calculations
Global GDP loss:
0.3-1.0% 1.0-3.3%
Agriculture
Coastal Zones
Energy Demand
Extreme Precipitation
Events
Health
Tourism Demand
Global damages 2060
Agriculture
Coastal Zones
Energy Demand
Extreme Precipitation
Events
Health
Tourism Demand
Global damages 2035
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
9
There are very significant downside risks from unmitigated climate change on
ariculture
Source: ENV-Linkages calculations
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
OECD America OECD Europe OECD Pacific Rest of Europe& Asia
Latin America Middle East &North Africa
South andSouth-East Asia
Sub SaharanAfrica
World
Range (8 scenarios) Central projection (w/o CO2) Central projection with CO2
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
OECD America OECD Europe OECD Pacific Rest of Europe& Asia
Latin America Middle East &North Africa
South andSouth-East Asia
Sub SaharanAfrica
World
Range (8 scenarios) Central projection (w/o CO2) Central projection with CO2
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
Cana
da
Chile
Mex
ico USA
EU la
rge
4
Othe
r OEC
D EU
Othe
r OEC
D
Aus.
& N
ewZ.
Japa
n
Kore
a
Chin
a
Non-
OECD
EU
Russ
ia
Casp
ian
regi
on
Othe
r Eur
ope
Braz
il
Othe
r Lat
.Am
.
Mid
dle
East
Nort
h Af
rica
ASEA
N 9
Indo
nesia
Indi
a
Othe
r Asia
Sout
h Af
rica
Othe
r Afri
ca
OECD America OECD Europe OECD Pacific Rest of Europe and Asia LatinAmerica
MiddleEast &NorthAfrica
South- and South-EastAsia
Sub-Saharan
Africa10
…and on the economy as a whole
Source: ENV-Linkages calculations
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Cana
da
Chile
Mex
ico USA
EU la
rge
4
Othe
r OEC
D EU
Othe
r OEC
D
Aus.
& N
ewZ.
Japa
n
Kore
a
Chin
a
Non-
OECD
EU
Russ
ia
Casp
ian
regi
on
Othe
r Eur
ope
Braz
il
Othe
r Lat
.Am
.
Mid
dle
East
Nort
h Af
rica
ASEA
N 9
Indo
nesia
Indi
a
Othe
r Asia
Sout
h Af
rica
Othe
r Afri
ca
OECD America OECD Europe OECD Pacific Rest of Europe and Asia LatinAmerica
MiddleEast &NorthAfrica
South- and South-EastAsia
Sub-Saharan
Africa
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Cana
da
Chile
Mex
ico USA
EU la
rge
4
Othe
r OEC
D EU
Othe
r OEC
D
Aus.
& N
ewZ.
Japa
n
Kore
a
Chin
a
Non-
OECD
EU
Russ
ia
Casp
ian
regi
on
Othe
r Eur
ope
Braz
il
Othe
r Lat
.Am
.
Mid
dle
East
Nort
h Af
rica
ASEA
N 9
Indo
nesia
Indi
a
Othe
r Asia
Sout
h Af
rica
Othe
r Afri
ca
OECD America OECD Europe OECD Pacific Rest of Europe and Asia LatinAmerica
MiddleEast &NorthAfrica
South- and South-EastAsia
Sub-Saharan
Africa
OECD America OECD Europe OECD Pacific Rest of Europe and AsiaLatin
AmericaMiddle East &
N. Africa South and South-East AsiaSub-Saharan
Africa
INTERNATIONAL TECHNICAL CONFERENCE ON
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11
• Generally less imports and
exports
• Uneven regional effects across the
world
• Agricultural and food products
most affected
-8 -6 -4 -2 0 2
USA
Australia & New Zealand
Brazil
Canada
Caspian region
China
European Union
India
Indonesia
Mexico
Middle East & North African
OECD Asia
Other ASEAN countries
Other Asia
Other Europe
Other Latin America
Other OECD
Sub-Saharan Africa
World
Imports (volume)
-6 -5 -4 -3 -2 -1 0
Agriculture
Busines Services
Chemicals
Construction
Electronics
Food Product
Fossil fuel products
Motor Vehicles
Other EII
Other manufacturing
Other Mining
Public Services and Utilies
Textiles
Transportation services
Exports (volume)
Impacts on agriculture are relatively strong and agricultural and food
trade flows are more affected than other commodities
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
12
Despite negative climate impacts, region can increase competitiveness if
competitors are more severely damaged
ASEAN 9
Aus. & NewZ.Brazil
Canada
Caspian region
China
EU
India
IndonesiaMexico
Middle East & N.Afr.
OECD Asia
Other Asia
Other EuropeOther Lat.Am.
Other OECD
Sub-Sah. Africa
USA
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
-5% -4% -3% -2% -1% 0% 1% 2%Change in GDP
Exports Imports
INTERNATIONAL TECHNICAL CONFERENCE ON
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13
Agricultural impacts do not lead to proportional changes in GDP
ASEAN 9
Aus. & NewZ.
BrazilCanada
Caspian region
China
EU
India
Indonesia
Mexico
Middle East & N.Afr.
OECD Asia
Other Asia
Other Europe
Other Lat.Am.Other OECD
Sub-Sah. Africa
USA
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
-35% -30% -25% -20% -15% -10% -5% 0% 5%
Changes in GDP
Changes in yields
INTERNATIONAL TECHNICAL CONFERENCE ON
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14
Countries with larger domestic markets and more diversified trade patterns can absorb
climate shocks better
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Indi
a
Indo
nesia
China
ASEA
N 9
Oth
er A
sia
Mid
dle E
ast &
N.A
fr.
Oth
er L
at.A
m.
Braz
il
Sub-
Sah.
Afri
ca
Oth
er E
urop
e
Aus.
& N
ewZ.
Mex
ico
USA
OEC
D As
ia
Cana
da EU
Casp
ian
regi
on
Oth
er O
ECD
Change in export price Change in export volume Change in RCA
Regions with largest yield losses
Effects of agricultural impacts on food markets
INTERNATIONAL TECHNICAL CONFERENCE ON
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15
International linkages through world trade markets (import flexibility, international
damage spillovers) significantly differ across countries in size and sign
-20%
0%
20%
40%
60%
80%
100%
120%
USA EU China India Sub-Saharan Africa
Domestic import flexibility spillovers International import flexibility spillovers International damage spillovers Domestic damages
-20%
0%
20%
40%
60%
80%
100%
120%
USA EU China India Sub-Saharan Africa
Domestic import flexibility spillovers International import flexibility spillovers International damage spillovers Domestic damages
-20%
0%
20%
40%
60%
80%
100%
120%
USA EU China India Sub-Saharan Africa
Domestic import flexibility spillovers International import flexibility spillovers International damage spillovers Domestic damages
-20%
0%
20%
40%
60%
80%
100%
120%
USA EU China India Sub-Saharan Africa
Domestic import flexibility spillovers International import flexibility spillovers International damage spillovers Domestic damages
-20%
0%
20%
40%
60%
80%
100%
120%
USA EU China India Sub-Saharan Africa
Total impact
INTERNATIONAL TECHNICAL CONFERENCE ON
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16
CONCLUSION (I)
Key Findings:
• Climate damages will negatively affect the economies of almost all regions, including lower-than-baseline (but still growing!) trade flows
• Impacts on agriculture are relatively strong and agricultural trade flows will be affected more than other commodities as heavily internationally traded goods
• Despite being negatively affected by climate damages, a region can increase its competitiveness if competitors for a certain market are more severely damaged
or specialise in the production of other goods
• Countries that have larger domestic markets and more diversified trade patterns can absorb climate shocks better than countries that are more specialised
INTERNATIONAL TECHNICAL CONFERENCE ON
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17
CONCLUSION (II)Key Messages:
• Each region will need to understand not only the impacts of climate change on their domestic sectoral production and trade flows, but also the projected
impacts of climate change on regions they are competing with on specific
markets.
• Adjusting trade patterns is a useful mechanism to minimise the costs of climate change. Without trade flexibility, the global costs of climate change are projected
to be higher, especially in some of the regions which are most severely affected
by climate damages.
The main policy recommendation:
• Climate policies and trade policies could be aligned in order to offset some of the worst climate damages and alleviate the burden on the most vulnerable
economies.
INTERNATIONAL TECHNICAL CONFERENCE ON
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THANK YOU
For further information please contact
Rob Dellink([email protected])
or visit
www.oecd.org/environment/CIRCLE.htm
www.oecd.org/environment/modelling
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
Country A Country B TRADE
CLIMATE CHANGE
DIRECT
IMPACTS
INDIRECT
IMPACTS
METHODS
qualitative
analysis
quantitative
analysis
Climate Change could affect trade in two main ways: direct impacts and indirect impacts.
(Mostly short-term) consequences on trade such as changes in trade
infrastructure and disruptions
through changes in relative
comparative advantage
19
INTERNATIONAL TECHNICAL CONFERENCE ON
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20
NO-DAMAGE BASELINE GDP PROJECTION
Source: ENV-Linkages calculations
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SELECTED IMPACTS OF CLIMATE CHANGE
21
• Agriculture: yield changes for 8 crop sectors, and fisheries
• Coastal zones: capital and land losses due to sea level rise
• Health: diseases and labour productivity losses from heat stress
• Energy demand
• Tourism demand
• Capital damages from hurricanes
Included in the modelling
• Fatalities from heatwaves
• Urban damages from river floods
• Ecosystems: biodiversity (crude approximation)
Stand-alone analysis
• Large-scale disruptive events, …
Still not quantified
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22
The regional consequences of market damages are strongest in Africa and Asia
Source: ENV-Linkages calculations
Uncertainty ranges in 2060 due to uncertainty in ECS
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2010 2020 2030 2040 2050 2060
-South & South East Asia
OECD Pacific
Rest of Europe & Asia
OECD Europe
Latin America
OECD America
World
-Sub Saharan Africa
Middle East & NorthAfrica
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23
The long-term damages are much more uncertain, but future damages
are inevitable when GHG are emitted
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
Likely uncertainty range - central projection until 2100
Likely uncertainty range - central projection until 2060
Central projection until 2100
Central projection until 2060
Weitzman damage function-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
Likely uncertainty range - central projection until 2100
Likely uncertainty range - central projection until 2060
Central projection until 2100
Central projection until 2060 (Committed by 2060)
Weitzman damage function-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
Likely uncertainty range - central projection until 2100
Likely uncertainty range - central projection until 2060
Central projection until 2100
Central projection until 2060 (Committed by 2060)
Weitzman damage function
Source: AD-DICE calculations
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24
There are potentially very significant other (non-market) consequences of climate change
Source: Own calculations based on various sources
OECD country Current climate 2050
Mortality
(thousands)
Costs
(billion USD)
Mortality
(thousands)
Costs
(billion USD)
Canada 1 3 8 23
Chile 0 0 1 4
Mexico 1 4 12 36
USA 11 2 63 27
EU large 4 11 34 66 197
Other OECD EU 8 17 44 104
Other OECD 1 4 13 39
Aus. & New Z. 1 2 3 9
Japan 3 8 10 30
Korea 1 2 6 17
OECD total 38 75 226 487
RCP6.0 RCP8.5
Most OECD countries 0.5 1.1
Chile 0.3 0.6
Mexico 0.4 0.9
Non-OECD EU 0.3 0.7
Brazil 0.1 0.2
Russia 0.2 0.4
India 0.0 0.1
Indonesia 0.0 0.1
China 0.2 0.5
South Africa 0.4 0.8
Other regions 0.0-0.1 0.0-0.3
…and many more that could not be quantified!
Urban flood
damages
Premature
deaths from
heat stress
Loss of
biodiversity
and
ecosystems
Tipping
points
OECD country Current climate 2050
Mortality
(thousands)
Costs
(billion USD)
Mortality
(thousands)
Costs
(billion USD)
Canada 1 3 8 23
Chile 0 0 1 4
Mexico 1 4 12 36
USA 11 2 63 27
EU large 4 11 34 66 197
Other OECD EU 8 17 44 104
Other OECD 1 4 13 39
Aus. & New Z. 1 2 3 9
Japan 3 8 10 30
Korea 1 2 6 17
OECD total 38 75 226 487
RCP6.0 RCP8.5
Most OECD countries 0.5 1.1
Chile 0.3 0.6
Mexico 0.4 0.9
Non-OECD EU 0.3 0.7
Brazil 0.1 0.2
Russia 0.2 0.4
India 0.0 0.1
Indonesia 0.0 0.1
China 0.2 0.5
South Africa 0.4 0.8
Other regions 0.0-0.1 0.0-0.3
INTERNATIONAL TECHNICAL CONFERENCE ON
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01/12/2017 JWPTE ENV Directorate 25
TRADE AND COMPETITIVENESS: RCA
defined as the share of a region’s exports of a set of commodities in the
region’s total exports relative to the share of the world’s exports of these
commodities in global exports.
i.e. A higher RCA index in rice indicates a comparative advantage in the
exportation of rice.
Used for measuring a country’s export performance for a specific commodity or
industry.
RCA (Revealed Comparative Advantage) index
INTERNATIONAL TECHNICAL CONFERENCE ON
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Direct Impacts of Climate Change
Climate change
effectMode Direct impact Consequences on trade infrastructure
Increased
temperature and
solar radiation
Land-based Road pavement cracking; Asphalt rattling; Rail
buckling, etc.
Require track and road repairs to avoid
derailments (-)
Aviation Reduced life of asphalt on tarmacs;
Reduced airlift capacity
Need to construct longer runways to
compensate for reduced airlift (-);
Need for ground-cooling mechanisms (-)
Sea-based Reduced refrigeration storage period Increase refrigeration costs (-)
Increased
precipitation and
river floods
Land-based,
Aviation
Flooding of infrastructures;
Wet pavements and safety risks;
Reduced visibility Need to avoid affected roads (-)
Sea-based
Reduced capabilities in loading/uploading of
cargo at ports; Increased rates of corrosion /
oxidation equipment
Risk of delays (-)
INTERNATIONAL TECHNICAL CONFERENCE ON
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01/12/2017 27
Climate change
effectMode Direct impact Consequences on trade infrastructure
Sea level rise
and sea storm
surges
Land-based,
Aviation
Permanent or temporary inundation; Submerge
of bridges, terminals and villages
Risk of delays (-);
Relocation and migration of people and
business (-)
Sea-based
Lower clearance under waterway bridges;
Increased rates of corrosion and oxidation
equipment
New ship design (-);
Reconfiguration of operational areas (-)
Extreme weather
conditions
Land-based,
Aviation
Disturbance to transport electronic
infrastructures, signalling, etc. Disruption to operations (-)
Sea-based
Deterioration of sailing conditions; Disturbance to
transport electronic infrastructures, signalling,
etc.
Risk of delays (-)
Reduced Arctic
sea ice coverSea-based
Opening of Arctic shipping routes
Reduced distances and time (+);
Need for additional navigation aids such as
ice-breakers for ships using the Arctic route (-
)
Direct Impacts of Climate Change
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MAIN MESSAGES (I)
1. In almost all regions significant negative market and non-market impacts,
plus downside risks
• Global GDP cost 1.0-3.3% by 2060, 2-10% by 2100
• Largest losses in Africa and Asia
• Largest losses from health and agricultural impacts
• Largest losses to capital and labour
• Costs increase more than proportionately with temperature
2. Losses spread across economies
• All sectors and regions are indirectly affected
3. Consequences are unavoidable and enduring
• Emissions commit the world to long-lasting impacts
28
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MAIN MESSAGES (II)
4. Ambitious adaptation and mitigation can reduce future impacts and limit
risks
• Ambitious policies can reduce macroeconomic costs by 2100 from 2-10% to 1-3%
• Adaptation is important to ensure consequences of climate change remain limited
• Ambitious global mitigation can help avoid half of the economic consequences and limit downside risks
• Distribution of policy costs and benefits across regions and sectors will not be proportional (but both imply a shift towards more services)
29
INTERNATIONAL TECHNICAL CONFERENCE ON
CLIMATE CHANGE, AGRICULTURAL TRADE AND FOOD SECURITY
THE INTERNATIONAL TRADE
CONSEQUENCES OF CLIMATE CHANGE
Rob Dellink
OECD Environment Directorate
17 November 2017