TODAY’S STUDY: CANADA DISCOVERS THE COSTS AND OPPORTUNITIES OF CLIMATE CHANGE

Climate Prosperity; Paying the Price – The Economic Impacts of Climate Change for Canada
September 2011 (National Round Table on the Environment and the Economy)

Executive Summary

Climate change will be expensive for Canada and Canadians. Increasing greenhouse gas emissions worldwide will exert a growing economic impact on our own country, exacting a rising price from Canadians as climate change impacts occur here at home.

click to enlarge

This report by the National Round Table on the Environment and the Economy (NRTEE) — the fourth in our Climate Prosperity series — sets out what those costs could be. It makes clear that while there is an environmental cost to climate change, there is an economic cost too: a cost of letting climate impacts occur and a cost to adapting to protect ourselves from these impacts.

Having highlighted some of the likely physical impacts of warming temperatures and changing precipitation patterns from climate change in Canada in our second report, Degrees of Change, we undertook new analysis to assess the economic costs in this companion report, Paying the Price.

click to enlarge

This report represents the first time a national analysis of this kind, using various climate and growth scenarios, has been conducted to calculate how the economic costs of climate change stack up over time.

This is necessary research that allows Canadians to appreciate just how pervasive and pernicious climate change can be. It shows the uncertainty of estimating economic impacts of climate change and increases our understanding of how to assess climate risk and our own willingness to accept — or not — the probability of more damages for future generations. It then identifies how adaptation measures can reduce those costs, saving money and lives.

click to enlarge

The National Cost of Climate Change

Climate change costs for Canada could escalate from roughly $5 billion per year in 2020 — less than 10 years away — to between $21 billion and $43 billion per year by the 2050s. The magnitude of costs depends upon a combination of two factors: global emissions growth and Canadian economic and population growth. Our study generated four separate scenarios combining these factors to understand the potential costs of climate change under different futures.

As the speed and scale of climate change is uncertain, we need to consider the probability of both higher and lower costs. The NRTEE’s research sheds new light on how to assess national economic risks. Our modeling shows not just the average results listed above, but what those economic costs could be as climate change plays out under a range of assumptions for key scientific and economic variables. It shows there is a risk those costs could be not just higher, but much higher. In the 2050s, where costs are estimated at $21 billion in the low climate change–slow growth scenario, there is a 5% chance that the costs could be at least $44 billion per year, and where costs are estimated at $43 billion in the high climate change–rapid growth scenario, there is a 5% chance that the costs could be at least $91 billion per year.

How do we get costs down? Global mitigation leading to a low climate change future reduces costs to Canada in the long term. This reinforces the argument that Canada would benefit environmentally and economically from a post-2012 international climate arrangement that systematically reduced emissions from all emitters — including Canada — over time.

click to enlarge

Climate Impacts on People , Places , and Prosperity

Because climate change impacts will manifest themselves sectorally and regionally in different ways across our enormous country, the NRTEE conducted specific “bottom-up” studies to assess the costs of climate change on three representative aspects of Canada: its prosperity (timber supply), places (coastal areas), and people (human health).

In each of these three areas, climate change will impose costs for Canada. By the 2050s, the impacts of climate change on the timber supply through changes in pests, fires, and forest growth are expected to cost the Canadian economy between $2 billion and $17 billion per year. The coastal land area exposed to climate change–induced flooding from sea-level rise and increased storminess across Canada by the 2050s is roughly equivalent to the size of the Greater Toronto Area. The costs of flooding from climate change could be between $1 billion and $8 billion per year by the 2050s. Climate change will lead to warmer summers and poorer air quality, resulting in increased deaths and illnesses in the four cities studied — Montréal, Toronto, Calgary, and Vancouver. Illnesses associated with climate change impacts on air quality in turn will impose costs on the health care system; in Toronto these costs could be between $3 million and $11 million per year by the 2050s.

click to enlarge

Our analysis shows that the costs of climate change on people, places, and prosperity will vary and be uneven across the country. Timber supply in Western Canada will be more affected than in the East. British Columbia’s forest-reliant economy will suffer more than many others while Ontario’s economy — due to its size — will see the largest absolute economic impact. Coastal regions across Canada are also affected differently by climate change. Relative to the total land area of each province and territory, Prince Edward Island’s coastal areas are most at risk. Many dwellings in the Lower Mainland of British Columbia are likely to be impacted given that the area is low-lying and has a high housing density, and the per capita costs of dwelling damage will be highest in British Columbia and Nunavut. Human health impacts and increased health system costs from climate change vary across the four cities we studied, with cities that experience the greatest increases in temperature — Toronto and Vancouver — experiencing the greatest impacts.

click to enlarge

Adaptation Saves Money

Adapting to climate change is both possible and cost-effective. Halting emissions growth tomorrow will do nothing to arrest the impacts of GHGs already in the atmosphere. So, some form of climate change impacts due to global warming can be expected, requiring adaptation measures in response. Our study examined five different adaptation strategies to assess their costs and benefits. All but one was found to be cost-effective, with the costs of the strategies being far lower than the savings they would yield through reducing the economic impacts of climate change.

Enhancing forest fire prevention, controlling pests, and planting climate-resilient tree species together reduced the impacts of climate change on timber supply across the country. Under a high climate change–rapid growth scenario, the benefit to cost ratio was 38:1 while it was 9:1 under a low climate change–slow growth scenario. In coastal areas, prohibiting new construction in areas at risk of flooding as well as undertaking “strategic retreat” by gradually abandoning dwellings once flooded reduces the costs of climate change to only 3–4% of what the costs would have been without adaptation. Adaptation strategies can reduce prospective health impacts of heat exposure and lower air quality. Replacing conventional roofs with green roofs helped reduce the urban heat-island effect across our four cities, but the costs of this strategy exceeded the benefits. In contrast, installing pollution control technologies to limit ozone formation was found to be cost-effective.

click to enlarge

Ecosystems

Ecosystems provide us with a range of services critical to our health, economy, and overall well-being, but climate change is altering the quality and health of Canada’s ecosystems. Our report illustrates some possible economic implications of climate change on ecosystem services: climate change could increase visitor spending in and around Canada’s national parks due to warmer temperatures, and reduced availability of lake trout could lead to losses in recreational fishing expenditures. While ecosystem services, and the impact that climate change will have on them, can be very difficult to express in economic terms, a failure to do so underestimates the costs of climate inaction. At the same time, it is important to recognize that nonmonetary indicators may matter more to people when it comes to preserving ecosystems —their “value” is often intrinsic and personal. Ecosystem losses can simply be irreplaceable.

click to enlarge

Two Futures

Examining long-term economic costs of climate change to Canada raises the spectre of two futures: one where the world acts — and keeps global warming to 2°C by 2050 as world leaders have pledged — and one where it doesn’t and climate change impacts grow and accelerate beyond targets. At slightly under 2°C of global warming, the economic costs of climate change to Canada in 2050 would be between $21 billion and $43 billion with no adaptive action taken; costs could be at the lower end of range if economic growth slowed as part of domestic mitigation or for other reasons. If the world acts to limit warming to 2°C, future costs could stabilize around this 2050 level since emissions growth would have been dampened and plateaued to reach this new global reality.

click to enlarge

What Do We Recommend?

Canadians can and should use economic information to decide how to best prepare for, and respond to, the impacts of climate change. Our recommendations are as follows:

1 The Government of Canada invest in growing our country’s expertise in the economics of climate change impacts and adaptation so we have our own Canadian-focused, relevant data and analysis for public and private-sector decision makers.

2 The Government of Canada cost out and model climate impacts to inform internal decisions about adapting policies and operations to climate change and allocating scarce resources to programs that help Canadians adapt.

click to enlarge

3 Governments at all levels continue investing in generating and disseminating research to inform adaptation decision making at the sectoral, regional, and community level. This research should, as a matter of routine, incorporate economic analysis of the costs and benefits of options to adapt to climate impacts because the current data is insufficient for decision makers and is not readily or consistently available.

4 The Government of Canada forge a new data- and analysis-sharing partnership with universities, the private sector, governments, and other expert bodies to leverage unique and available nongovernmental resources for climate change adaptation.