Environmental and social impacts

T h e environmental and social consequences of global warming which do not enter directly into the calculation of economic impacts but which could nev- ertheless be significant include:

inundation and permanent loss of coastal locations with particular social, natural, or educational value;

loss of biodiversity, natural habitats, nature reserves, and areas of special scientific interest, for instance through the inability of ecosystems to migrate sufficiently rapidly in response t o shifting climatic zones;

a lower quality of life through environmental degradation and health effects, for instance from the interaction between climatic extremes and pollution, from the spread of disease with climatic and vegetation shifts, and from the degradation of water resources in less developed regions;

loss of human life through coastal flooding, natural hazards, health ef- fects, and regional degradation of the socioeconomic resource base;

the societal, cultural and security implications of large-scale migration;

local transitional pressures resulting from economic decay in some re- gions and sectors, and the problems of restructuring t o take advantage of new economic opportunities elsewhere.

These impacts cannot easily be estimated, and none of the results re- ported so far has included them. However, with PAGE we can calculate how such environmental and social impacts would have t o be valued in order that a particular combination of preventive and adaptive policies (namely

"aggressive" prevention combined with "aggressive" adaptation) would be considered a worthwhile option, both for individual regions and for the world as a whole.12

T h e environmental and social impacts are incorporated into PAGE by designating a new impact sector, and using this t o define an impact weight like those described in Table 2 for direct economic impacts. Table 9 shows the weight that needs t o be placed upon environmental and social impacts (as a multiple of the modal weight on all economic impacts combined, 62 billion ECU per OC in the EC) for the mean value of a combined strategy of "aggressive" prevention with "aggressive" adaptation t o be preferred t o adaptation alone.

Because the effect of a preventive policy is to reduce the rise in global temperature, some of its benefits are received outside the region adopting the policy. Two types of motivation are recognized in Table 9 for adopting the combined strategy. If the motivation is selfish, the countries implementing the combined strategy need t o see a sufficient reduction in impacts in those countries alone; if the motivation is altruistic, the countries implementing

lZ1n this calculation, it is assumed that adaptive measures would be largely ineffective against environmental and social impacts. This may overstate the difficulty of dealing with these impacts, since, for instance, land use planning would prevent some of the loss of life that would otherwise occur with increased flooding in developing countries.

Table 9. Valuation of environmental and social impacts to justify a com- bined strategy, by region and motivation, multiple of direct economic im- pact.

Selfish Altruistic

Region adopting combined strategy motivation motivation

European Community 14.8 5.1 ^a

Whole of the OECD 3.9 2.3

Worldwide 2.0 2.0

the strategy need t o see a sufficient reduction in impacts in the world as a whole.

The results in Table 9 show how important it would be for the E C t o persuade a t least its main trading partners in the rest of the OECD t o adopt the combined strategy as well.

Environmental and social values would have t o be about 15 times the sum of all economic impacts if the E C were to introduce the combined strat- egy alone, and expect t o see a sufficient reduction in impacts just in its own member states. Even with an altruistic motivation, environmental and social impacts would have to be five times direct economic impacts. How- ever, if the whole of the OECD were t o introduce the combined strategy, the corresponding valuation of environmental and social impacts would need t o be only about four times with selfish direct economic impacts and just over twice with altruistic motivation, respectively. This does not fall much fur- ther if the whole world were to adopt a combined strategy; a valuation of environmental and social impacts of twice the sum of direct economic im- pacts would still be required for adoption of the combined strategy t o be justified.13

Environmental and social impacts of this sort of magnitude are not un- usual in willingness to pay studies; for instance, Randall reports that non-use values such as these are frequently substantial and sometimes exceed current use values, such as our direct economic impacts, by a considerable margin (Randall, 1991).

13These multiples are of the valuation of direct economic impacts without adaptation;

because the "aggressive" adaptation considered here reduces the direct economic impacts by up to 90% by 2050, environmental and social impacts actually make up the great major- ity of realised impacts, since adaptive policies are assumed to be ineffective at mitigating them.

Table 10. Input parameters having the greatest effect on the costs and

Adaptive cost for altered plateau in services sector $0335 Adaptive cost regional factor for rest of the world $0.50 Range of cheaper C 0 2 costs in former USSR and Eastern Europe -0.35 Preventive cost regional factor for former USSR and Eastern Europe $0.35 Adaptive cost for altered plateau in manufacturing sector $0.35 Influence on total impact uncertainty:

Global temperature sensitivity to doubling of C 0 2 Half life of global warming response to change in forcing Weight on economic impacts in agricultural sector Weight on economic impacts in service sector Weight on economic impacts in manufacturing sector Proportion of COz emitted to air

Stimulation of natural emissions of C 0 2 Weight regional factor for OECD excl. EC Weight on economic impacts in tourism sector

3.8. T h e treatment of uncertainty

This is about as far as analysis with PAGE can go without some reasonable estimates for actual valuations of environmental and social impacts as op- posed t o direct economic impacts. The essence of greenhouse policy making is t o decide whether the decrease in damage from a more aggressive policy outweighs the increase in preventive or adaptive costs. Given the present state of knowledge, any conclusion must be tentative, and subject t o great uncertainty. PAGE offers a final, important means of assistance t o the policy maker in the form of a measure of the contribution that the uncertainty in each of the 84 input parameters in the model makes t o the uncertainty in the results.

Table 10 shows the input parameters whose uncertainty has the greatest effect on the costs and the impacts of the combined strategy, respectively.14 The standard measure of the Partial Rank Correlation Coefficient (PRCC) between the input and the result in question is employed in PAGE. PRCC

14The costs and impacts d o not include environmental and social impacts. These are t h e inputs whose influence can be declared to be different from zero a t the 95% confidence level.

values close t o plus or minus 1 show a strong influence; values near t o zero show a weak influence.

For costs, all the preventive cost factors refer t o C 0 2 , rather than CFCs or HCFCs, as we would expect given the dominance of C 0 2 costs. T h e region t h a t has the greatest influence on uncertainty in the total costs is t h e former USSR and Eastern Europe; no factor for the OECD is significaht.

Three adaptive cost factors also have a large influence. All the PRCCs are in the direction t h a t would be expected.

For impacts, four factors from the climate part of the model and five concerned with weights show that neither the science nor the economics is dominant in introducing uncertainty about the impacts. All the PRCCs are again in the direction t h a t would be expected.

Overall, it can be seen t h a t important factors come from all four groups of inputs t o the model, science, costs of control, costs of adaptation, and valuation of impacts. The ability of PAGE t o incorporate all of these un- certainties within a unified framework is one of its greatest advantages over more detailed but partial models.