international technical conference on climate … › 3 › a-bu424e.pdfland-water-energy nexus...

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



THE INTERNATIONAL TRADE

CONSEQUENCES OF CLIMATE CHANGE

Rob Dellink

OECD Environment Directorate

17 November 2017



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)



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.



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%



• 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



• 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



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



9

There are very significant downside risks from unmitigated climate change on

ariculture


-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



-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


-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




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




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



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



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



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



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



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%



-20%

0%

20%

40%

60%

80%

100%

120%



-20%

0%

20%

40%

60%

80%

100%

120%



-20%

0%

20%

40%

60%

80%

100%

120%


Total impact



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



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.



THANK YOU

For further information please contact

Rob Dellink([email protected])

or visit

www.oecd.org/environment/CIRCLE.htm

www.oecd.org/environment/modelling



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



20

NO-DAMAGE BASELINE GDP PROJECTION




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



22

The regional consequences of market damages are strongest in Africa and Asia


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



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


Central projection until 2100


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




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




Central projection until 2060 (Committed by 2060)

Weitzman damage function

Source: AD-DICE calculations



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



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



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 (-)



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



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



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



THE INTERNATIONAL TRADE

CONSEQUENCES OF CLIMATE CHANGE

Rob Dellink

OECD Environment Directorate

17 November 2017

international technical conference on climate … › 3 › a-bu424e.pdfland-water-energy nexus...

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