paying the price: the economic impacts of climate change for canada

7/31/2019 Paying The Price: The Economic Impacts of Climate Change for Canada

1/168

PAYINGTHEPRICE:THEECON

OMICIMPACTSOFCLIMATEC

HANGEFORCANADA

//REPORT04

ACANADIA

NINITIATIVE


2/168


3/168

THIS IS NOTJUST ABOUTCOPING WITH

CLIMATE CHANGE,BUT PROSPERING

THROUGH IT.A CANADIAN INITIATIVE


4/168

National Round Table on the Enironment and the Economy, 2011

All rights resered. No part o this work coered by the copyright herein may bereproduced or used in any orm or by any means graphic, electronic or mechanical,including photocopying, recording, taping or inormation retrieal systems without

the prior written permission o the publisher.

Library and Archies Canada Cataloguing in Publication

National Round Table on the Enironment and the Economy (Canada)Paying the Price: The Economic Impacts o Climate Change or Canada

(Climate Prosperity; Report 04)Issued also in French under title: Le prix payer : rpercussions conomiquesdu changement climatique pour le CanadaIncludes bibliographical reerences.Aailable also on the Internet.

ISBN 978-1-100-19091-4Cat. No.: En133-40/4-2011E

1. Climatic changes--Economic aspects--Canada.2. Climatic changes--Goernment policy--Economic aspects--Canada.3. Enironmental policy--Economic aspects--Canada.4. Enironmental economics--Canada.I. Title: Paying the Price: The Economic Impacts o Climate Change or CanadaII. Series: Climate Prosperity; Report 04

QC903.2 C3 N37 2011 363.738740971 C2011-980105-1

Concept/Design: Bleublancrouge-Kolegram

Suggested citation: Canada. National Round Table on the Enironment and the Economy.(2011). Paying the Price: The Economic Impacts o Climate Change or Canada

National Round Table on the Enironment and the Economy344 Slater Street, Suite 200Ottawa, OntarioCanada K1R 7Y3

T 613 - 992-7189F 613 - 992-7385E [email protected] www.nrtee-trnee.ca

Discaimer: The iews expressed in this document do not necessar ily represent those o the org anizations

with which indiidual Round Table members are associated or otherwise employed. T he NRTEE stries

or consensus but does not demand unanimity. The NRTEE s deliberations included igorous discussionand debate reecting diersity o opinion.


5/168

ACKNOWLEDGEMENTS

The National Round Table on the Environment and the Economy (NRTEE) is grateul to the generous

contributions o expertise rom many individuals and organizations. We are particularly grateul to the

members o our Advisory Committee who provided invaluable advice and direction as we developed

and analyzed the research or this report, and to the many expert stakeholders who participated in our

scoping and outreach sessions.

This type o work is necessarily interdisciplinary, in our case requiring an integration o climate, ecological,

health, geographic, and economic inormation. We drew on exper tise rom many disciplines to inorm

our research and peer review our ndings. These contributions helped us to improve the quality o our

report. The nal product is that o the NRTEE.

The NRTEE would also like to acknowledge the contributions rom key consultancies involved in the

research underpinning this report: Metroeconomica Limited, Paul Watkiss Associates, Burton Dickinson

Consulting Limited, Marbek Resource Consultants, Van Lantz, David Antho, Patrick Kinney, Stockholm

Environment Institute U.S. Center, Industrial Economics Ltd., Paul Chinowsky, ArborVitae Environmental

Services Ltd., and Chris Hope.

Finally, thanks to the NRTEE Secretariat sta or their contributions to developing the report. Nadra Meigag

and Denise Edwards coordinated numerous stakeholder sessions. Marie-Jose Lapointe, Tony Bgin,

Tania Tremblay, Edwin Smith, and Richard Pilon managed the design and production o the report.

Will McDowell contributed to scoping the report and establishing a research ramework and James Wellstead

and Jolle Boutin provided research support and editorial assistance. Suzanne Loney and Jimena Eyzaguirre

steered the research underpinning this report, analyzed ndings, convened stakeholders across the

country, and prepared drats. As project lead, Suzannes contribution was instrumental in producing this

ourth report o the Climate Prosperityseries.


6/168

04 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

R.W. SlATER, CM, PH.D.NRTEE Vice-Chair

MESSAGE FROM THE vICE-CHAIR

Paying the Price: The Economic Impacts o Climate Change or Canada is the latest report in the Climate

Prosperity series by the National Round Table on the Environment and the Economy. It complements

Degrees o Change: Climate Warming and the Stakes or Canada, published in 2010, which shows a vast

range o physical impacts o a warming climate on Canada. With these reports, we can better understand

the growing economic impacts o climate change to Canada and assess both the costs we could ace and the

adaptation choices we can make.

Degrees o Change showed what the physical impacts o climate warming could be or Canada; Paying the

Price shows what the economic impacts could be or Canada. Many o these impacts will be negative and

many will carry a cost. Together, these two NRTEE reports will help Canadians know more aboutwhat some o those impacts could be and how much they could cost.

Paying the Price sets out to help all o us -- governments, business and communities -- make climate-wise

investment choices now, and in the uture. The economic inormation we provide in this report will urther

help us understand what is at stake i we ail to respond and global greenhouse gas emissions continue to rise.


7/168

PAYING THE PRICE: THE ECONOMIC IMPACTS OF CLIMATE CHANGE FOR CANADA // 05

DAVID MclAUGHlINNRTEE President and Chie Executive Ocer

MESSAGE FROM THE PRESIDENT AND CEO

Climate change has a price tag and it could be expensive. But ew Canadians know what that could be.

To date, ocus has mostly been on what it would cost to reduce greenhouse gas emissions by industry and

consumers. Little attention has been paid to the cost o inaction, to what economic damages could accrue

to Canada and Canadians as global emissions rise and climate change plays out.

Paying the Price: The Economic Impacts o Climate Change or Canada sets out or the rst time ever in

Canada what those costs could be. This report makes clear that while there is an environmental cost to

climate change, there is an economic cost too: o simply letting climate impacts occur. Those costs are high

and could get higher.

Our report also shows that adapting to climate change makes economic sense. It can lower the costs o

climate impacts by preventing damage, saving money and lives.

The Round Tables report now makes clear that getting global emissions down is both in Canadas economic

and environmental interest.


8/168

06 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

ABOUT US

Emerging rom the amous Brundtland Report,Our Common Future

, the National Round Table on the

Environment and the Economy (NRTEE or Round Table) has become a model or convening diverse and

competing interests around one table to create consensus ideas and viable suggestions or sustainable

development. The NRTEE ocuses on sustaining Canadas prosperity without borrowing resources rom

uture generations or compromising their ability to live securely.

The NRTEE is in the unique position o being an independent policy advisory agency that advises the

ederal government on sustainable development solutions. We raise awareness among Canadians and their

governments about the challenges o sustainable development. We advocate or positive change. We strive to

promote credible and impartial policy solutions that are in the best interest o all Canadians.

We accomplish that mission by ostering sound, well-researched reports on priority issues and by oering

advice to governments on how best to reconcile and integrate the oten divergent challenges o economic

prosperity and environmental conservation.

The NRTEE brings together a group o distinguished sustainability leaders active in businesses,

universities, environmentalism, labour, public policy, and community lie rom across Canada. Our

members are appointed by the ederal government or a mandate o up to three years. They meet in a

round table ormat that oers a sae haven or discussion and encourages the unettered exchange oideas leading to consensus.

We also reach out to expert organizations, industries, and individuals to assist us in conducting our

work on behal o Canadians.

The NRTEE Act underlines the independent nature o the Round Table and its work. The NRTEE reports,

at this time, to the Government o Canada and Parliament through the Minister o the Environment. The

NRTEE maintains a secretariat, which commissions and analyzes the research required by its members

in their work.


9/168

PAYING THE PRICE: THE ECONOMIC IMPACTS OF CLIMATE CHANGE FOR CANADA // 07

NRTEE MEMBERS

NRTEE vICE-CHAIRRobert SlaterAdjunct Proessor

Environmental Policy

Carleton University

Ottawa, Ontario

NRTEE vICE-CHAIRMark ParentFormer Nova Scotia Minister o

Environment and Labour

Canning, Nova Scotia

David John BishopPartner

McKercher LLP

Regina, Saskatchewan

The Honourable Pauline Browes, P.C.Director

Waterront Regeneration Trust

Toronto, Ontar io

Dianne CunninghamDirector

Lawrence National Centre

or Policy and ManagementUniversity o Western Ontario

London, Ontario

John V. HacheyLachine, Qubec

Timothy R. HaigDirector and Past President and CEO

BIOX Corporation

Oakville, Ontario

Christopher HilkenePresidentClean Water Foundation

Toronto, Ontar io

Franklin HoltorsterPresident and Chie Executive Ocer

MHPM Project Managers Inc.

Ottawa, Ontario

Robert KulhawyExecutive Chairman

Calco Environmental Group

Calgary, Alberta

Donald MacKinnonPresident

Power Workers Union

Toronto, Ontar io

Robert MillsInternational Advisor, Globe International

Senior Advisor, Plasco Energy Group

Red Deer, Alberta

Richard Prokopanko

DirectorGovernment Relations

Rio Tinto Alcan Inc.

Vancouver, British Columbia

NRTEE PRESIDENT AND CEODavid McLaughlin


10/168

CONTENTS

0.0 // EXECUTIVE SUMMARY 0141.0 // ClIMATE CHANGE: AN ECONOMIC STORY 0221.1 // Whats at Stake 0231.2 // Our Contribution 0231.3 // Our Appoach 025

2.0 // CANADA-WIDE COSTS OF ClIMATE CHANGE 0342.1 // How is Canada Aected? 0352.2 // Modelling the Costs o Climate Change 0362.3 // Economic Consequences o Climate Change or Canada 0402.4 // Canada and the World at 2C Warming 044

2.5 // Conclusion 045

3.0 // TIMBER SUPP lY 0483.1 // The Climate Connection 0493.2 // An Oeriew o Our Methods 0513.3 // Timber Impacts due to Climate Change 0523.4 // Economic Impacts 0523.5 // Adaptation Strategies 0553.6 // Conclusion 059

4.0 // COASTAl AREA S 0624.1 // The Climate Connection 0634.2 // An Oeriew o Our Methods 0664.3 // Coastal Flooding Impacts 0674.4 // Economic Impacts 0714.5 // Adaptation Strategies 0754.6 // Conclusion 079

5.0 // HUMAN HEAlTH 0825.1 // The Climate Connection 0835.2 // An Oeriew o Our Methods 0855.3 // Health Impacts due to Climate Change 0875.4 // Economic Impacts 091

5.5 // Adaptation Strategies 0955.6 // Conclusion 099


11/168

6.0 // ECOSYSTEMS 1026.1 // The Climate Connection 1036.2 // Economic Impacts 1056.3 // Adaptation Strategies 1106.4 // The Limits o Economic valuation 1116.5 // Conclusion 113

7.0 // CONClUSIONS AND RECOMMENDATION S 1167.1 // What Did We Find? 1177.2 // What Does It Mean ? 1197.3 // What Do We Recommend? 1207.4 // Where Do We Go From Here? 121

8.0 // APPENDICES 1248.1 // Analytical Framework 1258.2 // Cost Distributions under Four Climate and Growth Scenarios 1268.3 // Additional Details on the Methods Used or the Timber Supply Study 1298.4 // Additional Details on the Methods Used or the Coastal Areas Study 1328.5 // Additional Details on the Methods Used or the Human Health Study 1358.6 // Expert Stakeholder Engagement 1428.7 // Glossary 1468.8 // Reerences 1498.9 // Endnotes 158


12/168

Widening Uncertainty in Costing the Impacts o Climate Change 026Emissions Trajectories Driing Global Climate Scenarios 027National Growth Scenarios 028Four Scenarios Used or our Analysis 029How the PAGE09 Model Works 037Aerage Annual Costs o Climate Change or Canada 041Aerage Annual Costs o Climate Change or Canada Relatie to GDP 042Distribution o Costs o Climate Change in High Climate ChangeRapid Growth Scenario, 2050 043Impacts o Climate Change on Canadas Forests 049Impacts o Climate Change on Coastal Areas 064Land Area at Risk o Flooding Along Canadas Marine Coasts 067

Land Area at Risk o Flooding as Percentage o Total Land Area by Region, 2050s 068Annual Number o Dwellings at Risk o Flooding in Canada 069Annual Damages to Dwellings rom Flooding 071Per Capita Costs o Dwelling Damages by Region, 2050s 073Impacts o Climate Change on Human Health 083Annual Deaths Attributable to Heat and Air Quality Impacts rom Climate Change 088Annual Hospital visits Attributable to Air Quality Impacts rom Climate Change 090Annual Increase in visitor Spending due to Climate Change 106Forecasting Future Conditions 126Distribution o Possible Costs in Low Climate ChangeSlow Growth Scenario, 2050 127Distribution o Possible Costs in Low Climate ChangeRapid Growth Scenario, 2050 127

Distribution o Possible Costs in High Climate ChangeSlow Growth Scenario, 2050 128Distribution o Possible Costs in High Climate ChangeRapid Growth Scenario, 2050 128

LIST OF FIGURES

FIGURE 1FIGURE 2FIGURE 3FIGURE 4FIGURE 5FIGURE 6FIGURE 7FIGURE 8FIGURE 9FIGURE 10FIGURE 11

FIGURE 12FIGURE 13FIGURE 14FIGURE 15FIGURE 16FIGURE 17FIGURE 18FIGURE 19FIGURE 20FIGURE 21FIGURE 22

FIGURE 23FIGURE 24

//////////////////////

//////////////////////

////


13/168


14/168

E

XEC

UTIV

E

S

UMMARY


15/168


16/168

01 4 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY14 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

EXECUTIvE SUMMARY//0.0


17/168

PAYING THE PRICE: THE ECONOMIC IMPACTS OF CLIMATE CHANGE FOR CANADA // 015PAYING THE PRICE: THE ECONOMIC IMPACTS OF CLIMATE CHANGE FOR CANADA // 15

0.0 EXECUTI VE SUMMARY

Climate change will be expensive or Canada and Canadians.

Increasing greenhouse gas emissions worldwide will exert a

growing economic impact on our own country, exacting a

rising price rom Canadians as climate change impacts

occur here at home.

This report by the National Round Table on the Environment and the Economy (NRTEE) the ourth in

our Climate Prosperityseries 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 o letting climate impacts occurand a cost to adapting to protect ourselves rom these impacts.

Having highlighted some o the likely physical impacts o warming temperatures and changing precipitation

patterns rom climate change in Canada in our second report,Degrees o Change, we undertook new analysis

to assess the economic costs in this companion report,Paying the Price.

This report represents the rst time a national analysis o this kind, using various climate and growth

scenarios, has been conducted to calculate how the economic costs o 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 o estimating economic impacts o climate change and increases our

understanding o how to assess climate risk and our own willingness to accept or not the probability

o more damages or uture generations. It then identies how adaptation measures can reduce those costs,

saving money and lives.

THE NATIONAL COST OF CLIMATE CHANGE

Climate change costs or Canada could escalate rom 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 o costs depends upon

a combination o two actors: global emissions growth and Canadian economic and population growth. Ourstudy generated our separate scenarios combining these actors to understand the potential costs o climate

change under dierent utures.


18/168

016 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY16 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

As the speed and scale o climate change is uncertain, we need to consider the probability o both higher and

lower costs. The NRTEEs research sheds new light on how to assess national economic risks. Our modelling

shows not just the average results listed above, but what those economic costs could be as climate change plays

out under a range o assumptions or key scientic and economic variables. It shows there is a risk those costscould be not just higher, but much higher. In the 2050s, where costs are estimated at $21 billion in the low

climate changeslow 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 changerapid 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 uture reduces costs to

Canada in the long term. This reinorces the argument that Canada would benet environmentally and

economically rom a post-2012 international climate arrangement that systematically reduced emissions

rom all emitters including Canada over time.

CLIMATE IMPACTS ON PEOPLE, PLACES, AND PROSPERITY

Because climate change impacts will maniest themselves sectorally and regionally in dierent ways across

our enormous country, the NRTEE conducted specic bottom-up studies to assess the costs o climate change

on three representative aspects o Canada: its prosperity (timber supply), places (coastal areas), and people

(human health).

In each o these three areas, climate change will impose costs or Canada. By the 2050s, the impacts o

climate change on the timber supply through changes in pests, res, and orest growth are expected to costthe Canadian economy between $2 billion and $17 billion per year. The coastal land area exposed to climate

changeinduced fooding rom sea-level rise and increased storminess across Canada by the 2050s is roughly

equivalent to the size o the Greater Toronto Area. The costs o fooding rom 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 our cities studied Montral, 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.

Our analysis shows that the costs o climate change on people, places, and prosperity will vary and be unevenacross the country. Timber supply in Western Canada will be more aected than in the East. British Columbias

orest-reliant economy will suer more than many others while Ontarios economy due to its size will see

the largest absolute economic impact. Coastal regions across Canada are also aected dierently by climate

change. Relative to the total land area o each province and territory, Prince Edward Islands coastal areas

are most at risk. Many dwellings in the Lower Mainland o British Columbia are likely to be impacted given


19/168


that the area is low-lying and has a high housing density, and the per capita costs o dwelling damage will be

highest in British Columbia and Nunavut. Human health impacts and increased health system costs rom

climate change vary across the our cities we studied, with cities that experience the greatest increases in

temperature Toronto and Vancouver experiencing the greatest impacts.

ADAPTATION SAvES MONEY

Adapting to climate change is both possible and cost-eective. Halting emissions growth tomorrow will do

nothing to arrest the impacts o GHGs already in the atmosphere. So, some orm o climate change impacts

due to global warming can be expected, requiring adaptation measures in response. Our study examined ve

dierent adaptation strategies to assess their costs and benets. All but one was ound to be cost-eective,

with the costs o the strategies being ar lower than the savings they would yield through reducing the

economic impacts o climate change.

Enhancing orest re prevention, controlling pests, and planting climate-resilient tree species together

reduced the impacts o climate change on timber supply across the country. Under a high climate change

rapid growth scenario, the benet to cost ratio was 38:1 while it was 9:1 under a low climate changeslow

growth scenario. In coastal areas, prohibiting new construction in areas at risk o fooding as well as

undertaking strategic retreat by gradually abandoning dwellings once fooded reduces the costs o climate

change to only 34% o what the costs would have been without adaptation. Adaptation strategies can

reduce prospective health impacts o heat exposure and lower air quality. Replacing conventional roos

with green roos helped reduce the urban heat-island eect across our our cities, but the costs o this strategy

exceeded the benets. In contrast, installing pollution control technologies to limit ozone ormation wasound to be cost-eective.

ECOSYSTEMS

Ecosystems provide us with a range o services critical to our health, economy, and overall well-being, but

climate change is altering the quality and health o Canadas ecosystems. Our report illustrates some possible

economic implications o climate change on ecosystem services: climate change could increase visitor

spending in and around Canadas national parks due to warmer temperatures, and reduced availability o

lake trout could lead to losses in recreational shing expenditures. While ecosystem services, and the impact

that climate change will have on them, can be very dicult to express in economic terms, a ailure to do

so underestimates the costs o climate inaction. At the same time, it is important to recognize that non-

monetary indicators may matter more to people when it comes to preserving ecosystems their value is

oten intrinsic and personal. Ecosystem losses can simply be irreplaceable.


20/168

018 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY18 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

TWO FUTURES

Examining long-term economic costs o climate change to Canada raises the spectre o two utures: one

where the world acts and keeps global warming to 2C by 2050 as world leaders have pledged and onewhere it doesnt and climate change impacts grow and accelerate beyond targets. At slightly under 2C o

global warming, the economic costs o 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 o range i economic growth

slowed as part o domestic mitigation or or other reasons. I the world acts to limit warming to 2C, uture

costs could stabilize around this 2050 level since emissions growth would have been dampened and

plateaued to reach this new global reality.

WHAT DO WE RECOMMEND?

Canadians can and should use economic inormation to decide how to best prepare or, and respond to, the

impacts o climate change. Our recommendations are as ollows:

1 // The Government o Canada invest in growing our countrys expertise in the economics o climate

change impacts and adaptation so we have our own Canadian-ocused, relevant data and analysis or

public and private-sector decision makers.

2 // The Government o Canada cost out and model climate impacts to inorm internal decisions about

adapting policies and operations to climate change and allocating scarce resources to programs that

help Canadians adapt.

3 // Governments at all levels continue investing in generating and disseminating research to inorm adap-

tation decision making at the sectoral, regional, and community level. This research should, as a matter

o routine, incorporate economic analysis o the costs and benets o options to adapt to climate impacts

because the current data is insucient or decision makers and is not readily or consistently available.

4 // The Government o Canada orge a new data- and analysis-sharing partnership with universities,

the private sector, governments, and other expert bodies to leverage unique and available non-

governmental resources or climate change adaptation.


21/168


WHATS NEXT?

Knowing the economic risks o climate change is one thing; acting to reduce them through adaptation

is another. The NRTEEs th report in its Climate Prosperityseries will examine the state o readinesso Canadas private sector to manage the impacts o climate change and what the private sector can and

should do to reduce its own risk and exposure to climate change. We will analyze various risk management

practices to build business resilience to climate change and barriers to putting them in place. And we will

consider how government can cost-eectively promote private-sector adaptation, what businesses need

rom government to plan and adapt, and how government can most useully contribute to this growing,

long-term, shared challenge acing our country.


22/168

ClIMATECHAN

GE:

ANEC

ONO

MIC

STOR

Y

//CHAPTER1.0


23/168


24/168


CLIMATE CHANGE: AN ECONOMIC STORY

WHATS AT STAKE

OUR CONTRIBUTION

OUR APPROACH

//

//

//

//

1.0

1.1

1.2

1.3


25/168


1.1 WHATS AT STAkE

Climate change has a price tag.But ew Canadians know what that could be. To date, ocus has mostly been on what it would cost to reduce

greenhouse gas emissions by industry and consumers. Little attention has been paid to the cost o inaction,

to what economic damages could accrue to Canada and Canadians as climate change plays out.

This matters. For one, we have a clear interest in reducing the negative economic consequences o climate

change by adapting to impacts in cost-eective ways. So its important to understand what the cost o

climate change rom increasing global emissions could amount to and what the implications o taking

action to avoid these costs could be. For another, understanding what the scale o the costs o climate

change could be makes us realize that we have a clear economic stake in reducing global greenhouse gasemissions. Both the physical impacts on our environment and the economic damages on our prosperity

rom climate change wi ll only increase in the decades ahead. Canadas limited but real contribution to

global greenhouse gas emissions masks the growing negative economic impact o overall world emissions

on us. Reducing those emissions is not just in our environmental interest but, as our report shows, in our

economic interest as well.

1.2 OUR CONTRIBUTION

Pay ing the Price: the Economic Impacts o Cl imate Change or Canada is the ourth report in the Climate

Prosperity series by the National Round Table on the Environment and the Economy.It complementsDegrees o Change: Climate Warming and the Stakes or Canada, published in 2010, which shows a vast

range o physical impacts o a warming climate on Canada. With these reports, we can better understand

the growing economic impacts o climate change to Canada and assess both the costs we could ace and the

adaptation choices we can make.

A growing body o research on the economic costs o climate change is amassing internationally, but less

so in Canada. Canada has conducted remarkably little economic analysis to date on climate change impacts

and the costs and benets o adaptation. Much o the economic analysis undertaken in this country to datehas ocused on the costs o reducing greenhouse gases here in Canada, rather than the costs o climate

change impacts themselves rom rising global emissions. This needs to change.


26/168


The NRTEE believes that to both cope and prosper through climate change, we need better inormation on

the costs o climate change impacts. We need to improve our understanding o the risks and opportunities

we could ace, including the opportunity to reduce costs by adapting to climate change impacts. So ar,

the amount o adaptation to uture changes in climate taking place in Canada is small relative to whatwill likely be needed.1 Public- and private-sector decision makers more readily see the costs o adapting to

climate change as a key barrier to moving orward; less obvious is the cost onot adapting.

This report helps ll this knowledge gap by exploring, or the rst time, the costs o climate change or

the country as a whole, together with the costs o climate change with and without planned adaptation

or three important impact areas: timber supply, coastal areas, and human health. We also discuss the

economic implications o ecosystem impacts o climate change.

WE UNDERTOOK THIS RESEARCH AND A NALYSIS WITH THREE GOALS IN MIND:

FIRST, increase awareness o the costs we can expect rom climate change. Climate change will impose

costs on Canada. We need to prepare to ace these costs and invest in actions that reduce costs to the extent

possible. But what might those costs be? Our report explores this question.

SECOND, demonstrate that both domestic adaptation and global mitigation can reduce the costs o the

impacts o climate change. We compare the costs and benets o adaptation to the costs o some impacts o

climate change to show that adaptation can save us money. Our analysis also shows the dierence in costs

Canadians could ace with higher and lower levels o global greenhouse gas emissions, demonstrating that

actions that curb global emissions can reduce the costs o impacts or us in the long run.

THIRD, encourage urther exploration o the costs o climate change at the sectoral and regional level. Our

analysis is one contribution to this eld. By necessity, our coverage o climate change impacts and sectors

assessed in this report is limited. Most decisions taken to adapt to climate change impacts are context and

site-specic, requiring a more detailed analysis than what is possible at a national level. Our intention is

that by documenting our approaches to developing these cost estimates we will inspire others.


27/168


1.3 OUR APPROACH

TO ACHIEvE THESE GOALS, WE USED T WO COMPLEMENTARY RESEARCH APPROACHES:

FIRST, we conducted top-down economic analysis that estimates the potential costs o climate change

or the country as a whole. These high-level estimates give a sense o the scale o the challenge and the

dierence in costs that could be aced depending on uture global greenhouse gas emissions under

var ious scenarios. We also used this analysis to highlight the large degree o uncertainty and risk that

underlies this type o costing work.

SECOND, we conducted bottom-up analysis that estimates the economic consequences o climate

change or three specic impact areas timber supply, coastal areas, and human health and the

relative costs and benets o adaptation. Bottom-up studies are most helpul or inorming decision

making on adaptation because they connect the costs o climate change to particular sectors and

regions where they will be elt most. Where possible our analyses are national in their scope. We used

a common analytical ramework to ensure a consistent approach to the research and, where possible, a

consistent presentation o results across these studies (see Appendix 8.1). We also explore how climate

change could impose costs through impacts on Canadas ecosystems.

With both our top-down and bottom-up analysis, we explore the costs that climate change could

impose on Canada. Where there may be benets in specic impact areas, we draw attention to these

also. Studies o other impact areas such as energy demand or agr iculture may identiy other economic

benets rom climate change.

OUR APPROACH TO CONSIDERING THIS ISSUE IS B ASED ON WELL-UNDERSTOOD LIMITATIONS:

FIRST, economics is not a perect tool or understanding the impacts o climate change or or deciding

how to respond. When it comes to impacts on health, ecosystems, and culture (among other areas),

expressing the impacts o climate change in dollar values is not always meaningul to people. Also,

most o our costing methods consider incremental costs resulting rom smal l changes in climate change

impacts, but these methods are not appropriate when applied to major shits in components o the

earths system, such as the global climate. In spite o these limitations, economics combined with

other inormation is essential to appreciating the scope o what climate change portends and to help

make societal choices on how to deal with it.


28/168


SECOND, there are many t ypes o costs o cl imate change, some o which are more readily monetized

than others. Economic value can be broken up between use values and non-use values.2 Use values

are, or the most part, amiliar to us and to our pocketbooks. Within this wide category o costs, we

include goods and services with a market price like replacement costs o dwellings damaged rom afood or timber losses rom wildres. A lso within th is category o costs, we include ecosystem services

like air purication by trees or clean water. We are amiliar with these ecosystem benets but their

worth is hard to capture in economic terms because they typical ly lack market prices. Non-use values

are, by comparison, intangible. They reer to our willingness to pay to maintain some service in existence

despite no actual, planned or possible use, such as the value we derive rom simply knowing that polar

bears will be protected rom extinction. Our analysis ocuses primarily on traditional market values,

which is a partial accounting.

THIRD, orecasting the economic impacts o a changing climate is no exact task. Uncertainty pervades

every step in any such analysis: we dont know precisely what global greenhouse gas emissions wi ll bein the uture, how much or how ast the climate will change, how signicant the impacts o climate

change will be, how our economy and population will grow and respond to these impacts, or how

these impacts will be elt in economic terms. Our analysis relies on the current scientic and economic

understanding o climate change, which is incomplete and always being updated. Figure 1 shows how

uncertainty in this sort o analysis can accumulate. But uncertainty is part and parcel o all climate

change policy planning. Following the precautionary principle and prioritizing no-regrets strategies

can help decision makers navigate through the uncertainty, assess degrees o risk, and make sound,

cost-eective investment and adaptation decisions.

Futureemissions

Climateresponse

Weatherand climatechanges

Physicalimpacts

Futuresociety,economy

COSTSOF CLIMATECHANGE

WIDENING UNCERTAINTY IN COSTING THE IMPACTS OF CLIMATE CHANGE

SOURCE: ADAPTED FROM MENNE AND EBI 2006

FIGURE 1


29/168


ASSESSING CLIMATE CHANGE IMPACTS AND STRATEGIES BASED ON A RANGE OF SCENARIOS AND POSSIBLE FUTURES IS

CONSIDERED SOUND POLICY PRACTICE.

Knowing this, the NRTEE adopted a consistent, comparable scenario approach throughout our analysisand in this report. Instead o estimating the costs o climate change or only one possible uture, we applied

scenarios representing our possible utures to our analysis to highlight uncertainty and illustrate a range

o uture economic outcomes. These scenarios combine two key drivers o change: (1) extent o c limate

change resulting rom global GHG emissions and (2) national rate o population and economic growth

in Canada. A brie explanation o our scenario ramework ollows.

// EXT ENT OF CLIMATE CHANGE: Our assumptions about global GHG emissions trajectories relied on well-

established scenarios o the Intergovernmental Panel on Climate Change (IPCC), representing possible

climate utures in the absence o climate mitigation policy. a,3 The low climate change scenario results rom

a convergent low-emissions world with a heightened environmental consciousness, a population that peaks

by mid-century, accelerated technological advances, service-ocused economies, and equitable economic

development. The high climate change scenario results rom a high emissions world o less economically

integrated regions, continued population growth, slow-paced technological change, and slow growth in

per-capita incomes. Figure 2 presents the two hypothetical trajectories o global GHG emissions. In the low

climate change scenario, annual emissions start to decline around 2040, but global greenhouse gas concen-

trations in the atmosphere continue to rise.

a We used the IPCC A2 scenario or our high climate change scenar io and the B1 scenario or our low climate change scenario.

FIGURE 2

Low climate change

High climate change

2000

2030

2050

2070

2020

2040

2060

2080

2090

2100

2010

CARBONEMISSIONSFROM

FOSSIL

FUELS(GIGATONNESOFCARBON)

EMISSIONS TRAJECTORIES DRIvING GLOBAL CLIMATE SCENARIOS

35

30

25

20

15

10

5

0

++++++++

++++++

++++++

++++++

++++++++

++++++++

++++++

++++++

+++++++

++++++

++++

++++

++++

++

SOURCE: NAKICENOvIC ET AL. 2000


30/168


FIGURE 3

2030

2030

2050

2050

2070

2070

2020

2020

2040

2040

2060

2060

2080

2080

2090

2090

2100

2100

2010

2000

2010

2000

CANADIANPOPULATION(MILLIONPEOPLE)

GDP($B

,2008$)

NATIONAL GROWTH SCENARIOS

60

55

50

45

40

35

30

25,000

20,000

15,000

10,000

5,000

0

Rapid Canadian economic and population growth

Slow Canadian economic and population growth

SOURCE: NRTEE ESTIMATES BASED ON DATA FROM INFORMETRICA AND STATISTICS CANADA

POPUlATION

ECONOMY

// RATE OF POPULATION AND ECONOMIC GROWTH IN CANADA : To our assumptions o global climate utures,

we overlay a distinct set o assumpt ions about Canadas uture population and economic growth. We

use slow growth and rapid growth scenarios adapted rom the United Kingdom Climate Impacts

Programs local stewardship and world markets scenarios, respectively.4

Our slow-growth scenariorepresents a Canada characterized by slow population and economic growth, and our rapid-growth

scenario represents the opposite a Canada with both rapid population and economic growth. Figure 3

shows our assumptions on population and economic growth or these two scenarios. Annual growth in

gross domestic product (GDP) is 1.3% in the slow-growth scenario and 3% in the rapid-growth scenario.

When these growth scenarios are overlaid on the climate scenarios, we have our possible utures as

shown in Figure 4.


31/168


Implicit in our selection o population and economic growth assumptions or Canada is the notion

that Canada could evolve dierently than the rest o the world. So, although global growth patterns

determine aggregate emissions levels, we are assuming that Canadas own growth could ollow a separate

path. The our scenarios allow us to explore the relationship between domestic development, global

emission trajectories, and climate change impacts in Canada.

For each scenario, we present results in the near term (next 10 to 20 years), medium term (mid-century)

and long term (late century). We present both annual costs and cumulative costs over time. Throughout

the report annual costs are not adjusted to present-day terms using a discount rate. They are instead the

costs that will be experienced at the uture time (in C$(2008)). However, when we present cumulative

costs aggregated over the century we use present-value terms, employing a 3% discount rate as recom-

mended by the Government o Canada or this type o analysis.5

HIGHCLIMATE CHANGE

SLOWCANADIAN

ECONOMIC ANDPOPULATION GROWTH

LOWCLIMATE CHANGE

FOUR SCENARIOS USED FOR OUR ANALYSISWE COMBINED TWO IPCC CLIMATE SCENARIOS WITH TWO GROWTH SCENARIOS

TO ANALYSE THE POTENTIAL COSTS OF CLIMATE CHANGE IN FOUR FUTURES

+++

----

RAPIDCANADIAN

ECONOMIC ANDPOPULATION GROWTH

High climate changeRapid Canadian economic and population growth

Low climate changeSlow Canadian economic and population growth

FIGURE 4


32/168


RESEARCH AND CONvENING: The NRTEE conducted extensive research and convening, bringing together

experts, advisers, and stakeholders to augment our understanding o the modelling and research data

and analysis produced. This type o work is necessarily interdisciplinary, in our case requiring an

integration o climate, ecological, health, geographic, and economic inormation. No one expert canspeak to all the components o this report, so we engaged a wide cross-section o experts and

adaptation practitioners to oer advice, input, and commentary as we went along. Their eedback

helped identiy the best inormation available or our analysis, the limits o the existing knowledge

base, and where we could useully contribute.

WE EMPLOYED SEvERAL ENGAGEMENT vEHICLES:

1 // EXPERT SCOPING WORKSHOP: A group o experts comprising academics and adaptation experts in

government and the private sector participated in a workshop in July 2009 to help narrow down

topics or sectoral analysis.

2 // ADvISORY COMMITTEE: An advisory committee comprising representatives rom government, academia,

and the private sector provided advice throughout the process.

3 // EXPERT REvIEW PROCESS: Individuals rom government, academia, research organizations, and

proessional associations knowledgeable in the issues and this type o analysis reviewed our commis-

sioned studies and this nal report.

4 // STAKEHOLDER ENGAGEMENT SESSIONS: We discussed preliminary ndings, particularly those with

regional signicance, with expert stakeholders in ve cities in October 2010, to assess their validity

and salience.


33/168


OUR REPORT HAS THE FOLLOWING STRUCTURE:

CHAPTER 2 presents the estimated costs o climate change or Canada rom now to 2075. We show

the costs in absolute dollars and relative to the uture GDP. We then critically assess the uncertaintyunderlying these estimates, including the possibility that costs could be much higher than expected.

CHAPTER 3 presents an analysis o the impacts o climate change on the timber supply and the economic

consequences o timber supply changes or the Canadian economy. It shows economic consequences with

and without planned adaptation.

CHAPTER 4 presents an analysis o the number and value o dwellings that could be looded across the

countrys marine coasts due to sea-level rise and increased storminess in a changing climate. It shows

economic consequences with and without planned adaptation.

CHAPTER 5 presents an analysis o the social costs and costs to the health care system o illnesses

and deaths in our o Canadas cities due to warmer summers and poorer air quality rom climate change. It

considers how planned adaptation could reduce the incidence o illness and death and lead to welare savings.

CHAPTER 6 discusses the costs o ecosystem impacts o climate change by way o examples. It explains

the limits o economics in shaping our response to climate change.

CHAPTER 7 concludes with the key messages stemming rom our analysis, introduces the uture workplanned at the NRTEE exploring policy pathways to adaptation, and provides recommendations.


34/168

CANA

DA-W

IDECOST

S

OFCl

IMAT

ECH

ANGE

//CHAPTER2.0


35/168


36/168


CANADA-WIDE COSTS OF CLIMATE CHANGE

HOW IS CANADA AFFECTED?

MODELLING THE COSTS OF CLIMATE CHANGE

ECONOMIC CONSEQUENCES OF CLIMATECHANGE FOR CANADA

CANADA AND THE WORLD AT 2C WARMING

CONCLUSION

//

//

//

//

//

//

2.0

2.1

2.2

2.3

2.4

2.5


37/168


38/168


This chapter provides estimates o the costs that Canada could expect over this century in a changing

climate.b We show that there is a clear economic link between rising global emissions and how Canada

is impacted. These are the costs o inaction possible costs o climate change without concerted global

action on mitigation and without signicant adaptation domestically. We do not provide an assessment othe relative costs and benets o mitigation action and inaction as was conducted in earlier international

studies like the Stern Review or Garnaut Report.11 Nor do we compare the costs and benets o mitigation

with the costs and benets o adaptation. Climate change is real and requires concerted international action

involving both mitigation here and elsewhere to reduce uture emissions and adaptation to live with

the climate impact results o past emissions.

Some readers may be inclined to make comparisons between the costs o action and inaction drawing

rom earlier NRTEE work on the costs o mitigation, or the work o others, and this report on the costs o

impacts. These were dierent reports or dierent purposes with dierent modelling and analysis. Such a

comparison would not be reliable due to signicant technical d ierences between reports (e.g., time

horizon, economic modelling orecasts). Nor would it be meaningul, since climate change is a global

problem and any assessment o the economically optimal response to climate change should occur at the

global level, actoring in all the costs o climate change impacts and mitigation in Canada and abroad as

well. Also, choices about the balance o approaches and timing o actions will need to consider adaptive

capacity, rigidity o our economies and societies to accommodate change, and our willingness to tolerate

irreversible losses like the extinction o iconic wildlie, considerations that are not economic in their nature.

Our estimates are not the last word, but even partial estimates o the costs o climate change or Canada

such as these can help shape how Canada and Canadians should respond to climate change. Our estimatesdemonstrate the potential scale o the economic challenge acing Canada rom climate change. They

highlight the importance o investing in strategies to adapt to the damages we are likely to incur over the

next ew decades due to greenhouse gases that have already been emitted, and show the long-term cost

implications o uture global emissions pathways on Canada.

2.2 MODEllING THE COSTS OF ClIMATE CHANGE

We used the well-established model PAGE (Policy Analysis o the Greenhouse Eect) to explore

the costs o climate change or Canada. Initially developed in the early 1990s, the PAGE model has

undergone periodic upgrades in line with advancements in the scientic and economic understanding

o climate change. Our modelling employs the version completed in summer 2010, PAGE09.12 We adapted

PAGE09 to include Canada as a distinct region in the model.

b A technical report underpinning t his chapter was prepared by the NRTEE Secretariat and is ava ilable upon request (National Round Table on the Environment

and the E conomy 2011). It includes more on the PAGE09 model, the results generated, a nd sensitivity a nalysis.


39/168


PAGE09 is a simple representation o a complex problem. It estimates the costs o climate change by

integrating orecasts o global emissions, population, and economic growth with climate change

science and economics (see Figure 5). To be consistent with our sectoral analysis and to ocus on the

costs or Canada, we isolated Canada as one o the eight world regions in the model and ed inorecasts o the uture global emissions and Canadian growth pathways that correspond to each o our

SCENARIOS. PAGE09 estimates the extent o warming and sea-level rise resulting rom global emissions

and monetizes these impacts or our categories: (1) costs to traditional economic sectors; (2) non-

economic costs, such as those related to health and ecosystem impacts; (3) costs rom sea-level rise;

and (4) costs rom catastrophic damages such a sea-level rise o several metres due to rapid melting o

Greenland and West Antarctic ice sheets. Given that PAGE09 uses such broad categories, it is not a tool

to identiy specic costs and benets o particular impacts o climate change, but instead to identiy

the broad costs that climate change could impose.

MODELLING THE ECONOMIC IMPACTS OF CLIMATE CHANGE REQUIRES SEvERAL KEY ASSUMPTIONS ABOUT THE SCIENCE

AND ECONOMICS OF CLIMATE CHANGE AND THE FUTURE STATE OF THE WORLD:

// CLIMATE SENSITIv ITY: Scientic research has not pinpointed the precise amount o global warming

corresponding to given levels o greenhouse gases in the atmosphere. The majority o estimates o the

temperature rise resulting rom a doubling o carbon dioxide levels in the atmosphere relative to

pre-industrial times are in the range o 2C to 5C. PAGE09 allows us to capture this type o uncertainty in

our analysis, orecasting a range o possible temperatures.

FIGURE 5

HOW THE PAGE09 MODEL WORKS

OUTPUTSINTERMEDIATE

OUTPUTS

COSTS OFCLIMATE CHANGE

Economic

Non-economic

Sea-leel rise

Catastrophic damages

Temperature changeglobal and regional

Sea-leel riseglobal

INPUTS

Economic baselinedata or each region

Emissions trajectories

Physical data or each region(e.g., area, latitude)

Climate change science(e.g., climate sensitiity)

Socioeconomicdeelopment trajectories

Climate change economics(e.g., damage unctions)

See

chapter 1

for a

reminder

of ourScenarioS


40/168


// GLOBAL COSTS:Building on a research report prepared or the Stern Review, which assessed damages

rom several integrated assessment models,13 PAGE09 is structured to estimate costs in most regions

equivalent to slightly under 2% o GDP per year in response to 3C o warming. This assumption unda-

mentally determines the sca le o global economic impact that PAGE09 can generate. The model variesthe costs among world regions based on wealth, population, orecast temperature change, and relative

vulnerability to climate change.

// CANAD AS vULNERA BILIT Y:On average, Canada will experience more warming than world regions urther

rom the poles, but exposure to warming doesnt directly translate into impacts or costs. For a host o

reasons, heat-related deaths will likely be lower here than in regions with warmer baseline temperatures;

damages rom sea-level rise are likely to be more acute in regions with more densely populated, low-lying

coastlines; and agricultural production in some parts o Canada may are better in a warmer world than in

some other regions. The costs estimated by the model refect these dierences in vulnerability, based on

an up-to-date body o evidence that includes our own sectoral analyses presented in the next ew chapters.

As the evidence base grows, urther renements to our characterization o vulnerability are possible.

// COSTS OF NON-MARK ET IMPACTS:PAGE09 conceptually captures non-market impacts o climate change

such as species extinctions and losses in ecosystem services. Research that monetizes these types o

non-market impacts is sparse and incomplete. For example, what would a credible economic value be o

widespread coral mortality possible at 2.5C global temperatures above pre-industrial levels? 14 Since

humanitys well-being economic and otherwise relies on healthy unctioning ecosystems, the

economic signicance o ecosystem impacts o climate change could well dwar global GDP. By necessity,

the coverage o important non-market impacts in the model is limited, and so we could be understatingthe costs estimated. However, the extent to which a more comprehensive inclusion o non-market impacts

would increase costs is unclear.15 Chapter 6 o our report inc ludes urther inormation on the economics

o climate change impacts on ecosystems within Canada.

// COSTS OF CATASTROPHIC CLIMATE CHANGE: Scientic understanding o the risks o catastrophic climate

change is limited and the corresponding costs even more so. Such rapid climate change and resulting

impact s are beyond humanity s collective experience. Not only that, these impacts will likely never be

ully anticipated, with surprises likely looming on the horizon. In our modelling we assumed that we

only ace a chance o catastrophe ater a temperature threshold has been crossed (between 2C and 4C

o global warming) and then the chance o catastrophe grows with every urther degree o warming. Icatastrophe occurs, then between 5% and 25% o GDP is expected to be lost.

// ADAPTATION:To illustrate the economic impacts o climate change itsel, our analysis ocuses on the

cost o inaction and thereore assumes that no adaptation takes place. Some degree o adaptation to

uture climate change will undoubtedly occur without policy intervention but its extent and associated

costs were too unclear to ormulate deensible assumptions. In this sense our estimates could be overstating

what we could expect in terms o costs.


41/168


A strength o PAGE09 is its bui lt-in capability to undertake uncertainty analysis. It provides both the

average (mean) result and a range o possible results or temperature change, sea-level rise and costs (see

Box 1). Presenting this range o possible results is essential. It underscores the uncertainty underpinning

this type o analysis and helps illuminate the implications o dierences in our perception and toleranceo risk. An outcome with an estimated 1 in 20 chance o occurring based on the available inormation,

might be unacceptable to some but not others, due to the magnitude o impacts we could ace in that

1 in 20 chance.

CAPTURING UNCERTAINTY IN MODELLING THE COSTS OF CLIMATE CHANGE

Costing the uture impacts o climate change requires working with incomplete and uncertain inormation. Two alternatie approaches

exist to deal with this ineitable situation:

We can ignore uncertainty and solely rely on best guesses o all model inputs in our costing work, ollowing a deterministic

approach. This approach combines our best guesses into a single result. For example, i we think that a rise in global temperatures oer

pre-industrial times o 3C would occur at a doubling o carbon dioxide leels in the atmosphere, and that each degree o warming

would cost us $1 million, then a doubling o carbon dioxide leels in the atmosphere would cost $3 million. This cost estimate would only

hold true i we turned out to be right about our best guesse s.

Or, we can explicitly actor in the uncertainty that underlies our best guesses in our costing work, ollowing a probabiistic

approach. This approach produces a distribution of possible results and provides a range of possible outcomes. It inoles input-

ting our best guesses along with a range o alues we think are possible or each model input. We can use the distributions associated

with each model input to generate a distribution o results. Applying the probabilistic approach to the same example, we could assume

that the most likely rise in global temperatures at a doubling o carbon dioxide in the atmosphere is 3C, but it could be anywhere

between 2C and 5C, and that the most likely cost o each degree o warming is $1 million, but it could be anywhere between

$0.5 million and $2 million. Then, i we wanted to know the costs o a doubling o carbon dioxide leels we could say that these costs

hae a central estimate o $3 million but could be anywhere bet ween $1 million and $10 million.

The probabilistic approach yields richer results than the deterministic approach because they let us know about a range o possible

utures rather than one outcome. But, these results are still only as accurate as the inormation we include in the model. We could introduce

bias in the distribution o results we generate and in central estimates by, or example, using too narrow a range o alues or a gien model

input. In time, and with more research, we could fnd out that the costs o each degree o warming are nowhere near $0.5 million to $2 million,

but much higher (or much lower).

We tae a probabiistic approach in our modeing for this chapter. For uncertain model inputs, the PAGE09 model includes distributions like

the ones described aboe, with outer limits and a most likely alue. Each time we hit go, the model runs 10,000 times, each time randomly

selecting a alue rom a dierent point along each uncertain distribution. The model generates a se t o results or each o the 10,000 runs

and when all these r esults are combined, we can see the ull distribution o possible outcomes what outcomes are possible and how likely

each one is relatie to the other possible outcomes.

BOX 1


42/168


Against this backdrop o assumpt ions and uncerta inties, the PAGE09 model is a power ul tool that

highlights the potential scale o the issue to Canada and Canadians, shows trends over time, shows how

our uture choices can infuence uture outcomes, and incorporates uncertainty and risk in cost orecasts.

2.3 ECONOMIC CONSEqUENCES OF ClIMATE CHANGE FOR CANADA

In all scenarios, climate change is expected to impose accelerating costs, rising rom an average

value o $5 billion per year in 2020 to an average value o between $21 billion and $43 billion per

year by 2050.Figure 6 shows the costs out to 2075 in each scenario. The emissions levels in our high and

low climate change scenarios start to diverge around 2010 (see Figure 2), but the impact o these uture

emissions on temperatures does not become very large until ater 2050, due to the lag time between

emissions and warming and inertia among components o the Earth system climate, ocean, and

terrestrial biosphere.16 Costs are higher with more climate change. On a dollar basis, a richer Canada would

ace higher costs than in the alternate case, since the value and number o assets exposed to damages rom

climate change is higher. The combination o high climate change and rapid growth leads to the highest

economic cost impacts.


43/168


Climate change presents a growing, long-term economic burden or Canada. Changes in uture global

emissions have little eect on the costs in Canada in the next three or our decades but have a major eect

later in the century. Figure 7 shows the average annual costs o climate change relative to the orecast GDP

between now and 2075. Presenting costs this way shows the variation o costs o climate change relative

to our overall wealth, and gives a dierent perspective than the results shown in Figure 6. We can expect

average costs to amount to roughly 0.8% to 1% o GDP by 2050. The economic burden will be much greateron uture generations with higher uture emissions. The model assumes that richer societies are somewhat

less vulnerable than poorer societies, so the relative burden o the costs in the slow growth scenarios or

Canada is higher than in the rapid growth scenarios.

FIGURE 6

$(2008)BILLIONS,

UNDISCOUNT

ED

$(2008)BILLIONS,

UNDISCOUNTED

AvERAGE ANNUAL COSTS OF CLIMATE CHANGE FOR CANADA

CANADIANTEMPERATURE

CHANGE

GLOBALSEA-LEvEL

RISE

1.8C

3.6C 29cm

44cm5.3C

18cm2020

2050

2075

CANADIAN

TEMPERATURECHANGE

GLOBAL

SEA-LEvELRISE

1.8C

3.4C 28cm

41cm4.3C

18cm2020

2050

2075

Rapid Canadian economic and population growth

Slow Canadian economic and population growth

lOW ClIMATE CHANGE

HIGH ClIMATE CHANGE

2010

2020

2030

2040

2050

2060

2070

2080

2010

2020

2030

2040

2050

2060

2070

2080

250

200

150

100

50

0

250

200

150

100

50

0


44/168


45/168


FIGURE 8

A lower emissions uture would remove the possibility o very costly outcomes that would be

possible in a high emissions uture.Table 1 shows that by 2075, when dierences in impacts between the

low and high climate change scenario start to become more pronounced, the annual costs at the upper end

o the range o possibilities are substantially lower in the low climate change uture than in the high climate

change uture. Comparing the results o the two rapid growth scenarios, with high climate change there

would be a 5% chance o costs exceeding $546 billion and a 1% chance o costs exceeding $820 billion,

but with low climate change the magnitude o the low riskhigh impact possibilities is much lower a 5% chance o costs exceeding $350 billion and a 1% chance o costs exceeding $525 billion.

TABlE 1

AvERAGE ANNUAL COST

5% CHANCE OF ANNUALCOSTS REACHING AT LEAST

1% CHANCE OF ANNUALCOSTS REACHING AT LEAST

ANNUAL COSTS OF CLIMATE CHANGE, 2075

$51B

$119B $350B $198B $546B

$300B $820B$525B$180B

$149B $80B $221B

HIGH CLIMATE CHANGE

SLOW GROWTH SLOW GROWTHRAPID GROWTH RAPID GROWTH

LOW CLIMATE CHANGE- +

DISTRIBUTION OF COSTS OF CLIMATE CHANGE

IN HIGH CLIMATE CHANGERAPID GROWTH SCENARIO, 2050PERCENTAGE LIKELIHOOD OF DIFFERENT ANNUAL COSTS OF CLIMATE CHANGE

50%

20%20%

5%5% Less than $16BBetween$16B and $36B

Between$36B and $58B

Between$58B and $91B

Greater than $91B

$ (2008), UNDISCOUNTED

$ (2008), UNDISCOUNTED


46/168

04 4 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY4 4 // NATIONAL ROUND TABLE ON THE ENvIRONMENT AND THE ECONOMY

2.4 CANADA AND THE WORlD AT 2C WARMING

The results o the PAGE09 modelling can be used to explore the scale o costs we may ace rom climate

change under dierent policy utures. Under the 2009 Copenhagen Accord, Canada is working in concert

with other governments to limit the global temperature increase to 2C above pre-industrial levels.17 Being

a northern country, a 2C rise in global average temperature could mean a temperature increase o over 3C

on average or Canada. Although we do not explore this specic scenario in our analysis, we can extract

rom results presented in this chapter to think about what that global target could mean or Canada. The

our scenarios we modelled would lead to a global temperature increase o 1.7C to 1.8C by 2050.

Even i we succeed in achieving the 2C temperature limit established in the Copenhagen Accord, our

analysis shows that climate change would still be expensive or Canada: the average costs o a 1.7C to

1.8C increase in global temperatures are estimated at $21 billion to $43 billion per year or Canada in 2050

i we do nothing to adapt and try to reduce those impacts. Costs would more likely be at the lower end o

this range i domestic mitigation slowed economic growth. However, in sharp contrast to the growing costs

oinaction presented in this report, under the Copenhagen Accord costs would not continue to increase in

later time periods as emissions continue to grow, as shown in our results, but instead stabilize at the 2050

levels (at least in relative terms) and perhaps decline over time as we adjusted to a new reality.d

The pattern o possible results illustrates the nature o risk and uncertainty in orecasting climate change

outcomes. Our modelling shows not just expected or average costs but the prospect or risk o either

lower or higher costs. And it shows what the magnitude o those dierent costs could be. By examining

the distribution o possible results through this kind o modelling we can assess Canadas risks o actingor not acting in the ace o uncertain economic outcomes. For while all results show there is a chance the

costs could be somewhat lower under each scenario at one end o the scale, they also demonstrate that the

same chance 1% or 2% or even 5% leads to demonstrably higher costs at the other end o the scale.

These ndings show that lower global emissions levels would greatly reduce the costs o climate change

in absolute and relative terms or put another way, they show that higher global emission levels mean

correspondingly greater economic costs. They also show that lower global emissions levels reduce the risks

o extremely high costs o climate change. By implication, worldwide eorts, including ours, to rein in

and cut emissions can be seen as an insurance strategy to reduce these risks. Canadians make regular

investments to reduce or manage the risks o small probability events like car accidents and house res.We spend money on winter tires and smoke alarms to reduce risks and impacts, and we spend money

on insurance so that i that small probability event occurs despite our eorts to avoid it, we take less

o a nancial hit. We should thereore assess not just the societal and economic acceptability o the

higher likelihood impacts o climate change and their costs, but also consider the acceptability o a lower

likelihood outcome o climate change with more costly impacts.c

c See section 3.3 o the NRTEEs recent reportDegrees o Change: Climat e Warming and the Stakes or Cana da or a discussion on navigating uncertain cli mate

utures (National Round Table on the Environment and the Economy 2010).

d However due to lags and eedback mechanisms related to greenhouse ga ses already in the atmosphere, temperatures may rise well-above 2050 levels until they

reach long-term (equilibrium) levels.


47/168


2.5 CONClUSION

Climate change has a price tag or Canada, and it could be big. Our research and analysis shows it could

range rom $21 billion to $43 billion per year by 2050, equivalent to 0.8% to 1% o GDP, depending uponwhat uture global emissions occur and how Canada grows in the meantime. There are also r isks o costs

being ar higher and these risks merit consideration.

These Canada-wide results rame some o the issues or us. So ar we have shown that we expect to ace

costs and that we need to adapt to that reality. But, as ourDegrees o Change report illustrated, the impacts

o climate change will be elt dierently in dierent parts o the economy and dierent parts o the

country. Given the local or regional impacts o climate change, solutions and responses to managing its costs

are most readily identied by analyzing the impacts on dierent sectors. To gain a better understanding

o the economic impacts o climate change and possible adaptation measures or Canadas prosperity,places, and people, the ollowing three chapters explore three important and representative areas that will

all be aected by climate change: timber supply, coastal areas, and human health.


48/168

TIMB

ERSUPPl

Y

//CHAPTER3.0


49/168


50/168


TIMBER SUPPLY

THE CLIMATE CONNECTION

AN OvERvIEW OF OUR METHODS

TIMBER IMPACTS DUE TO CLIMATE CHANGE

ECONOMIC IMPACTS

ADAPTATION STRATEGIES

CONCLUSION

//

//

//

//

//

//

//

3.0

3.1

3.2

3.3

3.4

3.5

3.6


51/168


3.1 THE ClIMATE CONNECTION

Climate change adds a new threat to Canadian timber supply.

Canada is home to almost 3.5 million square kilometres o orests, representing 10% o global orest cover

and 30% o the boreal orest.18 These orests clean our water and our air, shelter many species, provide us

with recreation values, absorb and store carbon, and support a orest industrye that drives 1.7% o our GDP.19

Climate change will have real consequences or Canadas orest industry and cascading eects will impact

other sectors. GDP could all by 0.1% to 0.3% by mid-century.

Forests are sensitive to changes in weather and climate. Canadian researchers, including in the Canadian

Forest Service at Natural Resources Canada, are studying the potential impacts o climate change

on Canadas orests (Figure 9).20

In a changing climate, orest re activity is expected to increase,aecting timber supplies and leading to h igher re management and control costs. An increase in pest

disturbance is likely over the next ew decades, and more requent and intense extreme weather events

including wind and ice storms could damage trees and industrial operations. Warmer temperatures and

higher levels o carbon dioxide in the atmosphere may accelerate productivity under certain conditions.

The distribution and composition o ecosystems including orests is shiting, with some species

gaining suitable habitat and others losing it. In a global economy, impacts o cl imate change on orests

outside o Canada could have cascading eects on our orest industry.

e The orest industry includes orestry and logging, pulp and paper manuactur ing, and wood product manuacturing. We use orestry to reer to the orestry and

logging sector that includes timber production, har vesting, reorestation, and gathering o orest products ( Industry Canada 2010a).

FIGURE 9

IMPACTS OF CLIMATE CHANGE ON CANADAS FORESTS

SOURCE: ADAPTED FROM WILLIAMSON ET AL. (2009)

CLIMATE CHANGEECONOMIC AND

SOCIAL IMPACTS

Macroeconomic impacts

Timber supply

Change in globaltimber markets

Human health impacts

Non-market alues

Temperature andprecipitation change

Changing weatherpatterns

PHYSICAL IMPACTS

Composition, distributionand structure o ecosystems

Forest productiity

Pests and diseases

Forest fres

Extreme weather eents

Impacts quantifed in our analysis


52/168


A changing c limate is one driver o economic change, among many others. Box 2 highlights the steps

underway to transorm Canadas orest industry and draws connections between this transormation

and climate change.

But just how much economic impact could climate change have or Canadas orest industry and or

Canada as a whole? This chapter explores the relationship between climate change impacts on t imber

supply and the economic repercussions or Canadas economy that fow rom these impacts. As high-

lighted in Figure 9, we concentrate on shits in timber quantities resulting rom changes to orest re

regimes, orest productivity, and pest disturbance in a changing climate and then estimate the economic

costs or benets o these impacts. Finally, we consider whether adapting to climate change could improve

our economic welare.

TRANSFORMATION OF CANADAS FOREST INDUSTRY

Canadas orest industry is ulnerable to global dynamics including international labour and wood costs, the strength o the U.S.

dollar, and U.S. housing starts. Total exports hae allen by nearly 50% between 2004 and 2009 partly because o the recent economic

downturn.21 In order to tackle increased international competition and maximize the alue extracted rom timber, work is underway to

transorm Canadas orest sector by diersiying the use o orest products through the deelopment o new bioproducts (e.g.,

biodegradable plastics) and by enhancing penetration o wood products as building materials.22 A recent study has identifed a roughly

$200 billion global market opportunity or bioproducts rom the orest industry.23

The Canadian Council o Forest Ministers has set out a ision or sustainable orest management in Canada underpinned by orest sector

transormation and climate change. These two themes go hand in hand.24 The emergence o car bon markets and carbon-pricing policy with

mechanisms to allow osets rom orest carbon projects could create economic opportunities or the sector. Adapting orest management

practices to account or uture impacts o climate change could help adance industrial transormation and the objecties o climate change

mitigation, or example, by increasing our orests capacit y to absorb carbon and industrys capacity to produce a reliable supply o

sust ainable biouels. Transorming the economic trajectory o the sector toward diersifed and highly alued products is also a strategy to

buer the orest industry and the communities it supports rom aderse impacts o climate change.

A technical r eport underpinning this chapter is ava ilable upon request: Costing Climate Impacts and Adaptation: A Canadian Study on the Forest Sector (Marbek

and Lantz 2010).

BOX 2


53/168


3.2 AN OVERVIE W OF OUR METHODS

This section provides highl ights o the methods used to guide our analysis. Additional inormation on

the methods and limitations is available inAppendix 8.3.

PHYSICAL IMPACTS: Our analysis o physical impacts covers shits in timber quantities rom orest res,

orest productivity, and pest disturbance in a changing climate. We ocus on these impacts or two reasons:

(1) they most directly aect the quantity o timber supplyg that will be available in the uture and (2) there

is already a sucient evidence base upon which to build. Geographically, our analysis covers orest areas

assigned or timber production across six regions: British Columbia; Alberta; Manitoba, Saskatchewan and

the Territoriesh; Ontario; Qubec; and Atlantic Canada.

We developed estimates o the expected changes to timber supply or each region and climate change

SCENARIO (both high climate change and low climate change).These estimates were drawn primarily

rom research conducted by the Canadian Forest Service at Natural Resources Canada, including

qualitative or quantitative estimates o the impacts o climate change on res, orest productivity, and

pests in Canadas various orest regions.

ECONOMIC IMPACTS: The economic consequences o changes in timber extend beyond orestry, aecting

industries such as manuacturing and construction. We used computable general equilibrium (CGE)

modelling to explore the costs and benets to Canadas broader economy o changes in timber quantities

due to climate change. Generally speaking, CGE models orecast macroeconomic trends, using simpliying

assumptions to represent regional economies and their complex interactions. CGE models integrateconsumer demand, labour and capital supply, and markets or production inputs and outputs. We ran

CGE models or each region under both rapid and slow growth scenarios. We then changed the orest

sector output based on the estimated changes in timber supply rom climate change and reran the

models. Comparing the economic indicators across model runs with and without climate change lets us

explore the economy-wide impacts o dierent climate utures.

g Our ocus is on timber quantity but we recognize that climate change also a ects timber quality and the tim ing o planting and harvesti ng.

h Yukon and the Northwest Territories have ar more orested land than Nunavut.

See

chapter 1

for a

reminder

of our

ScenarioS


54/168


3.3 TIMBER IMPACTS DUE TO ClIMATE CHANGE

The eect o climate change on timber quantities intensies over time and varies regionally

with western parts o the country aring worse than eastern parts. The analysis shows that timberquantities decrease in all regions as climate change heightens over time. These decreases range rom

1-5% in the 2020s to 2-23% in the 2080s. But these impacts are more noticeable or western Canada than

or eastern Canada. For example, according to the analysis, timber quantities could all by between 9% and

14% in Alberta, between 7% and 11% in Manitoba, Saskatchewan, and the Territories, and between 5% and

8% or British Columbia by the 2050s. In Qubec, timber quantities could all by 1% to 2% by the 2050s.

Our estimates refect expectations o broad trends rather than specic events. Recent experience with the

mountain pine beetle in British Columbia, projected to result in an estimated loss o 23% o provincial

timber volume by 2015,25 suggests that our results are conservative or British Columbia. Table 2

summarizes our estimated range o reductions in timber quantities relative to current levels rom the

combined eects o climate change on re, orest productivity, and pests, under both the low and highclimate change scenarios.

3.4 ECONOMIC IMPACTS

Changes to timber quantities due to climate change in the 2050s could reduce national GDP by

up to 0.3% or about $17 billion compared to a case with no climate change. The costs o

climate change are a unction o the rate o change o timber supply impacts and the evolving structure

o the economy as a whole. Table 3 presents the impacts o climate change to Canadas economy, as

measured by changes in GDP. We show results or all our scenarios. In each scenario, the relative

GDP changes are higher in the 2050s than the 2020s but then subside somewhat by the 2080s as GDP

growth outpaces the growth in the costs o climate change.

Forest res have the largest impact on timber quantities in most regions. The infuence o orest productivity

on timber quantities is positive in eastern Canada while negative in the west. All regions are expected to be

negatively similarly aected by pests in the uture.

TABlE 2

2020s

2050s

2080s

BRITISHCOLUMBIA ALBERTA

MANITOBA,SASKATCHEWAN,

TERRITORIESONTARIO QUBEC ATLANTIC

CANAD

paying the price: the economic impacts of climate change for canada

Documents