The economic impact of global climate and tropospheric oxone on world agricultural production

Abstract

The objective of my thesis is to analyze the economic impact on agriculture production from changes in climate and tropospheric ozone, and related policy interventions. The analysis makes use of the Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy and crop yield results from the Terrestrial Ecosystem Model (TEM), a biogeochemical model of terrestrial vegetation. I disaggregated the original EPPA model to capture the dynamic behaviors of crops, livestock and forestry within the agriculture sector. Further calibration was done to validate projections on future food shares according to Engel's Law. Results from AIDADS (An Implicit Direct Additive Demand System) were used to adjust the model, as the EPPA Agriculture Model was implemented using CES (Constant Elasticity of Substitution) consumption function that, other things equal, keeps the food share constant as income grows. My research shows that the direct effects of environmental change on yields are substantially moderated in terms of production effects as a result of crop sector adaptations and reallocation of resources within the economy. However, costs (or benefits) resulting from reallocation of resources show up as losses (or gains) in aggregate economic consumption. The findings also uncover additional benefits of policies that impose greenhouse gas emissions constraints as they mitigate damages from ozone pollutions. For example, in 2005 the consumption loss due to ozone damage is estimated to be 7.4 billions (5% of the value of crop production) for the United States, 16.5 billions (8.4%) for the European Union, and 17.8 billions (9.8%) for China.

(cont.) In a scenario where greenhouse gas emissions are controlled, the consumption loss is reduced by 28%, 33%, and 23% for the US, the EU and China by 2050, respectively. Therefore, ozone pollution policy and climate policy (because it reduces ozone precursor emissions) are both effective in reducing ozone damages considerably.