Economic Aspects of Climate Economic Aspects of Climate Change Impacts and Adaptation Change Impacts and Adaptation Measures in the MediterraneanMeasures in the Mediterranean

Some Case Studies from Cyprus Some Case Studies from Cyprus

Theodoros ZachariadisTheodoros Zachariadis

Dept. of Environmental Science & TechnologyDept. of Environmental Science & Technology

Cyprus University of TechnologyCyprus University of TechnologyE-mail: E-mail: t.zachariadis@cut.ac.cy

Brokerage Event of the "ENV-NCP-TOGETHER" Project, Malta, August 2012

Source: Future Impacts of Climate Change across Europe. Center for European Policy Studies (CEPS) Working Document No. 324/February 2010. www.ceps.eu/ceps/download/2972

Overview of climate change impacts in EuropeOverview of climate change impacts in Europe

Climate Change and Its Impacts in CyprusClimate Change and Its Impacts in Cyprus

Recent region-specific projections: (Hadjinicolaou, P.C. et al., Regional Environmental Change (2011) 11: 441–457)

Temperature increase of 2C in summer, 1C in winter by mid-21st century

Slightly reduced rainfall levels (27%) + sea level rise

Effects:

Increased shortage of water resources

Vulnerability to desertification

Damages to coastline, ecosystems & biodiversity

Higher energy needs for cooling (lower for heating)

Risk of decreasing tourist flows

Adverse impacts on public health

Analysis of Climate Effects on Energy UseAnalysis of Climate Effects on Energy Use(Zachariadis T., Energy Policy 38 (2010) 744–750)

• Econometric time series analysis of energy use in Cyprus by sector and fuel, 1960-2007

Energy consumption = f (income/economic activity, energy prices, time trends, climate)

• Climate effects captured by the variables of heating & cooling degree days (they express intensity + duration of cool & hot days respectively)

• Effect of climate statistically significant only for electricity consumption in households & tertiary sector

Forecast of electricity consumptionForecast of electricity consumption up to up to 20302030 – – with climate changewith climate change

• Assumption: uniform temperature increase by 1C in 2030, during the whole year

• Electricity use in 2030 higher by 2.9% (compared to ‘no climate change’ scenario)

• Present value of total cost in period 2008-2030: > 200 MEuros (at constant prices of year 2007)

• Average cost per household: ~30 Euros/year in 2020, ~80 Euros/year in 2030 (at constant prices of year 2007)

• Further econometric analysis + forecast of peak electricity load in summer with climate change: additional 65–75 MW in 2020, 85–95 MW in 2030

Update of forecasts up to 2050 in preparation

Effects of climate change in Cyprus

on agricultural yields & production Assess variability and changes in irrigation

water demand in Cyprus over the past 30 years (1981-2008)

Assess variability and changes in agricultural yields, total production the past 30 years (1981-2008)

Assess potential irrigation water demand and crop production for the coming 10 years (2011-2020).

(Bruggemann A. et al., Effect of climate variability and climate change on crop production and water resources in Cyprus. Final Report, July 2011, http://works.bepress.com/theodoros_zachariadis/21)

Methodology

Evapotranspiration was computed using the FAO Penman-Monteith method.

Blue water demand and green water use was computed for all crops based on: location (431 communities) climatic conditions crop coefficients (Kc) soil water holding capacity efficiency of irrigation method irrigation fraction (area)

Climate Data (1980-2010)

Results

Two climate scenarios up to 2020, using data of recent years with a) average and b) highest aridity ratios

Average annual national crop production lower by 4143%, relative to 1980/81-2008/09(including sustainable water management policies)

Assuming constant agricultural product prices, loss of agricultural production equal to €574€602 million for 20132020

High variability in water use for different crops, locations and years various options for climate change adaptation

Methodology to assess costs of water Methodology to assess costs of water shortages in non-agricultural sectorsshortages in non-agricultural sectors

Willingness to pay for water p (€/c.m.)

Price

Water demand curve

q0q'

Water quantity q

Welfare losses of consumers due to reduced

availability of water

Estimating Residential Water Demand in CyprusEstimating Residential Water Demand in Cyprus (Zachariadis T., Water Vol. 2, pp. 788–814 (2010))

• Data from the three Water Boards of Cyprus serving the main cities (Nicosia, Limassol, Larnaca):– Billed water consumption per consumer type

– No. of consumers by type

– Water tariffs (fixed prices & prices per consumption block)

– Fraction of consumers in each consumption block

– Revenues and expenditures (from Board financial accounts)

– Period: 1980-2009 (annual data), 2000-2009 (data available per billing period – 2/3/4 months)

• Other data:– Monthly temperature and rainfall (from Met. Service)

– Quarterly GDP & population (from Statistical Service)

– Household income by district of Cyprus (Family Expenditure Surveys conducted by Statistical Service)

Cyprus:Cyprus:Costs of Water Shortages up to 2030Costs of Water Shortages up to 2030

Water consumption Cost Water consumption Cost Water consumption CostYear (mio c.m.) (mio Euros'2009) (mio c.m.) (mio Euros'2009) (mio c.m.) (mio Euros'2009)2010 54.8 0.21 54.8 0.21 54.8 0.212015 57.0 0.75 60.0 1.95 63.0 3.842020 58.5 1.27 64.6 5.15 71.3 12.812025 59.5 1.73 69.1 9.86 80.1 29.122030 60.1 2.01 73.3 15.84 89.3 54.80

Total economic loss, 2010-30 25.57 130.69 381.97Present value of economic loss, 2010-30 15.20 71.96 204.21

Scenario 1: Constant per capita water use Scenario 2: Per capita water use grows 1% p.a. Scenario 3: Per capita water use grows 2% p.a.

YearDifference in water availability due to climate change

Scenario 1: Constant per capita water use

Scenario 2: Per capita water use grows 1%

p.a.

Scenario 3: Per capita water use grows 2%

p.a.2010 0.0% 0.00 0.00 0.002015 -0.9% 0.17 0.28 0.412020 -1.9% 0.46 1.00 1.742025 -2.8% 0.85 2.27 4.582030 -3.7% 1.28 4.17 9.72

Total additional economic loss, 2010-30 11.11 29.42 60.19Present value of economic loss, 2010-30 6.12 15.69 31.49

Additional scarcity cost due to climate change (mio Euros'2009)

151520% higher costs due to climate changed induced water scarcity20% higher costs due to climate changed induced water scarcity

New desalination plants cost 400 MEuros!New desalination plants cost 400 MEuros!

Potential adaptation measures for CyprusPotential adaptation measures for Cyprus

WaterWater: Proper pricing to a) encourage conservation and b) increase funds available for technical measures

AgricultureAgriculture: Shift to production patterns with high value and high water efficiency

TourismTourism: Focus on non-summer visitors

EnergyEnergy: Improve energy efficiency of buildings

InfrastructureInfrastructure: Invest in measures to protect roads & buildings along the coastline

Forests, biodiversity & public healthForests, biodiversity & public health: Monitor vulnerable sites/species and take precautionary measures

An adaptation measure: ‘Efficient’ household An adaptation measure: ‘Efficient’ household water prices to account for scarcitywater prices to account for scarcity

Year Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 32010 50.8 46.9 43.1 50.1 46.2 42.42011 51.2 47.7 44.2 50.5 47.0 43.52012 51.5 48.3 45.1 50.7 47.6 44.42013 51.7 48.9 46.0 50.9 48.1 45.32014 51.9 49.5 47.0 51.1 48.7 46.22015 52.1 50.1 47.9 51.3 49.3 47.12016 52.3 50.7 48.9 51.5 49.8 48.02017 52.4 51.2 49.7 51.5 50.3 48.82018 52.5 51.6 50.6 51.5 50.7 49.72019 52.5 52.1 51.4 51.6 51.1 50.52020 52.6 52.5 52.3 51.6 51.5 51.42021 52.6 53.0 53.2 51.6 52.0 52.22022 52.6 53.3 54.0 51.6 52.3 53.02023 52.6 53.7 54.8 51.5 52.7 53.82024 52.5 54.1 55.7 51.5 53.0 54.62025 52.5 54.5 56.5 51.4 53.4 55.42026 52.4 54.8 57.4 51.3 53.7 56.22027 52.3 55.1 58.1 51.1 53.9 56.92028 52.2 55.3 58.9 51.0 54.2 57.72029 52.0 55.6 59.6 50.8 54.4 58.42030 51.8 55.9 60.4 50.6 54.6 59.1

λ (€cents'2009) 27.0 62.8 113.9 32.7 70.8 125.3

Constraint: Q 1095 mio c.m. Constraint: Q 1075 mio c.m.

q i , without climate change (mio c.m.) q i , with climate change (mio c.m.)

Climate change increases water shortages modestly, requires 8-13 €cents/c.m. higher water prices to induce conservation

in order to address this additional scarcity

An adaptation measure: Effects of An adaptation measure: Effects of ‘efficient’ household water pricing‘efficient’ household water pricing

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2010 2015 2020 2025 2030

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Unconstrained water consumption

Average annual water availability

Water conservation to be achieved through scarcity pricing

at 63 €cents'2009 per c.m.

Constrained water consumption

Benefits of long-term planning: What if Benefits of long-term planning: What if we had ‘efficient’ prices already in 2000?we had ‘efficient’ prices already in 2000?

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2000 2005 2010 2015 2020 2025 2030

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pricing at 25 €cents'2009 per c.m.

Unconstrained water consumption

Average annual water availability

Constrained water consumption

Conclusions and policy implicationsConclusions and policy implications

South Europe to be adversely affected by climate change, more than any other European region

Monitoring of vulnerable sites / species necessary

Long-term planning has tangible benefits – both environmental and economic

Proper pricing of scarce natural resources is necessary to:Encourage long-term resource conservation.

People respond to incentives!

Provide funds that can be used for financing climate change mitigation & adaptation measures