Impacts of climate change adaptation policies at city scale
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Impacts of Climate Change Adaptation Policies at City Scale. CHRISTINA B. WILKE STEFAN TSCHARAKTSCHIEW (HWWI HAMBURG) (TU DRESDEN) European Meeting of the International Microsimulation Association, Dublin, May 17-19 2012 Farm Workshop, Session 6: Environment. Outline.

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Impacts of Climate Change Adaptation Policies at City Scale

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Impacts of climate change adaptation policies at city scale

Impacts of Climate Change Adaptation Policies at City Scale

CHRISTINA B. WILKE STEFAN TSCHARAKTSCHIEW (HWWI HAMBURG) (TU DRESDEN)

European Meeting of the International Microsimulation Association, Dublin, May 17-19 2012

Farm Workshop, Session 6: Environment


Outline

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

Hamburg Institute of International Economics (HWWI)


1 motivation

1. Motivation

a) Climate Change

Occurrence of extreme weather events (heavy rainfalls, storms, heat waves) will increase

b) Cities

About 50% of world population lives in cities (2050 69%)

Number of megacities will increase from 2 in 1950 to 29 in 2025

Most cities are coastal cities, vulnerable to storm surges, flooding and tsunamis

c) Urban General Equilibrium Model

Simultaneous, spatial analysis of all relevant markets (Labour, Goods and Land market)

Hamburg Institute of International Economics (HWWI)

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Outline1

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

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Hamburg Institute of International Economics (HWWI)


2 the model

2. The Model

Urban Computable General Equilibrium Model based on

Anas and Xu (1999)

Representative type of household (number is exogenous)

Representative type of firm (number / aggregate output endogenous)

Area is given (number of zones exogenous)

Simultaneous decisions on output production, location of households and firms, prices on labour, goods and land market are determined

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

2. The Model - Firms

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


2 the model firms

2. The Model - Firms

C-D production function:

Index i = zones

Xi = aggregate output

B = technology factor (in base simulation 0.25)

Mi = aggregate labor input

Qi = aggregate land input

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

2. The Model - Households

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2 the model households

2. The Model - Households

N consumers, each consumer maximizes utility via the

utility function:

Uij = utility

Zijk= number of shopping trips the consumer makes to zone k

qij = lot size

Lij = leisure hours

uij = idiosyncratic taste constants

shopping

living

leisure

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


2 the model households1

2. The Model - Households

Budget restriction:

Zijk= number of shopping trips the consumer makes to zone k

pk = commodity price

tij = money costs of one-way travel from zone i to j

ri = rent

qij = lot size

v = number of working days per year

wj = wage

H = hours per year

Tij = total annual travel time of the consumer (commuting and shopping trips)

Lij = leisure

D = rent dividend paid to each consumer reflecting his share of land

labour income

costs for rent

expenditure for shopping

costs for commuting to work

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

Increase in Demand

Increase in Supply

Price

Supply

Supply

p1

p0

p0

p1

Demand

Demand

x0

x1

x0

x1

Quantity

2. The Model – Goods, Labour and Land Market

Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

2. The Model – Spatial Effects

City

Zone 1

Zone 2

Zone 3

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Impacts of climate change adaptation policies at city scale

2. The Model - Firms

City

Zone 1

Zone 2

Zone 3

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

2. The Model - Households

City

Zone 1

Zone 2

Zone 3

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Impacts of climate change adaptation policies at city scale

2. The Model – Spatial Distribution of Firms and Households

City

Zone 1

Zone 2

Zone 3

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2 the model equilibrium

2. The Model - Equilibrium

As a result households and firms are dispersed over the city

Residental and employment density are highest in the center and decreasing in outer zones

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2 the model equilibrium1

2. The Model - Equilibrium

land is immobile, labour is mobile between zones

Rents are highest, wages are lowest in the center

Reason: Substitution between land and labor inputs in the center (wage increases), but labour supply in the center is very high (wage decreases)

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Outline2

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

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Hamburg Institute of International Economics (HWWI)


3 introducing climate change induced shocks land

3. Introducing Climate Change Induced Shocks - Land

Climate change (more or more severe floods) reduces the amount of available resources (land):

Due to floods a certain amount of land is no longer available (completely flooded)

Available land is more valuable

Substitution of land and labour, effects on distribution of firms

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Hamburg Institute of International Economics (HWWI)


Impacts of climate change adaptation policies at city scale

Floods destroy infrastructure, thereby increasing transport costs:

Due to floods a parts of the transport infrastructure are destroyed or no longer usable

Transport costs between zones increase

Effects on the production of firms

Feedback effects on goods and labour markets …

3. Introducing Climate Change Induced Shocks - Transport

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Hamburg Institute of International Economics (HWWI)


Impacts of climate change adaptation policies at city scale

3. Introducing Climate Change Induced Shocks

- Spatial Effects

City

Zone 1

Zone 3

Zone 2

+415%

-25%

-25%

-64%

-15%

-15%

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Hamburgisches WeltWirtschaftsInstitut (HWWI)


Impacts of climate change adaptation policies at city scale

3. Introducing Climate Change Induced Shocks - Spatial Effects

City

Zone 1

Zone 3

Zone 2

+6%

+3,1%

+3,1%

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Outline3

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions housing sector firms

4. Possible Model Extensions - Housing Sector (Firms)

C-D production function with CES-subfunction (for i zones)

pih = price of the housing good

Xih = aggregate housing quality output

Bh = technology factor

Intjih = intermediate goods input from zone j in zone i

Cjiint = total costs of intermediate goods (goods price and transport costs)

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions housing sector firms1

4. Possible Model Extensions - Housing Sector (Firms)

Climate change lowers the productivity of the housing sector that produces housing quality:

Inputs are less productive due to climate change effects (partly flooded land)

No direct effects of climate change on housing quality, but

maintaining certain level is more costly (needs more

resources)

Supply of housing quality decreases

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions housing sector firms2

4. Possible Model Extensions - Housing Sector (Firms)

Xih = aggregate housing quality output

Bh = technology factor

Mih = aggregate labor input

Qih = aggregate land input

Intjih = intermediate goods input from zone j in zone i

Dih = damage factor between zero and one

^

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions demand for housing quality households

4. Possible Model Extensions - Demand For Housing Quality (Households)

Uij = utility for living-work pair i,j

Zijk= number of shopping trips the consumer makes to zone k

qij = lot size

qhij= housing quality

Lij = leisure hours

uij = idiosyncratic taste constants

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions demand for housing quality households1

4. Possible Model Extensions - Demand For Housing Quality (Households)

Climate change increases the demand of housing quality:

In a costal city climate change increases the probability of floods

Housing quality (flood protection) becomes more important compared to other utility factors

Demand of housing quality increases

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Hamburg Institute of International Economics (HWWI)


4 possible model extensions demand for housing quality households2

4. Possible Model Extensions - Demand For Housing Quality (Households)

Uij = utility for living-work pair i,j

Zijk= number of shopping trips the consumer makes to zone k

qij = lot size

qhij= housing quality

Lij = leisure hours

uij = idiosyncratic taste constants

D0 = whole city damage; if damages occur, D0>1

Di = zone specific damages in zone i; if damages occur, Di>1

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Hamburg Institute of International Economics (HWWI)


Outline4

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

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Hamburg Institute of International Economics (HWWI)


5 some thoughts on modelling climate change adaptation policies

5. Some Thoughts On Modelling Climate Change Adaptation Policies

Possible adaptation policies

Dikes (public goods character)

Retention Areas

Private Insurance (incentives)

How can they be introduced into the model?

Additional costs: Investment into policy measure

Additional benefit: less damage in the case of the occurence of an extreme event (uncertainty…)

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Outline5

Outline

  • Motivation

  • The Model

  • Introducing Climate Change Induced Shocks

  • Possible Model Extensions

  • Some Thoughts On Modelling Climate Change Adaptation Policies

  • Outlook

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Hamburg Institute of International Economics (HWWI)


6 outlook

6. Outlook

Further possible extensions:

Intermediate goods sector

Two household types (rich – poor)

Uncertainty and risk (with certain probability particular zones are flooded)

Scenario analysis:

Uncertainty of occurence of extreme events

Economic scenarios

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Impacts of climate change adaptation policies at city scale

Thank you for your attention!

Comments?

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