Economic Effects of Climate Change across Russia s regions

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1 Economic Effects of Climate Change across Russia s regions - project highlights R. Kosonen, P. Druzhinin, S. Leppänen, L. Saikkonen, S. Ledyaeva, L. Skryzhevska M. Ollikainen, V-P. Tynkkynen, L. Solanko FICCA final seminar Helsinki

2 Aim of the project The project has studied various aspects of potential economic effects resulting from climate change in Russia Utilizing historical climate and economic data for Russia ( ) for quantitative impact assessment Russia is a good subject: versatile climate, faster than average warming, political importance We cannot account for major impacts (e.g. thawing of the permafrost) or effects on ecosystems and are constrained by short- and mid-term weather variation magnitude However, the benefit is to get concrete economic impact estimates based on actual data

3 Key methodological aspects Mostly quantitative analysis but also including a policy paper based on interviews of local authorities Quantifying adaptation: Short-term weather variation impact without adaptation Mid-term (5-10 years) climate change incorporates some level of adaptation / intensification / market equilibrium effects Non-linearity: climate versatility = impact versatility

4 CC impacts on Russian grain yields Agriculture 4% of Russian GDP but 30% in some areas Russia notable wheat exporter (10% of global production) Agriculture most studied area concerning CC impacts Russia related lit. is scarce, especially accounting for adaptation Here we study impacts on Russian grain yields Accounting for partial adaptation (e.g. crop varieties, not permanent/expensive adaptation investments) Controlling for winter crop circumstances and fertilization Allowing regional differences

5 CC impacts on Russian grain yields Table 2 Results of the fixed effects estimation Degree days ( )*** Degree days_squared -3.43E-06 (8.90E-07)*** Degree days_cubic 8.18E-10 (2.15E-10)*** Winter temperature ( )*** Precip. winter sowing ( )*** Precip. growing season ( )*** Precip. harvest season ( )*** Figure 4 Effect at different degree days a Mean GDD a. X-axis is the degree day (GDD), left axis the value of f(x) and right axis the derivative at different degree days. Upward line shows the Russian average. No adaptation scenario: yields -5% by 2020s and -11% by 2050s With adaptation: up to +21% by 2020s & +14% by 2050s Winter temperature warming is unequivocally beneficial In NWFD adaptation (crop selection) needed to improve yields

6 CC impacts on Russia s budget expenditures In Russia, government has notable role in many sectors CC effects will be reflected on budget Potential channels e.g. housing, infrastructure, health Almost untouched topic in the literature We look at impacts on total and housing expenditures Housing is one of few expenditures with coherent historical data In /3 of Russian housing was public, currently around 15% We find non-linear impact: cold regions will benefit but this effect evens out in warmer regions Russia could save 4-9 bln. $ in due to CC

7 CC impacts on Russia s budget expenditures Figure 2: Non-parametric fit for weather variation at different temperatures (x-axis is annual ⁰C) Total expenditures Housing expenditures

8 Russia s CC policies and local reality Russia currently inactive in international climate discussions It is currently establishing a national climate plan Emphasis on energy efficiency, technology, geoengineering Current national target, 25% reduction in CO2 in Effectively means growth: still 30% below 1990 level Latest IPCC report emphasized the role of local governments in adaptation efforts Interview of local regional authorities on CC adaptation 11 regions, mainly in NWFD and Central FD, representing different climatic zones

9 Russia s CC policies and local reality Russia recognizes CC at the Federal level Regions with high level of agriculture etc. more aware Most regions expect effects to be negative on longer term Only two had adaptation plans, no CO2 mitigation efforts Budgetary limitations most prominent obstacle