The Economic Costs of Climate Change in MENA Countries: A Micro-Spatial Analysis

FEMISE Team: Prof. Nicolas Péridy (Université du Sud Toulon-Var, LEAD, France)

Prof. Ahmed Ghoneim (Cairo University,Egypt)Research Assistants: Dr. Marc Brunetto and Dr. Mohamed Hazem

(Université du Sud)

FEMISE Program FEM34-03

Femise Annual ConferenceMarseille 15-16 December 2011

1a. MotivationClimate change:

major issue for the world population and thus policy makers. Estimation of global warming: from 1.0°C to 4.5°C by the end of this century (IPPC (2007)).

The last forecasts (PNUE, 2011) are even more alarmists: from 2.5°C to 6.0°C.

Questions about the economic impact of climate changeNew literature (Stern, 2008, Dell and al., 2009, Pindyck,

2010)New data bases at micro-spatial level (TATP, 2009 and G-

Econ 2009) MENA countries are particularly concerned with CC

2a. Stylized facts: Temperature (moving av.)Algeria Egypt

2b. Stylized facts: Precipitations (mm per year)

1900-29 1930-59 1960-89 1990-2008 variation (%)Algeria 108,5 94,2 86,7 89,1 -17,9%Egypt 36,3 19,5 17,7 33,1 -8,8%Israel 298,2 195,0 164,5 145,9 -51,1%Jordan 238,9 149,6 124,9 108,3 -54,7%Lebanon 1035,0 727,2 654,1 568,0 -45,1%Libya 85,9 41,1 39,0 43,3 -49,6%Morocco 215,4 185,3 180,9 186,9 -13,2%Syria 479,3 364,8 332,9 272,0 -43,3%Tunisia 242,1 243,5 236,7 241,8 -0,1%Turkey 606,0 601,5 590,9 570,9 -5,8%

3. Main questions to be addressed Is there any evidence of climate change over

the past decades in MENA countries, notably in terms of temperature and rainfall?

What is the impact of a rise in temperature and a decrease in precipitation on income and growth in these countries?

Which policies can be implemented in order to adapt to global warming?

4a. Methodology: a micro-spatial analysisThe use of micro-spatial databases:

Terrestrial Air Temperature and Precipitation (Matsuura and Willmott 2009); 808 geographical cells for MENA countries for the time period 1900-2088 (88,072 observ.)

G-Econ (Yale University): Gross cell product (GCP) is measured at a 1-degree longitude by 1-degree latitude resolution

Highlighting statistical evidence of climate change in MENA countries:Regression of temperature and precipitations on timeIdentification of structural changes (Chow and Cusum tests)Calculating changes in temperature and precipitations

before and after the structural change

4b. Methodology: a micro-spatial analysisTesting the impact of climate change on the real

economy:On micro-spatial GDP and GDP per capita

With spatial conditional convergence models: Barro regression (Mankiw et al., 1992; Ramajo et al., 2008)

With an extended model at country level which accounts for other control variables (education, innovation, infrastructure, openness, etc…)

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4c. Methodology: a micro-spatial analysisUsing spatial econometrics

Test of the spatial autocorrelation of the residuals (Moran-I-test)

Estimating: spatial lag models: Y=rWy+Xb+ spatial model with autocorrelated residuals:

Y=X+ Avec =lW+u

5a. Results: Global Warming (temperatures)Table 1: Estimation of structural change

Chow statistics Structural parameter est. t-test parameter est. t-testchange before before after after

Algeria 26,52*** 1971 0,000374 0,19 0,04073*** 7,77Egypt 21,1*** 1967 0,000270 0,1 0,04617*** 5,24Israel 7,3*** 1971 0,001379 0,5 0,022174*** 4,25Jordan 7,9*** 1982 -0,000136 -0,06 0,04557*** 4,82Lebanon 13,92*** 1972 -0,006656** -2,39 0,03297*** 5,43Libya 38,91*** 1978 -0,004227** -2,21 0,03879*** 7,58Morocco 15,05*** 1971 -0,000392 -0,19 0,02411*** 4,98Syria 10,53*** 1971 -0,002018 -0,69 0,03329*** 4,73Tunisia 39,4*** 1971 0,001146 0,5 0,05631*** 9,92Turkey 2,25 1994 -0,000798 -0,37 0,00233 0,87

5b. Results: Global Warming (temperatures)Table 2: Global warming in MENA countries

(°C) Average Temperature: Change in temp. Average Temperature: Change in temp.

before after (°C) before 2000-2008 (°C)Algeria 23,1 23,4 +0,3 23,1 24,0 +0,9Egypt 22,0 22,3 +0,3 22,0 22,9 +0,9Israel 19,9 19,8 -0,1 19,9 20,2 +0,3Jordan 19,3 19,3 0,0 19,3 19,7 +0,4Lebanon 17,3 17,3 0,0 17,3 17,9 +0,6Libya 22,3 23,0 0,7 22,3 23,3 +1,0Morocco 19,1 19,2 +0,1 19,1 19,6 +0,5Syria 18,1 18,2 +0,1 18,1 18,7 +0,6Tunisia 20,0 20,4 +0,4 20,0 21,2 +1,2Turkey 12,1 12,5 +0,4 12,1 12,5 +0,4

5c. Results: Global Warming (temperatures)Figure 1: Global warming at micro-spatial

level

5d. Results: Climate change (precipitations)Table 3: Estimation results for the whole

period at country level (1900-2008) parameter est. t-stat constantAlgeria -0,26995*** -4,47 622,66Egypt -0,10677*** -2,38 234,68Israel -1,85259*** -9,61 3826,40Jordan -1,57062*** -7,86 3228,98Lebanon -5,44663*** -11,07 11406,75Libya -0,43409*** -5,13 901,40Morocco -0,55439*** -4,52 1272,45Syria -2,29282*** -8,72 4851,52Tunisia -0,03192 -0,22 303,32Turkey -0,40379** -2,11 1383,49

5c. Results: Climate change (precipitations)Figure 1: changes in precipitations at micro-

spatial level

6a. Impact on GDP and GDP per capita (spatial lag model)Impact on GDP

Impact of GDP per capita

All areas Algeria Egypt Israel Libya Morocco TurkeyTemperature -0.0803*** -0.1116*** -0.1974** -0.3233*** -0.1976*** -0.1052*** 0.0346Precipitations -0.0003 -0.0002 -0.0008 0.0025* 0.0013 0.0007 -0.0008Intercept 5.3705*** 6.1103*** 27.9521*** 14.1877*** 10.2190*** 5.3637*** 6.1924***Rho 0.7944*** 0.8016*** 0.7247*** 0.6341** 0.6703*** 0.8086*** 0.6965***obs 808 255 106 9 17 81 102

All areas Algeria Egypt Israel Libya Morocco TurkeyTemperature -0.0005 -0.0026 -0.1446*** n.a. -0.0143* -0.0011** 0.0449Precipitations 0.0004 -0.0002 0.0016* n.a. 0.0005 0.0001 0.0001Intercept 7.8244*** 3.8680 10.3606*** n.a. 3.4725*** 2.2512*** 7.8075***Rho 0.7877*** 0.5054*** 0.4063*** n.a. 0.6426*** 0.8086*** 0.9193obs 808 255 106 9 17 81 102

6b. Results of the conditional convergence model (spatial lag model)

GDP/cap GDPInitial income -0.2337*** -0.0451***Temperature -0.3343*** -0.2859*Precipitations 0.1292 1.7464Intercept 2.6573*** 4.3131***Rho 0.6869*** 0.8807***obs 808 808

7. conclusionMENA countries have all experienced significant climate

change, which has accelerated in the past decadeCompared with other countries, global warming in

MENA countries is comparable to that observed at world level BUT with a significant decrease in rainfalls.

There is some evidence of a negative impact of global warming on GDP and GDP per capita to a lesser impact (1°C => -8.5% GDP per capita)

This raises the question about the role of policies:To prevent additional climate changeTo adapt to these changes