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Assessment of Economic Impacts of Climate Change in Cyprus

Final Report Summary - CCECON (Assessment of Economic Impacts of Climate Change in Cyprus)

The major objective of the project was to quantify the economic effects of climate change in Cyprus in the coming decades, based on a wider multidisciplinary research study that would involve several authorities and research institutions of the country. The aim was to assess the effects of a changing climate on agriculture, energy use and human health in Cyprus. Although this wider study, which was planned to be co-funded by other sources, did not materialise in full, still the main research output of this project was realised: Impacts on agriculture and energy were assessed, and especially in the agricultural sector work proceeded at greater depth than initially planned; on the other hand it was not possible to proceed with a scientifically sound assessment of health impacts and their associated costs, but a relevant report outlining the expected health effects of climate change in the region of Cyprus was prepared and is expected to be published before the end of year 2011.

To achieve the objectives stated above, the research fellow collaborated with national authorities and researchers that deal with meteorology, agriculture and energy issues in Cyprus.

As regards climate impacts on agriculture, the researcher analysed initially the effect of climate change on water scarcity in Cyprus. He was assisted in this analysis by academic members of the host institution. Scarcity costs under climate change conditions were calculated with the aid of regional climate simulation results. The present value of additional costs for the entire period 2010-2030 was found to lie between EUR 6 and 31 million at 2009 prices, 15 %-40 % more than the costs due to already existing water scarcity in the country; the central estimate shows a 22 % cost increase - or EUR 15.7 million at 2009 prices.

Furthermore, innovative water management concepts (virtual water and water footprint) were applied and linked to the agro-economic analysis of water use. Climate change (affecting both temperatures and rainfall levels) is expected to strongly influence agricultural water availability; hence the implementation of these novel methods has provided further insights into the economic analysis of agricultural production. A doctoral student has collaborated with the project's researcher for this purpose. Results show that annual national crop production in the coming decade may be reduced by 41-43 %, relative to the actual data of the last 20 years. These results indicate that in the near future both climate change and water management policies will be critical for agriculture. The modelling analysis also indicated that there are various options for climate change adaptation in the agricultural sector.

As regards the impacts of climate change on energy production and use, a forecast of electricity consumption in Cyprus up to the year 2030 was performed, based on econometric analysis of energy use. Using the econometrically estimated model, it was found that electricity consumption in Cyprus may be 2.9 % higher in 2030 than in the reference scenario, thus leading to a welfare loss of over EUR 200 million at 2007 prices for the entire period 2008-2030. Moreover, climate change may lead to 85-95 MW of extra electricity load in 2030. This will lead to additional costs for investing in additional power reserve capacity.

The project has greatly helped the researcher integrate with both the European academic community in environmental economics and policy, and the national research community. He is currently an academic fellow at the host institution and also teaches environmental economics and management at another public University in Cyprus. He is also an associate editor of the academic journal 'Energy Economics', and a member of the Standing Committee on Life, Earth and Environmental Sciences of the European Science Foundation (ESF).