Economic impacts of climate change in the forest sector: a comparison of single-region and multiregional CGE modeling frameworks

Abstract

Climate change impacts on forests are largely expected to intensify over the next few decades. Computable general equilibrium (CGE) modeling is increasingly becoming a popular tool for assessing these impacts. Previous analyses in this area have been based on either single-region or multiregional CGE model specifications, each with their own advantages and disadvantages. To date, however, there has been no systematic comparison of the potential differences in economic impact estimates between the two CGE model specifications. To examine the extent of these potential differences, we conducted a comparative economic impact analysis of climate change in the forest sector across Canadian provinces, the United States, and the rest of the world using dynamic, single-region and multiregional CGE models over the 2006–2051 period. Results revealed that, within each region, different model specifications produced unique economic impact estimates, differing by as much as 18% under each climate change scenario considered. Overall, a majority of Canadian regions recorded smaller (in absolute value terms) and more positive economic impacts using single-region models compared with the multiregional model. Differences in international trade specifications between models, together with unique climate change impact considerations across regions, played key roles in the findings. While few general conclusions emerge from this analysis, it is clear that CGE model specifications can have a significant effect on regional economic impact estimates of climate change in the forest sector. Thus, caution is advised when using the estimates of any one CGE model for policy purposes.