An impact analysis of climate change on the forestry industry in Quebec

Abstract

Quebec’s forests represent 20% of Canadian forests and 2% of the world forests. Over the entire planet, forests play a major role in habitat preservation and in supplying goods and services to the population. However, climate change will have an impact on the forest through inter alia increased droughts, forest fires, warmer weather, and infestations. In this paper, we analyze the economic impact of climate change on the forest industry in Quebec over a 40-year period using a recursive dynamic computable general equilibrium model. We find that the climate change effects will be relatively weak on most macroeconomic variables as agents adjust their behavior over time and factors are reallocated across sectors. We find that climate change could generate losses in gross domestic product of up to Can$300 million (0.12% of gross domestic product) at the end of a 40-year period for Quebec’s economy. However, we find relatively more important effects within the sectors of the forest industry, with losses ranging from 3% to 7.5%.