Page 108

The main strength of the computable general equilibrium approach is the ability to illustrate the potential economic costs and benefits of climate variability under conditions in which resources are fully allocated throughout the economy (e.g., labor left unemployed by climatic events is reemployed where economically optimal). A major weakness is the inability to estimate how climatic impacts are distributed among different sectors, populations, and regions. Effects of climatic variability on interindustry purchases of inputs and sales of outputs (see discussion of input-output models) are not explicit. And, like the firm-level approaches noted above, the structural elements of computable general equilibrium models are rarely evaluated in light of observed human behavior.

Challenges in Estimating the Impacts of Climate Variability

Considerable attention has been devoted to estimating the effects of climatic variability on ecosystems and society. Food and fiber production has been the subject of most of the recent progress in understanding owing to their great sensitivity to climate. Water resources and energy have received somewhat less attention. The direct effects of climate variability on food, fiber, water, and energy can be analyzed with a high degree of precision and confidence in most developed countries, although knowledge is much more limited with regard to the other links that determine human consequences (see Figure 5-2). The situation is not as good in developing countries due to shortages of scientific infrastructure. Basic knowledge and modeling capacity for other sensitive sectors, including health, industry, transportation, and environmental amenities, are weak. Lack of data is a major hindrance to progress in understanding the effects of climate variability in these less studied sectors (see discussion below). The lack of an identifiable research community dedicated to understanding and predicting the effects of climatic variability in these sectors is a problem everywhere, but especially in developing countries.

Estimating the Value of Climate Forecasts

What Kinds of Benefit Can Climate Forecasts Provide?

As Chapter 4 makes clear, climate forecasts are beneficial only if they provide timely information people can use to modify the actions they take to cope with climatic variations. This information may concern a variety of weather and climatic events about which forecasts can provide useful early warning, including hurricanes and some other major storms, droughts, floods, wildfires, and subtle variations from climatic averages. Some climatic events cannot now be forecast with measurable skill, how-