Simulating the economic impacts of climate change in the Mid-Atlantic Region

This paper provides an overview of the Mid-Atlantic Region (MAR) economy and of models that can be used to analyze how climate change will affect it. A regional input-output (I-O) table, downscaled from its national counterpart, provides insight into the extent of the MAR's internal interdependence, as well as its dependence on trade with the rest of the US and the rest of the world. The table indicates that climate-sensitive sectors play a relatively small direct role in the MAR, but multiplier and other types of general equilibrium effects could result in some small, but not insignificant, impacts on other sectors and other regions. An application of the I-O model to climate variability impacts on forest-related sectors illustrates this point. Although I-O analysis is a useful tool for setting the stage for an impact analysis, limitations of the methodology are identified. A general equilibrium approach is presented as an alternative that captures the best features of I-O, yet is able to incorporate non-linearities, input substitution, behavioral considerations, and the workings of prices and markets.