Chapter 4 The Economic Impacts of Climate Change on the Hydro-Electric Sector: A Case Study of the Mavrovo Hydro Plant
the-art. Local water resource experts need to become familiar with how to calibrate and implement one or more rainfall runoff models that are suitable for Macedonian hydrologic and climatic conditions. The acquisition, training and use of the model also needs to be set in a larger context, involving both a thorough investigation of the data needs of various rainfall runoff models and the availability of this data in the country as well as a plan to expand and improve the quality of hydrologic and meteorological data gathering networks and systems. 2. Improve the Methodology in this Study to Dispense with the Projection of Runoff Based on Wet, Average and Dry Precipitation Conditions. Simulating the physical impacts of climate change in this study was hindered by the fact that there was no way to tell how, for example, average precipitation conditions in the Base Case became wetter or drier relative to the other precipitation conditions in the climate change cases. In other words, it was not easily possible to show how climate change affected the distribution of precipitation conditions. This problem appears to be due to the reliance of OPTIM and local experts on historical runoff data. This situation will change if the first recommendation is followed, as the ability to use rainfall-runoff models to project future conditions breaks the need to be wholly dependent on historical data. 3. Improve the Methodology in this Study to Disentangle the Effects of Climate Change and Economic Development on Climate Change Damages. The question is how large is a share of the damages due to climate change and how much of the benefits of avoiding these damages are due to climate change and how much is due to economic development? The usual approach is to hold one of the two constant and “partial” out the contribution of the other effect. However, there is a limitation to this approach in that it does not include the interaction between climate change and economic development on benefit and cost measures. In fact, when both climate and economic development are changing at the same time, the benefits and costs that are estimated for this interaction must, by definition, have something to say about the vulnerability of what we do (or don’t do) to adapt to climate change. Decomposing climate change damages and the net benefits of climate change into the partial effects of climate, economic development and the interaction between the two should be possible with the models used in this study. However, the experimental design of the scenarios is very important in order to isolate these effects. 4. Link the OPTIM and MARKAL Models in order to Better Simulate Long-Run Physical Impacts and Adaptation. The MARKAL model was not used in this analysis. However, the models have been used together in a previous study to assess the costs of reducing GHG emissions. The benefit of integrating the models is that OPTIM can be used to provide information about the technology and operating parameters of existing and future HPPs that is used in MARKAL. In addition, OPTIM can provide this information for different climate scenarios that will also be used in the multi-year analysis conducted using MARKAL. In theory, the models should interact simultaneously, but this is perhaps too much to ask. However, for the Third National Communication efforts should be undertaken to develop a methodology to look at multiple climate impacts over a number of years in the entire energy sector, using both models. 5. Better Develop the Methodology to Decompose Residual Damages into Climate Change Damages and the Net Benefits (Benefits minus Costs) of Adaptation. One way to do this proposed by Callaway (2004A) is to use capital investment in new plants and distribution
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