SW-NCA-color-FINALweb

260 assessment of climate change in the southwest united statespolicies would need to be matched in much of the rest of the world before significantimpacts would be felt locally.Second, climate change could increase the demand for electricity: higher temperaturesare likely to be met with higher demands for cooling (Section 12.3.1). Alternatively,higher cooling needs could spawn improvement in cooling/energy efficiencies or higherenergy prices, which would reduce electricity demand.Third, climate change could impact the availability of water needed for primary energyextraction and processing (DOE 2006). Reduced water supplies (see Chapters 6 and10) could affect current production and especially the development of new resources.A particularly good example is the ongoing struggles over water and oil shale developmentin the Piceance Basin (Western Resource Advocates 2009).Cost of climate changeIn 2009, total expenditures for end-use energy (such as retail electricity and motor gasoline)in the Southwest was about $160 billion. California contributed about 66% to theseexpenditures (EIA 2010). Any changes in energy prices due to climate change or climatechange policies will have a direct economic impact on consumers. For example, sinceretail electricity expenditure in the Southwest was about $52 billion in 2009 (EIA 2010),the postulated increases in electricity demand due to higher temperatures discussedpreviously would have represented a few billion dollars per year for the current electricitygeneration and demand system. The estimation of changes of energy expendituresin the rest of this century due to physical changes in our climate is extremely difficultbecause it will depend on multiple uncertain factors such as the price of energy, populationgrowth, technology evolution, and human behavior.Climate policies directly limiting greenhouse gas emissions or indirectly affectingemissions via requirements such as renewable portfolio standards will also affect thecost of energy. At the same time, the potential benefits of policies such as increasing energysecurity, limiting climate change, reducing air pollution, and perhaps creating localjobs must be considered. The authors are not aware of a comprehensive study alongthese lines for the Southwest.Climate policies at the national and international levels designed to reduce greenhousegas emissions will directly impact the energy sector, given that currently fossil-fuelcombustion is by far the dominant source of these emissions. Conventional modelingstudies at the national level suggest that drastic reductions of greenhouse gases wouldreduce gross domestic product (GDP) by at most a few percent, delaying a given GDPlevel only for a few years (National Research Council 2010). However, as indicated before,this represents at best only a partial economic analysis because it does not take intoaccount the benefits of limiting the impacts of climate change. In addition, the economicmodels used in these studies assume perfectly functioning markets and any restrictionson emissions, by design, result in economic penalties (DeCanio 2003). Ironically, thesemodels do not take into account the effect that climate change would have on economicactivity and energy demand, for example, diverting economic resources to mitigateclimate damages (Hallegatte and Hourcade 2007). More realistic economic models aresorely needed.