The Economics of Climate Change at the Local Level: The Case of Shifting Oak Habitat Range in the Tulare Lake Basin

Scientists predict that climate change will cause suitable habitat ranges to shift for many plant species. To the extent that proximity to particular vegetation types increases residents' utility and/or these shifts affect services valued by all of society, such geographic shifts in ecosystems may significantly affect societal welfare. My dissertation consists of two primary components, each of which addresses an issue relating to conservation choice under climate change.;In the first component of my dissertation, I analyze the optimal policy choice for the conservation of privately owned open space when future land cover types are uncertain and development is irreversible. Policymakers must select land use policies to make conservation decisions under uncertainty over the social benefits of future vegetation, due to the uncertain effects of climate change on suitable habitat ranges. If policymakers fail to account for future information gains when designing land use policies, expected social welfare may not be maximized. To examine this situation, I consider three policy instruments: urban growth boundaries (UGB), location-independent development fees (LIF), and location-dependent development fees (LDF). I analyze them in a spatial-dynamic model in which climate change is treated as a land use externality with an uncertain future value. I derive the privately and socially optimal land allocations under open-loop and closed-loop control. By comparing the privately and socially optimal land allocations for each control problem, I identify the optimal trajectory of each instrument over time. Results depend on whether or not there is a cumulative externality from urban development. When no cumulative externality exists, the optimal trajectories of the welfare-maximizing UGB and LIF depend on the control problem. In contrast, the optimal trajectories of the welfare-maximizing LDF are identical in expectation across the two control problems. The optimally chosen LDF is the social welfare-maximizing policy when landowners do and policymakers do not anticipate (or cannot respond to) the future availability of climatic information. When a cumulative externality exists, all three welfare-maximizing policies depend on the control problem. In this case, none of the land use policies clearly dominates the others. This work implies that conservation programs should amend current methods for ranking conservation choices to account for future ecosystem movement, and return lands to other uses if climate change causes conservation goals to be impossible to achieve in a given location.;The second component of my dissertation undertakes a related empirical analysis. It estimates the possible welfare change from the marginal loss of blue oak due to development and climate change in the Tulare Lake Basin (Fresno, Kern, and Tulare Counties) in California. Using a hedonic pricing model, the marginal values of blue oaks and the land cover types most likely to replace them (herbaceous, urban, and crop land) are estimated at multiple spatial scales, using 1997--2003 sales of single family residences for the Tulare Lake Basin. In addition to the common identification problems of specification error, omitted variable bias, and multicollinearity, the variables measuring the degree of proximity of a property to land cover types are endogenous. To identify the marginal values of land cover types at multiple spatial scales using two-stage least squares, instrumental variables are developed using soil data. Cluster robust standard errors are calculated due to spatial autocorrelation within neighborhoods. Results indicate that households do not differentiate between vegetation land cover types; there is no indirect cost of climate change resulting from marginal shifts in land cover types. The results also indicate that Tulare Lake Basin households are unlikely to be negatively affected by, and may actually benefit from, marginal losses of blue oak woodlands to agriculture and urban land use. These results highlight the importance of non-use and ecosystem services values, and the importance of coordinating land use policies at spatial scale above the municipality level.