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Using a Hedonic Model of Solar Radiation to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards

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  • Orley Ashenfelter
  • Karl Storchmann

Abstract

In this paper we provide a simple, credible method for assessing the effects of climate change on the quality of agricultural land and then apply this method using a rich set of data on the vineyards of the Mosel Valley in Germany. The basic idea is to use a simple model of solar radiation to measure the amount of energy collected by a vineyard, and then to establish the econometric relation between energy and vineyard quality. Coupling this hedonic function with the elementary physics of heat and energy permits a straightforward calculation of the impact of any climate change on vineyard quality (and prices). We show that the variability in vineyard quality in this region is due primarily to the extent to which each vineyard is able to capture radiant solar energy, so that these data provide a particularly credible "experiment" for identifying and measuring the appropriate hedonic equation. Our empirical results indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount. Vineyard and grape prices increase more than proportionally with greater ripeness, so that we estimate a 3°C increase in temperature would more than double the value of this vineyard area, while a 1°C increase would increase prices by about 20 percent.

Suggested Citation

  • Orley Ashenfelter & Karl Storchmann, 2006. "Using a Hedonic Model of Solar Radiation to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards," NBER Working Papers 12380, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12380
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    References listed on IDEAS

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    1. Deschenes, Olivier & Greenstone, Michael, 2004. "The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations in Weather," University of California at Santa Barbara, Economics Working Paper Series qt6w7242cj, Department of Economics, UC Santa Barbara.
    2. repec:reg:rpubli:291 is not listed on IDEAS
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    Cited by:

    1. Gergaud, Olivier & Ginsburgh, Victor, 2010. "Natural Endowments, Production Technologies and the Quality of Wines in Bordeaux. Does Terroir Matter?," Journal of Wine Economics, Cambridge University Press, vol. 5(01), pages 3-21, March.
    2. Jeremy Galbreath, 2011. "To What Extent is Business Responding to Climate Change? Evidence from a Global Wine Producer," Journal of Business Ethics, Springer, vol. 104(3), pages 421-432, December.

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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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