Climate Change, Vegetation, and Welfare: Estimating the Welfare Loss to Landowners of Marginal Shifts in Blue Oak Habitat

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. In this paper, I estimate 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 scales above the municipality level.