Climate change and the economy in Baja California: Assessment of macroeconomic impacts of the State's Climate Action Plan

- Macroeconomic impacts of the Baja California Climate Action Plan are evaluated.
- Recommended policies are estimated to reduce 49 Tg CO2e between 2015 and 2030.
- REMI PI+ Model is adapted and refined to conduct the economic impact analysis.
- Major impacts include the creation of an annual average of 1680 new jobs.
- Sensitivity analyses indicate results are robust and provide insights to policy design.

Despite its developing country status, Mexico ranks 10th worldwide in total greenhouse gas (GHG) emissions. However, Mexico's vulnerability to climate change impacts is a major motivating factor behind its announced intended contributions at COP21 to cut its baseline emissions by at least 25% in 2030. We analyze the macroeconomic impacts of the Climate Action Plan (CAP) process undertaken in the Mexican border state of Baja California (BC). We adapt a state-of-the-art regional macroeconometric model to analyze the BC economy-wide impacts of 22 GHG mitigation policy options recommended in the Baja California CAP. The combined effects include an average annual increase of 1680 new jobs (or about 0.11% of the average annual employment in the baseline economic forecast) and a Gross State Product (GSP) increase of $9.85 billion pesos in NPV over the 2015-2030 planning horizon. Although the main objective of GHG mitigation is to reduce atmospheric concentrations, and hence future potential damages of these pollutants, the stimulus to the BC economy from the implementation of its CAP represents a valuable co-benefit. Moreover, it is a tangible one that will take place in the near-term, in contrast to the more long-term and more uncertain benefits associated with reducing climate change damages.