Using Hedonic Models of Solar Radiation and Weather to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards

In this paper we use two alternative methods to assess the effects of climate change on the quality of wines from the vineyards of the Mosel Valley in Germany. In the first, structural approach we use a physical 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 physics of heat and energy permits a calculation of the impact of any temperature change on vineyard quality (and prices). In a second approach, we measure the effect of year-to-year changes in the weather on land or crop values in the same region and use the estimated hedonic equation to measure the effect of temperature change on prices. The empirical results of both analyses indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.