Carbon Trade

AMERICAN ASSOCIATION OF WINE ECONOMISTS
AAWE WORKING PAPER No. 9
Editor Victor Ginsburgh
RED, WHITE AND “GREEN”: THE COST OF CARBON IN THE GLOBAL WINE TRADE
Tyler Colman Pablo Päster

October 2007

www.wine-economics.org

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Red, White, and “Green”: the Cost of Carbon in the Global Wine Trade

Tyler Colman New York University DrVino.com thc3@nyu.edu Pablo Päster SustainableSolutions Group, URS Corporation Pablo_Paster@URSCorp.com

Abstract: Climate change is altering a wide range of human activities, including wine making. While wine may appear to be one of the most natural alcoholic beverages, it is not without carbon inputs and emissions, which contribute to the very change in climate that is altering both wine and wine making. In this paper, we use a carbon life cycleanalysis to develop a model for quantifying carbon inputs in a bottle of wine. Current regulatory arrangements do not capture the carbon costs of wine effectively since most costs are externalized. We conclude with estimates of the cost of carbon under various regulatory regimes, which suggest how wine producers and consumers can reduce the carbon footprint of wine.

2 I. Introduction Theworld’s vineyards are getting warmer. England, known in Adam Smith’s day for trading wool for wine, is now not only making wine, but making wine that the critic Jancis Robinson calls “far from a joke now” (Robinson 2007). Even Germany’s Mosel Valley, which was previously the northern limit of quality wine production, has seen temperatures on the hillside vineyards rise with a concomitant increase inwine quality and vineyard prices, as Ashenfelter and Storchmann have demonstrated (Ashenfelter and Storchmann 2006). During the 1960s and 1970s in Bordeaux, vintages used to fluctuate between awful and outstanding but, for the last decade, the range has been almost exclusively between very good and outstanding. 1 And in presently hot areas of grape cultivation, such as California and Australia,climate change has led to rising alcohol levels in wines and irrigation issues in the vineyard. Some atmospheric scientists even predict the virtual eradication of the current premium American vineyards over the next century (White et al. 2006). The issue of terroir, or using the vineyard site as the key explanatory variable for determining a wine’s quality, appears under threat from a shiftingclimate. While many industries have a significant impact on global climate change, the wine industry is not innocent from altering vineyard microclimates. Most industries benefit from public goods such as natural resources, ecosystem services, and clean water, but they also incur costs that are passed on to society. These externalized costs include non-product output such as carbon dioxide (CO2)emissions, chemical effluent, and other wastes that contribute to the global tragedy of the commons. Understanding the type and magnitude of these externalities helps prepare companies and industries for potential impacts from regulation on such externalities (such as California's AB32), helps promote accountability to consumers, and helps to identify opportunities for innovation and costsavings. Inthis paper we calculate the carbon life cycle of wine. As wine producers become more aware of carbon use and emissions from their industry, they tend to focus only on the vineyard and the winery for emissions reductions. Here, we go beyond that to
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Changes in wine making partially explain this phenomenon. But the weather also has played a role as Marcel Ducasse, winemaker for 20 years at ChateauLagrange in St. Julien, was adamant to underscore on his farewell stop in New York City on January 18, 2007.

3 include the crucial issue of transportation. Thus, this paper also contributes to the debate about “food miles,” a shorthand way of telling the consumer about the “carbon footprint” of food transportation. In January 2007, the British retailer Tesco announced that every product...