Climate change may cost California billions-report

* Climate change cost seen in tens of billions annually

* Fresh water use and sea level change key factors

* Peak energy use could be higher than forecast

SAN FRANCISCO, April 1 (Reuters) - Climate change may cost California tens of billions of dollars annually in coming years as sea levels rise and hot days cause people to turn up the air conditioning, a draft report from the state said on Wednesday.

Thirsty cities may be able to buy water from farmers and high-altitude forests are expected to benefit for most of the century as trees enjoy the warmer weather, but a long-term effort to understand the details of climate change suggests costs will be higher than expected.

Much depends on whether global efforts to slow the Earth’s heating are successful.

“Climate change will impose substantial costs to Californians in the order of tens of billions of dollars annually,” the Climate Action Team draft report said, adding that “costs will be substantially lower if global emissions of greenhouse gases are curtailed.”

“On the whole, I am actually less optimistic,” said Michael Hanemann, an economist co-director of the California Climate Change Center at the University of California, Berkeley, and an author of the report.

The summary of 37 climate change studies is the latest in a series that America’s most populous state publishes every two to three years, adding detail as it goes. “As you fill in the detail, the whole gets worse,” Hanemann said by telephone.

California leads the United States in setting climate change goals, aiming to cut carbon emissions to 1990 levels by 2020, although proposed federal legislation could set similar targets for the nation.

Major concerns include a possible $100 billion loss from flooding concentrated around San Francisco Bay if sea levels were to rise and a hundred-year flood hit.

Governor Arnold Schwarzenegger, who wants Californians to approve billions of dollars in bonds to build fresh water projects, focused on water scarcity.

“Today’s new research reveals that California’s severe drought conditions are only a preview of what is likely to come because of our changing climate,” he said in a statement.

Heat may increase the output of some crops, but water will be a limiting factor. The study concluded the impact of climate change on the water sector itself could be modest -- but Hanemann said studies thus far assumed a perfect market where cities could buy extra water from farms, a situation that he said was not possible.

One of the major changes in the new report, based on an hourly look at California energy use, is that electricity demand may rise by 55 percent by the end of the century.

The report is availablehere. (for more environmental news see our Environment blog at (Reporting by Peter Henderson, Editing by Peter Cooney)