ECONOMIC CONSEQUENCES OF CLIMATE CHANGE – HOW ARE WE FARING?

ECONOMIC CONSEQUENCES OF CLIMATE CHANGE – HOW ARE WE FARING?

October 4, 2017

By Tahmina Islam & Tanjila Najnin

The two word phrase that has stirred much debates, discussions and dilemmas among scientists, economists and global leaders is- climate change.

Climate change is already having a significant impact on ecosystems, economies and communities. Some regions are experiencing more extreme heat while others may cool slightly. Other than increased temperature, floods, droughts, violent storms and other extreme weather events like cyclones and hurricanes are becoming commonplace around the world. It is also affecting water resources which are intimately tied to other resource and social issues such as food supply, health, industries, transportation and ecosystem integrity.

Thus, it is projected that climate change will essentially involve damage to property and infrastructure due to violent weather. Researchers estimate that climate change will wipe off $2.5 trillion worth of global assets which can soar up to $24 trillion in the worst case scenario. Other effects include decrease in the amount of food and other resources, increased medical cost, insurances and general costs of living. Price of everyday items will increase leading to inflation.

Productivity too will suffer due to disruptions brought by adversely changing climate. According to UN research, rising temperatures caused by climate change may cost the world economy over $2 trillion in lost productivity by 2030. Sea routes and infrastructure will become unsafe for transporting goods which will increase the freight cost and the risk in export-import. In fact, climate change will create a major havoc on the global economy that needs to be addressed. The MIT Technology Review predicts the average global income will drop by 23% by the end of the century simply due to climate change.

GLOBAL SCENARIO

Europe

Southern Europe will experience agricultural losses in the face of climate change whereas Northern Europe and British Isles due to longer growing season. Wine industry in Britain is rising due to a favorable climate for the ripening of grapes.  Due to warmer climate, conditions in Northern Europe will become better while situation for the rest of the Europe turns bleaker in light of floods and reduced crops.

Various policies are being undertaken in areas such as freshwater and coastal management, biodiversity and nature protection, and disaster-risk reduction. The EU maintains a website to assist the development of adaptation policies in Europe. European countries are also switching to renewable energies and limiting their CO2 emissions.

Latin America and Caribbean Islands

According to a new study published in Proceedings of the National Academy of Sciences, climate change may cut coffee growing areas in Latin America by as much as 88% by 2050. Agricultural production as a whole will suffer driving up food costs and threatening food security. Impaired port operations, unsafe conditions in the region’s ports and damage to infrastructure resulting from climate change will bear significant costs. Beach erosion and extreme weather will also reduce tourists. Cities built on the coastline are in severe danger as proven by the current hurricanes.

Countries such as Brazil, Mexico, Peru, and Colombia have made significant commitments to reducing their emissions. Other countries, such as Costa Rica, Uruguay, Nicaragua, and Chile, are betting on the potential of renewable energy. Latin American countries are presently assessing the impacts of climate change across critical sectors of the economy.

Africa

Across Africa, droughts, heat stress and flooding have led to a reduction in crop yields and livestock productivity. Conflicts often occur over the use of already limited natural resources, fertile ground and water.

In Africa many national governments are initiating governance systems for adaptation such as disaster risk management, technology adjustments, and infrastructure and ecosystem-based approaches. Basic public health measures and livelihood diversification are also reducing vulnerability. In Ethiopia, Niger, and Rwanda small-scale landowners and communities are adapting to climate risk and leading the way for sustainable land use at a large scale.  However, Africa needs more funding to do more.

USA

According to Sci- ence, Southern America will bear the worst of climate change’s costs, with dwindling harvests, high energy costs and flooded land. Climate change will cost the United States 1.2 percent of its GDP for every additional degree Celsius of warming.

USA government is currently silent about any mitigating steps. Individual state governments however are formulating and implementing policies of their own.

China

According to WEF, China’s infrastructure networks are becoming increasingly vulnerable to natural disasters such as flooding and drought, to which China is historically prone. High-temperature subsidies are allocated to Chinese employees for each day that they work in an extremely hot environment resulting in increased labor costs.

China has committed to halting the growth in its emissions of greenhouse gases by 2030. China has officially aimed to reduce water consumption, energy consumption and CO2 emissions by 2020.

India

Climate change will hit India hard with an onslaught of floods, cyclones and droughts. Adverse weather patterns will affect agricultural output and food security leading to water shortages and trigger outbreaks of water and mosquito-borne diseases.

Tourism will suffer, since tourists will choose to spend their holidays at higher altitudes due to cooler temperatures or the sea level rises, hitting beach resorts. Extreme weather may also harm infrastructure such as roads, ports and airports, impacting delivery of goods and services.

WHAT IS HAPPENING IN BANGLADESH?

Given how the world is combating the effects of climate change, the question now arises that how Bangladesh is dealing with this challenge.

Bangladesh, due to its geographic location, is one of the most disaster prone countries in the world. Hence, the country is highly vulnerable to the adverse effects of climate change – especially high temperature, sea-level rise, cyclones and storm surges, salinity intrusion, heavy rain falls, floods etc. According to the Germanwatch Global Climate Risk Index 2017, Bangladesh is the sixth most affected countries in the world. The lives and livelihoods of millions of people in the country are hugely affected due to the consequences of climate change. Thus the overall economic development is also facing the risk of serious disruption. According to the Asian Development Bank, Bangladesh may experience a 2% annual loss in GDP by 2050 because of climate change.

IMPACTS OF CLIMATE CHANGE ON ECONOMIC SECTORS

The pervasive effect of climate change can be observed in every aspect of the economy of Bangladesh starting from procuring raw materials to distributing the end products to the consumers. Loss of biodiversity, decrease in crop yields, decline in fish production, hindrance in transportation of goods via river routes or roads because of extreme weather conditions, infrastructural damage and damage of supplies due to bad weather, or even a fewer number of customers than usual in a shopping mall – all such instances are examples of climate change adding obstacles to the path of economic growth.

Significant economic sectors like agriculture, fisheries, manufacturing etc. will exhibit momentous transformations due to climate change.

Agriculture and Fisheries

Agriculture and fisheries are the most sensitive sectors to climate change. Though the country is shifting towards a service based economy, agriculture is still a vital part of the economy of Bangladesh. Nearly half of all of Bangladesh’s workers and two-thirds in rural areas are directly employed by agriculture, and about 87 percent of rural households rely on agriculture for at least part of their income. This sector is already under pressure from increasingly huge demand for food, and from scarcity of arable land and water resources. Due to the increasing salinity intrusion, it is becoming more difficult to grow crops especially in coastal areas. As an agrarian country, it can be presumed that an adverse impact on agriculture will impose threat to other sectors of the economy and reduce the overall economic growth of Bangladesh.

Fisheries are one of the top ten exports of Bangladesh and the economy is significantly dependent on this sector. But, fisheries are also facing the detrimental effects of climate change. Due to rise in temperature, the dissolved oxygen in water bodies is decreasing resulting in reduction of the growth and reproduction of fishes. In coastal areas freshwater fish production is declining because of extreme salinity. If climate change continues at this rate fisheries sector will face more unfavorable consequences.

Manufacturing

The manufacturing sector (e.g. textile, agro-processing, light-engineering etc.) can be affected by climate change due to decreasing availability of raw materials (agricultural inputs such as rice, cotton etc.), energy shortage, decreasing water supply and damaged manufacturing and storage facilities. Floods and other natural calamities can severely impact the sectors due to the disruption to communication and transport systems, power supplies or damage to infrastructure. Most of the raw materials of ready-made garment sector are imported from the overseas. The global production of raw materials (especially cotton) may be hampered due to the changes in the required temperature for production which will have a significantly negative effect on the RMG sector.

Tourism

Tourism in Bangladesh is mainly based around nature destinations like Cox’s Bazar, Chittagong Hill Tracts, Sunderbans, and Sylhet etc. Climate change causing natural disasters and unfavorable weather, is essentially leading to high floods, mudslides, prolonged waterlogging rendering the destinations inaccessible. Rising sea levels with a beach backed by a sea wall, will lead to a lowering of the beach. Recreational activities of the tourists will suffer in the wake of adverse climate. This can negatively affect current and future demand of tourists affecting directly on profitability.

Other Sectors

Other sectors like service sectors and SMEs are also indirectly affected by climate change though the impacts may not be quite visible. One way or the other, their sustainability and business continuity is at risk due to climate variability and extreme weather events which will in turn cause the entire economy suffer, resulting in job losses and a decline in economic growth.

STEPS TAKEN TO TACKLE CLIMATE CHANGE

It is evident that the negative impacts of climate change are threatening the goals Bangladesh aims to achieve. Therefore, the government has taken multiple steps to combat climate change with the main focus on increasing the nation’s resilience to its impacts.

Bangladesh government is adopting a two-fold strategy to counter climate change: Mitigation and Adaptation. Mitigation refers to efforts to reduce or prevent emission of greenhouse gases (GHG) whereas adaptation means anticipating the adverse effects of climate change and taking appropriate action to prevent or minimize the damage they can cause.

Mitigation Actions

The objectives of mitigation actions are to ensure energy security and low-carbon development of the economy, maximizing the use of renewable energy sources, raising productivity of agricultural land, ensure livable cities, and providing support to scale up afforestation and reforestation. To fulfill these objectives Bangladesh government set out several programs including energy management, solar homes, renewable energy development, urban waste management, afforestation and reforestation etc. The government intends to make a contribution of 20% in GHG reduction.

Adaptation Actions

The primary goal for adaptation actions is to protect the population, enhance their adaptive capacity and livelihood options, and to protect the overall economic progress of the country. In 2010, World Bank estimated that the total adaptation cost will reach around $6.59 billion by 2030. The adaptation actions include the following steps:

Establishment of Funds

Bangladesh has established two innovative funds: Bangladesh Climate Change Trust Fund (BCCTF) in 2010 funded by the government and Bangladesh Climate Change Resilient Fund (BCCRF) with the support of Australia, Denmark, European Union, Sweden, Switzerland, UK, and USA.

BCCTF: The Government has allocated nearly $400 million to BCCTF in order to accelerate the present domestic initiatives to adapt to climate change and secure lives and livelihoods of people. As of June 2015, BCCTF has funded over 236 projects of which 41 have already been implemented. (Source: Intended Nationally Determined Contributions 2015, Ministry of Environment and Forests).

BCCRF: BCCRF has allocated $13 million of its funding to NGOs through its Community Climate Change Project (CCCP). CCCP focuses on the communities hit hardest by current weather extremes: populations living in coastal areas affected by saltwater intrusions, in flood-prone chars (silt islands in rivers) and river basins, or in areas afflicted by recurring droughts.

GCF and Private Sector Contribution

The GCF (Green Climate Fund) has recently approved a project in Bangladesh to establish a national center for gathering, developing, and sharing knowledge about how to make infrastructure more resilient. The project targets three of the most vulnerable and poor coastal districts — Bhola, Barguna, and Satkhira. The total project cost is $80 million. Bangladesh is putting in $25 million, along with $40 million from GCF and the rest from Germany. (Source: GCF website)

GCF can help businesses in Bangladesh invest in climate change by providing access to finance. The GCF has a dedicated private sector facility (PSF) to channel funds to businesses. Other than financial assistance, the GCF can also provide other supports like capacity building, information and data to businesses.

Nature-based Technology Development and Diffusion

Over the years, many attempts have been made, particularly in the vulnerable, saline-prone coastal region of Bangladesh to explore nature-based solutions for agriculture. After many trials, farmers have developed the unique floating garden agricultural practices (locally known as “Dhap”) to grow plants and crops in nutrient supplemented water without soil. The main objective is to build sustainable local natural resource management (submerged areas) through floating agriculture practices and to cope with climate change.

In recent years, agricultural research institutes of Bangladesh have made significant progress in developing new rice and other crop varieties tolerant of salinity, floods and droughts. These inventions have been taken out of the laboratory to field stations by the government’s extension department as well as NGOs as part of technology diffusion and are being practiced widely.

The national afforestation program has led to significant afforestation in newly accreted lands along the coast in the Bay of Bengal as well as reforestation in the adjacent denuded hills. About 195,000 hectares of mangrove plantations have been raised so far and these new plantations are also playing an important role in carbon sequestration.

Though multiple steps have already been taken, more needs to be done to address the vulnerabilities climate change has brought. Widespread awareness regarding climate change and eco-friendly practices has to be promoted. Green investments to build green economy have to be encouraged to achieve sustainability. Being prepared now can mitigate a lot of costs and damage that climate change will bring.

No Comments so far

Jump into a conversation

No Comments Yet!

You can be the one to start a conversation.

Your data will be safe!Your e-mail address will not be published. Also other data will not be shared with third person.