Economy

The Fall of Economies due to Climate Change

Climate change refers to the long term change in global climate which may be directly or indirectly attributed to human activities. These activities affect the composition of the global atmosphere and therefore harm the planet. In simple terms, climate change may be defined as the abnormal variations in climate due to a variety of factors, leading to negative impacts on the demography of the earth and human life.

The Intergovernmental Panel on Climate Change has said that, as of August 2019, humans have 17 months left to save their planet. From the melting of the Arctic to the burning of the Amazon Rainforest, the world has witnessed a series of devastating natural disasters due to climate change. In India, severe drought and floods have caused irreparable damage to the country and its population. Therefore, natural disasters due to climate change are consistently rising.

A study that was conducted by Stanford indicated that global warming has caused the Indian economy to be 31% smaller than its actual potential. Alternative studies suggest that climate change may shrink the Indian economy by an additional 10% by the end of the century. Similarly, a loss of $125 billion was recorded due to Hurricane Harvey in the state of Texas. Therefore, climate change is not only an environmental concern but also an economic and developmental hazard.

A Global Perspective

While the impact of climate change on the human and environmental domains are regularly discussed, little is known about the impact of climate change on the economy. It is believed that those least responsible for climate change are often most affected by this phenomenon. Furthermore, the geographical location of a country also determines the degree of impact. Poorer countries, usually situated in warmer regions, tend to be severely affected. Correspondingly, cooler countries may even benefit from the extra CO2 in the short term. The gap in GDP per capita between poorer and richer countries is now 25% higher due to climate change. Therefore, the rise in global temperature has had a direct influence on increasing the inequalities between nations.

While the detrimental effects of climate change affect some countries more than others, this phenomenon has worldwide consequences. A 4-degree Celsius rise in the average global temperature is expected to occur by the end of the century. A study indicated that the US is likely to undergo a drop of 10.5% in its GDP by 2100. Its neighboring country Canada is also predicted to lose 13% of its income by 2100. Countries like Japan, India, and New Zealand are expected to experience a drop of 10% in their income. Switzerland is expected to have an economy that is 12% smaller and Russia would experience a 9% cut in its GDP.

Although the cause of these reductions has been attributed to a change in temperature, it is not the sole factor behind the economic downfall. An extremely important factor is the deviation of the temperature from that which was historically recorded. As said by Kamiar Mohaddes, co-author of a study from Cambridge’s Faculty of Economics, “Whether cold snaps or heat waves, droughts, floods or natural disasters, all deviations of climate conditions from their historical norms have adverse economic effects”.

The Indian Scenario

Scholars regularly suggest the reduction in consumption, production, and investment as important causes for the current economic slowdown. However, climate change has also played a significant role in slowing down the progress of the Indian economy. The agricultural industry employs nearly half of the Indian workforce. However, an extreme increase in rainfall later followed by extreme periods of drought has led to a reduction in the crop yield. The depletion in the groundwater levels is another cause for concern. These undesirable conditions cause nearly 9 to 10 billion dollars worth of damage to the agricultural industry in a given year. Besides the financial figures, since 1980, nearly 60,000 suicides have been recorded in the states of Karnataka, Maharashtra, Tamil Nadu and Andhra Pradesh due to agricultural misfortunes.

Additionally, the incidents of deluge in prominent cities like Kerala, Mumbai, and Chennai have caused massive property and road damage. Such calamities then demand additional reconstruction expenses from the government. Alternatively, the summer months in India have reached a temperature of above 45-degree Celsius in multiple states. This has led to a direct reduction in productivity and an unfortunate increase in the death rates; suicides included.

Water scarcity is another issue that plagues the Indian subcontinent. The lack of availability has led to concerning issues such as desertification, land degradation, drought, etc. Lack of water could also increase the price of water, therefore, increasing the prices of raw materials and production. According to India’s environmental industry, water scarcity cost the economy nearly 2.5% of its GDP in 2014-2015. Similarly, the World Bank reported an 8.5% loss in GDP due to extreme pollution levels in India.

Although India is responsible for only 7% of total global emissions, the impact of climate change is experienced in a greater capacity than that in the US and the European Union. Considering that nearly 7 million individuals from the rural population depend on climate conditions for their survival, the government needs to mandate necessary policies to protect the sensitive economic sectors often used for food and livelihood, namely, agriculture, fisheries and forests.

The Step Forward

Mohaddes opined that, “The economics of climate change stretch far beyond the impact on growing crops. Heavy rainfall prevents mountain access for mining and affects commodity prices. Cold snaps raise heating bills and high street spending drops. Heatwaves cause transport networks to shut down. All these things add up”. All industries are bound to face the impact of climate change whether due to flood, heat, drought or cold. Without efficient intervention and adaptation policies, all countries, irrespective of their financial and developmental status, are going to feel the grave repercussions of climate change.

Unfortunately, there are no easy or quick solutions to this global issue. Only reducing emissions will not reverse the effects of climate change. Immediate policy changes in the land, energy, industry, buildings, transport, and urban development sectors are required.

Government investments in education, energy, and ecology are vital to help combat climate change. Moreover, educational investments would help sensitize future generations towards this issue. Investments in energy would facilitate a shift from non-renewable energy production to renewable sources; solar, hydro, wind and thermal. Lastly, investments in ecology would help improve the overall environmental cover.

Nobel Prize-winning economist Joseph Stiglitz wrote, “We will pay for climate breakdown one way or another, so it makes sense to spend the money now to reduce emissions rather than wait until later to pay a lot more for the consequences… It’s a cliché, but it’s true: An ounce of prevention is worth a pound of cure.”  What nations and which leaders would embrace such ideal passionately is something we have to wait and watch.

Picture Credits: Time.com / Getty Images



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