Climate Change Expected to Give Rise to Major Economic Challenges as the Century Progresses

Climate will potentially cause major shifts in the global economy if the world continues with its current “business-as-usual” approach to manufacturing and trade policies, according to reports from this year’s Conference on Climate Change, Trade, and Competitiveness held by the World Trade Organization.

Image courtesy of the phoenixprojectfoundation.us.

The major areas expected to be effected, include:

• Rises in sea levels.
• Water availability.
• Agricultural outputs.
• Tourist travel.
• Energy demands.

The rise in mean temperature of 2.3º C could induce an overall economic decline of 1.8 percent, translating into a loss of some $2.4 trillion by the year 2050, according to calculations from the conference report - Climate, Trade, and Development.

The predictive model also expects that, “Overall the developing countries would bear the brunt of the negative impacts with an average net loss of 3.7 percent in 2050. Russia would be the only developing region (of the model) with positive gains. The high-income countries on average would see little loss, if any, though there are regional variations as well among them.”

Part of the forecasted economic impacts are attributed to changes in sea levels and water distributions. Among the projected effects, a significant portion of the loss in Southeast Asia would related to sea-level rise as well as loss in tourism revenues, according to the report.

Chinese cargo ship. Photo from managingthedragon.com.

It’s also predicted that there will be “sharp declines in agricultural exports” in East Asia, South Asia, the Middle East, North Africa, and Latin America due to water availability. On the flip side, “Europe and Central Asia would tend to see a large increase in agricultural exports, and Sub-Saharan Africa would also see a positive impact on exports through a relative improvement in water availability.”

The speculation is also that there would be “manufacturing declines in Europe and Central Asia and Sub-Saharan Africa (that) would in some part reflect the improvement in agricultural exports as resources would transfer from manufacturing to agriculture.

“Latin America would see the reverse, with resources transferred to manufacturing as agriculture exports decline. Moreover, the loss of tourism arrivals would likewise need to be compensated by a rise in exports.”

Despite the changes in the exports of countries, there is still expected to be a “rise in world output,” according to the report. Among the concerns is that if manufacturing continues using current technologies, “global emissions would be expected to rise.”

The report acknowledges that, “Achieving an international agreement to address climatre change has proven, and will continue to be diiffult,” adding that, “With their relative greater carbon intensity and lower fuel prices, developing countries would suffer greater losses in competitiveness than developed countries.

Graphic courtesy of tree hugger.com.

“Another key negative factor for world trade is trade in fossil fuels - a natural outcome of taxing carbon, but one with negative consequences for countries largely dependent on fossil fuel exports. They (will) suffer from at leat three channels - decline in export volumes, dcline in export prices, and a real exchnage rate depreciation as they replace their former fuel exports with non-fuel exports.”

After disussing the potential consequences of countries continuing with a “business-as-usual” approach to manufacturing and trade, the participants at the conference also discussed the report - Creating Incentives for Clean Technology Trade, Transfer, and Diffussion.

Among the ideas discussed were creating incentives in developing countries for ‘green’ technologies, such as:

• Nuclear power.
• Renewable energies.
• Carbon capture and storage.
• More efficient power generation from fossil fuels.

At issue for developing countries, according to this report, is that “comparatively high costs and insufficient operating experiences very often hamper deployment of clean energy technology on the scale needed for climate change mitigation and to meet the rising demand for primary energy.”

Other barriers to implementation within countries include “weak environmental regulations, fiscal feasibility, financial and credit policies, economic and regulatory reforms, and the viability of technology to local conditions.”

Among the strategies in the ‘incentives report’ suggested for countries to move to more renewable energies and clean technologies is to reduce or eliminate government subsidies to conventional fossil fuels, and “governments can directly intervene in the markets providing guarantees to encourage private credit and financing of renewable technology.”

This report also cautioned that, “Slow progress in agreeing on and creating such architecture will delay climate action mitigation in developing countries with catastrophic consequences. The reason is that as the economies of these countries grow and as they eliminate energy poverty, the investment decisions they make could lock them into a high carbon trajectory.”

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