Climate Change, Humanity's Biggest Challenge?
Imagine the world in 2040. In England, what used to be
considered a heatwave, is a typical summer. Hundreds of miles away in Ethiopia,
millions are in dire need of food, faced with droughts and heat stress.
Bangladesh and India face stronger floods and more devastating cyclones,
threatening millions of lives.
There is no doubt that climate change poses several risks to
humanity, and thus the economy and financial systems. Even more concerning is that
the understanding of these risks is limited, meaning it is difficult to propose
solutions to mitigate these risks. This problem is further inflamed by the fact
that climate change will be terrible for the rich, but simply catastrophic for
the poor.
Developing countries will feel the worst effects of climate
change first, due to their diminished ability to cope and recover from the
damage caused by extreme weather. Research has indicated that the world’s 100
poorest countries would be 5% worse off with climate change. Furthermore, the
repercussions of these extreme events is widespread, and would cause financial
losses and economic disruption. Perhaps, even destabilising the insurance and
banking systems.
The detrimental impacts on productivity growth stems from the
agricultural sector, one of the sectors hugely threatened by climate change,
composing a larger share of GDP in poorer countries. Large swathes of Africa,
including Botswana and Namibia, are already suffering from drought due to climate
change, leading to a drop in agricultural production, with 40 million people
expected to face food insecurity. Productivity growth plays a major factor in
long-run economic growth, meaning deceleration of economic growth in the
nations which need such growth the most, further swelling the immense gulf of
inequality between richer and poorer countries.
Many
have noted that unprecedented impacts of climate change disproportionately burden developing countries, yet historically, they have not been the major
contributors of CO2 emissions, and Figure 1 highlights this stark difference.
Developing countries
often lack the finances and ability to combat adverse effects. Moreover,
climate change is a global challenge, and therefore requires global
cooperation, meaning richer countries must offer their assistance to poorer
countries.
This involves sharing and collaborating on new technologies
producing renewable energy, making the transition to a low-carbon economy accessible
and easier for all countries. It also means mobilising production from both
private and public sectors, to tackle the challenges of climate change
effectively.
Policies to help combat climate change need to be fast-tracked
by governments in all countries, regardless of levels of development. Promoting
reforestation under tax-revenue reform, like in India - incentives of roughly
$6 billion a year-, needs to be implemented across other nations too. Banks could also increase their support for
sustainable finance, by directing loans and investments away from companies
with business models dependent on fossil fuels, to those in ‘green’ sectors.
Climate change is an imminent challenge, with ramifications
impacting life on earth. Countries, rich and poor need to take collaborative action,
especially when the future of not only economies but societies is at stake.
References:
https://www.un.org/press/en/2019/gaef3516.doc.htm
https://www.cgdev.org/topics/climate-change
https://www.cgdev.org/blog/climate-change-and-development-three-charts
https://www.cgdev.org/blog/indias-big-climate-move
http://www.sussex.ac.uk/broadcast/read/45443
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