The disproportionate impact of climate change on the global economy

Irene Lauro (Schroders) | According to the World Meteorological Organization, the past six years (2015–2020) have been the warmest on record, with global average temperatures rising 1.2 °C above pre-industrial levels.

more While climate change affects all regions of the world, the rate of global warming and precipitation will not be evenly distributed around the world. There will be winners and losers.

The Intergovernmental Panel on Climate Change (IPCC) seeks to better understand the specific risks of climate change. To do this, they modeled the amount of greenhouse gases (GHGs) that we generate to generate many climate change scenarios, or trajectories, called representative concentration pathways (RCPs). Each scenario corresponds to a different level of warming.

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RCP2.6 is a “best case” scenario. In this scenario, GHG emissions are reduced enough that global warming is limited to about 1.5 to 2 degrees above the pre-industrial average. At the other end of the scale is RCP8.5. This is the “worst case” scenario. Refers to “business as usual”in which no effort is made to control emissions. The scenario describes an increase in global temperature to 4 degrees above the pre-industrial average for 2100.

The IPCC states that, as the table above shows, All countries are expected to experience higher temperatures by the end of the century, But global warming will be more severe in some parts of the world. Thus, the economic impact of climate change will also vary, which will have a significant impact on the profitability of assets.

Specially, The Arctic region is expected to warm faster than the global average.. In addition, temperatures in the high latitudes of the Northern Hemisphere will rise faster than in the tropics.

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Precipitation will also not be evenly distributed around the world.. It is expected to increase in high latitude regions and in the equatorial Pacific, areas already affected by the long monsoon season. It is likely to occur over mid-latitude sub-tropical regions, which tend towards dry areas.

it means that Wetlands of the world are expected to become wetter. As climate change intensifies, water is likely to become less available in areas where water supplies are already inadequate. for example, India, Pakistan and Nepal are likely to experience a more severe monsoon season. While countries in Africa and South America are likely to experience dry conditions.

impact of climate change on productivity

We have incorporated the economic impact of climate change into our long-term productivity projections. The methodology and implications for investors are explained in our 30-year profitability forecast.

As recent research by Burke and Tanutama points out, There is a quadratic relationship between productivity growth and temperature. This means that in “cold countries” productivity tends to increase as annual temperatures rise, but where annual temperatures are above 12–13 °C, productivity begins to decline.

For example, in cold countries Rise in temperature could open up new areas for development or make more parts of the ocean navigable And fishing is available when the ice melts. Conversely, in warm countries, agricultural production is expected to decline due to the intensity of desertification. Increasing heat pressure will also reduce animal production.

Figure 2 shows the material cost in a scenario where the global temperature is 2100 . rises up to more than 3 °C compared to the pre-industrial average. This scenario suggests that global economies are not implementing adequate mitigation strategies to limit carbon emissions.

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are expressed in relation to the cost “No case of climate change”, where there is no temperature effect. Over the 30-year horizon, Switzerland, Canada, Germany, France and the United Kingdom would be better off in a scenario where global warming exceeds 3 °C above pre-industrial levels. Productivity is declining in Australia and most emerging countries.

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About the Author: Forrest Morton

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