ECONOMIC IMPACTS OF CLIMATE CHANGE – ENVIRONMENT
News:
For India Inc, climate
change is new ‘single biggest business risk’
What's
in the news?
●
Climate change can adversely impact both
the supply side (read the productive potential) as well as the demand side. It
can stroke inflation, reduce economic output, trigger uncertainty and change
consumer behaviour.
Key
takeaways:
Over the years, there
have been several predictions and assessments made about the impact of climate
change on India’s economy. Some are listed below:
●
According to Niti Aayog in 2019, around 600millions of India’s population are
facing severe water stress, with 8 million children below 14 years in urban
India at risk due to poor water supply.
●
The World
Bank in 2020 said that India could account for 34 million of the projected
80 million global job losses from heat stress associated with productivity
decline by 2030.
●
The IPCC
Working Group in 2022 stated that India is one of the most vulnerable
countries globally in terms of the population that would be affected by the sea
level rise. By the middle of the present century, around 35 million people in
India could face annual coastal flooding, with 45-50 million at risk by the end
of the century.
Risks
of Climate Change:
Typically the risks from
climate change are categorised in two main ways.
●
The physical
risks and these include chronic issues (such as a gradual and sustained
change in temperature and precipitation) as well as acute events such as
extreme weather occurrences).
●
Transition
risks refer to economy-wide changes arising from the
transition towards a low-carbon economy.
○
This is best encapsulated by a paradox
called “success is failure”.
○
This phrase was used by Mark Carney,
Governor of the Bank of England, in 2016.
○
Carney meant that if the shift towards
becoming a low-carbon economy is too rapid, it could materially damage a
country’s financial stability.
Economic
cost of climate change:
1.
Difficult to estimate:
●
As it depends on a number of factors,
including the severity of climate change, the rate of climate change and the
ability of societies to adapt to climate change.
2.
Highest in developing countries:
●
Study by IPCC found that the economic cost
of climate change would be highest in developing countries.
●
This is because developing countries are
less able to adapt to the effects of climate change.
●
The economic cost of climate change would
be highest in countries that are heavily dependent on agriculture and tourism.
3.
Supply and demand of economy:
●
Climate change can affect both the supply
side (productive potential) and the demand side of the economy.
4.
Diverse topography:
●
India is vulnerable to climate change due
to its diverse topography, which exposes
different regions to varying temperature and precipitation patterns.
5.
Extreme weather events:
●
Extreme weather events such as floods, droughts and heat waves, are
becoming more frequent and intense due to climate change.
●
These events are causing damage to
property and infrastructure and are also disrupting economic activity.
6.
Health problems:
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Health issues such as heat-related illnesses, respiratory problems and waterborne diseases.
●
These health problems are costing India
billions of dollars in healthcare costs.
7.
Agriculture:
●
Climate change has a negative impact on
agriculture. Rising temperatures and
changes in rainfall patterns are making it more difficult to grow crops.
●
This is leading to food shortages and
higher food prices.
8.
Tourism:
●
Climate change has a massive impact on the
tourism industry.
●
Rising
sea levels are threatening coastal resorts and extreme weather
events are making it more difficult for people to travel, costing India
billions of dollars in lost tourism revenue.
Challenges
ahead:
1.
Green financing requirement:
●
Estimations imply that India's green
funding demand might be at least 2.5% of
GDP each year to cover the infrastructure deficit induced by climate
disasters.
●
To properly contribute to the country's
net-zero aim, the financial system may need to mobilize appropriate resources
as well as reallocate present resources.
2.
Vulnerability of Bank:
●
The findings of a climatic stress test
show that public sector banks in India may be more vulnerable than private
sector banks.
WAY
FORWARD:
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Promote sustainable farming practices that reduce greenhouse gas emissions.
●
Implement effective waste management strategies such as recycling,
composting, and reducing landfill waste.
●
Enact and enforce policies that support climate-friendly practices.
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Invest in research and development of clean technologies and innovations that
can help reduce emissions and mitigate climate change.
●
Collaborate with other countries to
address global climate challenges.
●
Support businesses that are working to
reduce their environmental impact.