Economic risks posed by global heating

What is it and why is it happening?

The heating of the planet inevitably leads to long term changes in overall climatic conditions and seasonal weather patterns. From 1880 to 2019, the average temperature on Earth rose 1 °C (1.9 °F). With apparent insignificance, this rate of change exceeds (outscores) any other time during the Earth’s existence.

One of the main features of global warming is its unevenness: the temperature in the Arctic and Antarctic generally rises faster than in the tropical zone.

Depending on our location, we have grown accustomed to a certain climate and typical conditions for that location. However, global warming leads to an increase in extreme weather events such as hurricanes, tornadoes, floods, droughts, waves, etc., creating a different reality for people, and causing what are not insignificant changes in living conditions.

From Midwest report: “HEAT IN THE HEARTLAND:
Climate Change and Economic Risk in the Midwest (US)”

The Washington Post cites the Chapman University Survey of American Fears Wave 4 in that 48% of Americans fear global warming, and 55% believe that climate change makes hurricanes more frightening. 

The burning of large quantities of fossil fuels — coal, petroleum and natural gas — over a long period has resulted in elevated levels of greenhouse gases in the air  (most notable among those being CO2). Those gases trap the sun’s heat above the surface of our planet, causing a rise in the Earth’s atmospheric temperature. This phenomenon is called “the greenhouse effect,” leading to what is now known to be the heating of the planet.  

According to NASA, February 2019, the recorded CO2 level in the atmosphere was 411 ppm (part per million).

Such indicators were only in the Pliocene era, when the summer’s temperature in the Arctic was 7, 7 °C or 14 °F higher compared to nowadays. Although there was less ice, the sea level was 30 meters higher than the present. This much water could easily flood London, New York, San Francisco, Miami and Shanghai.

Implications for the global economy and society

From 1980 to 2019, the United States alone suffered from 250 weather and climate disasters. The total value of all losses exceeded $1.7 trillion.

According to data (2015) published in the Synthesis Report, “The Economic Cost of Climate Change in the EU,” the cost of erosion and floods is € 6 to € 19 billion per year. The report also said that the total losses from river floods in the future will increase to 32 billion euros by the middle of the century.

US economy expert Kimberly Amadeo writes that a temperature rise of only 2 °C will entail a 15% drop in the global gross domestic product, and that a rise in temperature of 3 °C degrees will cause a 25% drop. However, according to the International Journal of Science, which regularly publishes the latest natural research and analysis, if global warming is reduced to 1.5 °C, there is a greater than 60% chance that the world community can save more than $20 trillion. If a temperature rise to 4 degrees is allowed, the drop in GDP is expected to be 30%. These consequences are even more frightening than during the Global Depression, when GDP dropped 30%.

According to the International Labor Organization (ILO), “World Employment and Social Outlook 2018,” 1.2 billion jobs depend on climate stability. That necessitates achieving the goal of the 2016 Paris Agreement, which implies not exceeding the global heating threshold of 2 °C. A “green economy” can create 24 million jobs by 2030 in industries such as electrical machinery manufacturing, copper mining, renewable energy production and biomass crop cultivation, ILO reports.

Of tremendous relevance to a future global economy is that climate change inevitably triggers a wave of mass population migration from the areas prone to hurricanes, floods, droughts and other natural disasters. The United Nations High Commissioner for Refugees has reported that since 2008, more than 22.5 million have been forced to leave their homes due to adverse climatic conditions. Since 2009, it’s estimated that one person per second has been migrating due to climate. 

By 2050, climate-related migration could affect 700 million people around the globe. Among the countries most affected are El Salvador, Gambia, Bangladesh, Guatemala and Ethiopia. This, in turn, creates a wave of migration, particularly from the poorer countries.

Although the agricultural sector is most dependent on climatic conditions, the UN report, “The State of Agricultural Commodity Markets 2018,” identifies not only losers but also winners, writes CNBС.

For example, by the year 2050,  agricultural production will have declined in Africa by 2.9% and in India by 2.6%. The high temperatures, however, will increase harvest by 2.5% in Canada and 0.9% in Russia, and may create favorable conditions for growing grain in some areas of Finland.

Representatives of the insurance business warn that climate change may make insurance inaccessible to ordinary people. Ernst Rauch, chief climatologist for the largest reinsurance firm in the world, said in an interview with The Guardian on March 12, 2019 that “Affordability is so critical [because] some people on low and average incomes in some regions will no longer be able to buy insurance.”

Rauch added: “If the risk from wildfires, flooding, storms or hail is increasing then the only sustainable option we have is to adjust our risk prices accordingly. In the long run it might become a social issue.” 

In total, natural disasters in 2018 cost the US $160 billion, with half of those losses insured for $80 billion. The wildfires in California alone caused losses to the insurance business of 12.5 billion dollars (published in the report of insurance company Munich Re). 

Chris Free is the study’s lead author and a researcher at the University of California. He and his colleagues from the University of Washington and NOAA found that global warming caused a reduction in fish production of 4% (1.4 billion tons) since 1920. This is 35% in the North Atlantic and the Sea of ​​Japan. Some fish species are now endangered. The global heating can affect the $100 billion taken in annually by the fishing industry and its 56 million workers. Also, 3 billion people around the world suffer from food shortages, for whom fish is the basis of their diet and the main source of protein.

Daniele Bianchi, an assistant professor in the Department of Atmospheric and Ocean Sciences at the University of California, commented on the situation: “Is (sic) fairly significant for the past 80 years … Populations of fish that are negatively affected declined quite a lot, and I’m sure the people that rely on these resources might find these results quite worrisome, even more than someone taking the global perspective.”

Latest response to the problem of the global heating 

Felipe Larraín Bascuñán, Chile’s finance minister, says that although the fact of global warming and its consequences are depressing, “we can turn it into an opportunity.”

To this end, 23 financial ministers from 23 countries gathered on April 14, 2019 to create the “Coalition of Finance Ministers for Climate Action,” with the aim of aligning their politics with the “Helsinki Principles.” The event took place at the World Bank and the International Monetary Fund (IMF) spring meetings in Washington DC. The coalition included representatives of developed and developing countries: Austria, Costa Rica, Côte d’Ivoire, Denmark, Ecuador, France, Germany, Iceland, Ireland, Kenya, Luxembourg, Marshall Islands, Mexico, Netherlands, Nigeria, Philippines, Spain, Sweden, Uganda, United Kingdom, Uruguay and others. The United States was notably absent.

The essence of the Helsinki Principles involves the transition to a non-carbon economy on what’s considered an equitable basis. UN sustainable energy chief, Rachel Kyte, estimated it as “a step in the right direction,” adding: “This coalition will need to work hard between meetings …” 


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