What’s new on climate change and the global economy?

The fires in the Amazon rainforest, the melting of glaciers across the world and decreasing ice in the Arctic are all environmental crises that are largely discussed within the prism of the fight against climate change. Nonetheless, these environmental crises have an impact on the global economy which in turn is linked to socio-political and security (both traditional and non-traditional) spheres. Climate change is leading to growing inequality within and among nations. Warmer temperatures will not only affect the agricultural production due to change in weather patterns, it will also affect industries. It is no secret that as it becomes hotter labour production reduces. 

While the impact of climate change is not immediate, when calculated over a period of time it is significant. When countries discuss emission policies for the future they need to push for sustainable energy access to counter the negatives of a warming climate on economic production. According to the World Bank, “climate change is an acute threat to global development and efforts to end poverty. Without urgent action, climate change impacts could push an additional 100 million people into poverty by 2030. The impact of extreme natural disasters is equivalent to a global $520-billion loss in annual consumption, and forces some 26 million people into poverty each year.”

Two examples of climate change have galvanized the world. The melting of the Arctic Sea ice is being viewed as an opportunity to explore its vast natural mineral wealth and cost effectiveness for shipping, however, the economic benefits of the Arctic may be counterbalanced by the economic costs. The indirect effect would be felt by the destabilization of the climate system as more carbon is released from permafrost, the rise in temperature of the oceans would affect the blue economic activities across the world, and extreme climate would have an impact on agriculture, industry and human health.

The fires that have ravaged the Amazon have once again raised the question of how to remove political differences in our efforts to protect valuable environmental assets of international importance contained in national boundaries. The forest cover is a reservoir of carbon, and it is home to the largest concentration of biodiversity on the planet. It plays a major role in the region’s climate which scientists are still learning about. The fires in South America’s forest have aggravated as a result of unchecked deforestation and the push to clear land for cultivation and pasture. Government policy has encouraged this as a means to increase income levels and expand agriculture output and help the economy. As a result, the indigenous people of the forests have seen their lands and way of living disappearing at an alarming rate. The slash and burn method has also been employed by illegal loggers and ranchers to clear land for cattle ranching. The rainforests act as a reservoir for water conservation, providing water for major cities and irrigation, it helps check soil erosion and mitigate flooding. In a situation where cities such as Chennai, India and Johannesburg, South Africa are facing severe water crisis and strategists warn future wars on water, the Amazon is a boon to the South American nations.

Similar to the Arctic, the Amazon forests have global impact and it is one reason that the international community is rallying the governments in the region to act. The recently concluded G7 summit had a session on Environment, Climate, Oceans and Digital Transformation. While the G7 members and the international community have extended its help to the countries in South America, the Amazon fires are the latest in a series of climate emergencies that need to be arrested. 

The Coalition of Finance Ministers for Climate Action endorsed a set of six common principles, known as the “Helsinki Principles,” that promote national climate action, especially through fiscal policy and the use of public finance. Climate change provides an opportunity to finance the transition to low carbon technology and make significant investments in infrastructure. The need is to build new jobs, market opportunities and enhance competitiveness while improving the lives of people through innovation and cost effective technology.

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Dr. Stuti Banerjee is a Research Fellow at the Indian Council of World Affairs, New Delhi. At the Council, Dr. Banerjee is engaged in research on US and Latin America & the Caribbean, the Indo-Pacific and the Arctic. This includes producing analytical articles on the politics, economy and strategic issues of the region. She is also engaged in providing policy recommendations papers for concerned departments of the government.

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