Climate change and the economy – 02/12/2024 – Cecilia Machado

Climate change and the economy – 02/12/2024 – Cecilia Machado

The climate is a fundamental variable to promote various activities. Considering its relevance for the functioning of economies, it is expected that climate change — such as rising temperatures, rising sea levels and the greater frequency of extreme weather events — could impose substantial costs on the growth and development of countries. most adversely impacted by them. What is known so far about the impacts of climate change on the economy?

There are many ways in which climate change affects economic activity. Directly, they can affect basic components of production, such as damage to built infrastructure or losses to the physical production of goods, with effects that also extend to human resources, as climate change also brings deterioration in health —physical and mental— of people.

Indirect effects, in turn, result from the actions of markets, governments and other institutions, which adjust to absorb the impacts of climate on the economy and to direct changes. For example, variations in precipitation patterns and rising sea levels put existing buildings at risk of flooding, causing the price to fall or even the cost of flood insurance to rise.

With this in mind, the American Congress enacted, in 1990, a law that instituted a program to coordinate research and investment related to changes in the global environment, which has, among its objectives, the production of an assessment of the effects of climate change on various issues. , including the economy. Prepared over a maximum period of four years by a commission of experts, it is the scientific foundation for political decisions to be made in an informed manner.

The latest report, from 2023, brings several alarming numbers. In the case of rising temperatures, some studies are already able to show that it reduces student learning, increases the chance of accidents at work, reduces wages and increases mortality.

In terms of impacts for the future, there are estimates that point to losses in agricultural production, a drop in growth and a reduction in per capita income.

Although estimates of future economic impacts are subject to some degree of uncertainty — as the result depends on a complex interaction between natural and human forces —, projections have a high degree of confidence.

The report also establishes that its impacts will be distributed unequally, affecting precisely the most socioeconomically vulnerable regions and groups. For example, older people or people with health problems are more sensitive to changes in temperature and air quality.

In Brazil, sensitivity to temperature, water availability and extreme weather events puts yields and historical productivity gains in the agricultural sector at risk. It would be a lot if it were just that. But our starting point raises additional concerns: we still have 12.7 million people in extreme poverty, 4 million living in risk areas, and a contingent of workers who are poorly trained to adapt to changes that are also taking place in the job market, in direction of green economy sectors.

It is precisely these people who suffer most from material losses resulting from climate change, who have fewer resources to adapt or recover from the losses caused by them, and less capacity to relocate in sectors that will be more demanded by society in the transition to a low carbon economy.

The effects of climate change on the economy are not restricted to growth alone. They are also amplifiers of inequalities, constituting an additional reason — if not the most important — for Brazil to carry out a careful assessment of policies that strengthen the country’s preparedness for climate change.

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