The Earth Has a Fever. Is Man a Virus?

 

The Earth Has a Fever. Is Man a Virus?

by Dhruv Menon

 

 

Insidious: The Final Chapter

 

The human population has consumed almost 13509 million tonnes of oil equivalent (Mtoe) in 2016 alone. [1] With this amount of energy, you could generate power for the whole of China four times over! In fact, only about 20% of the world’s energy consumption comes from renewable sources on a daily average. [2] What are the implications of this? The most evident one is global warming.

The trend for the global mean temperature has been on the rise – 2016 has been the hottest recorded year according to the global land-ocean temperature index (GISS) with the temperature having risen by 0.99 degrees Celsius from the mean of the base years (1951-1980). [3]

An increased dependence on fossil fuels as a source of energy has caused the concentration of carbon dioxide – one of the main contributors to the rise in the global mean temperature – to increase from around 280 parts per million (in 1950) to about 407 parts per million. [4]

 

Figure 1: The Rising Gobal Mean Surface Temperature according to the Global Land-Ocean Surface Temperature Index

 

 

So, What?

 

The starkness of the economic implications of global warming is undeniable. Numerous studies conducted have shown a positive relationship between the rising global mean temperature and acute climate change: increasing both the severity and frequency of erratic weather occurrences such as severe droughts and increased precipitation among others. [5]

An increased frequency of such events not only causes damage to property and life but also adversely affects governmental policy. Hurricane Irma and Harvey alone, caused around $280 billion in damages. [6] An increased frequency of such events will force governments to spend greater amounts of their budgets on preventative measures rather than on productive and growth-enhancing projects.

In addition, the destruction wrought by these events will erode the productive capacity of an economy by causing damage to property initially and eventually force companies to completely abandon those sites. This will put further strain on the government, which will be expected to take measures to restore the damaged capital. Insurance companies, due to the erratic weather, will be forced to offer insurance at hugely increased premia and in some cases, will not provide risk insurance at all (insurance companies paid out $126 billion in 2011). [7]

 Under these circumstances, companies will be discouraged from opening new facilities. This will lead to an underutilization of economic resources and, therefore, affect the economic performance of the concerned countries.

 

Figure 2: Countries That Are Potentially Vulnerable To Climate Change

 

 

“In the long run we are all dead”

 

Erratic weather occurrences aside, what tangible effect does global warming have on the world economy? Predictive studies have shown that all areas will not be affected equally by rising mean temperatures: the countries to the south of the equator will experience greater disadvantages than those located to the north of the equator. [8]

The increased mean temperature will lead to a spike in the upward limit of temperatures experienced by regions rendering some regions uninhabitable. This will lead to mass relocation of citizens which can be disruptive to the economic performance of a country. Assuming that the rise in temperatures will cause previously uninhabitable regions to become habitable, the real hit to the global economy will come in the form of the wedge that global warming will drive in rising equality between countries.

The developing countries – whose major contributors to Gross Domestic Product (GDP) are agriculture and tourism – will face the brunt of the impact: crop yields will fall drastically; climatic conditions will become unsuitable for tourism and general labor productivity will fall due to the increased temperatures. This, coupled with the predicted lack of aid coming from the developed countries (due to budgetary constraints), will have a hugely detrimental impact on the GDP of these countries and could, even, cause permanent damage to their productive capacity.

Another factor to take into consideration is the increased level of inflation that will be experienced: low crop yields will lead to a fall in the overall amount supplied, thus causing prices to rise; increased demand for energy in order to maintain a suitable environmental condition (to mitigate the heat or alleviate the cold) will cause the prices of utilities to rise; land will be in short supply – due to the mass relocation of citizens – thus leading to an increased demand for an ever-decreasing quantity of land.

The economic slowdown experienced by these countries, when coupled with the rising inflation will result in “stagflation” which poses the classic question: should the monetary authorities try to curb rising inflation or rising unemployment? [7]

In a study conducted by Dietz and Stern, they predicted that should the global mean temperature reach 5 degrees Celsius above industrial standards, the annual output of the world will be 50% lower than if it had not. [7]

 

Figure 3: Climate Damage Functions As A Percentage Of Annual Economic Output

 

 

Can “We” Really Change?  

 

The United Nations took a very serious step towards addressing the issue of global warming when it decided to create the Intergovernmental Panel on Climate Change (IPCC) in 1988. The first step towards a global effort to curb climate change came in the form of the Kyoto Protocol (1997) which was based on a system of carbon trading combined with binding carbon emission targets on certain countries. [9]

After ten years of implementation, the United States of America – the second largest emitter of carbon dioxide – has pulled out of the Paris Climate Accords (2015) and has no binding targets; China and India – the largest and third largest emitters of carbon dioxide, respectively – are still classified as “developing” countries and, thus, have no restrictive targets. [10]

While the Kyoto Protocol has not failed completely, the targets set out in 1997 have not been met. In order to control the ever-rising global mean temperature, collective consensus must be reached in a manner that ensures that all countries implement carbon emission reducing measures. Furthermore, special attention should be given to the top ten emitters – like China and the United States – whereby, binding reduction targets must be agreed upon. [6]

Possible steps that could be taken towards the reduction of emissions involve building carbon storage facilities under the sea bed and focusing on transitioning away from fossil fuels as a source of energy by using renewable sources like Nuclear Energy, Solar Energy and Wind Power.

While transitioning away from fossil fuels may not be the market efficient option in the short run, with an approximately estimated cost of $45 Trillion, its payoffs in the long run will fully cover the investment made. [11]

Certain theories also point to the active role that shareholders can play: they can orient companies towards adopting a carbon emission reducing business model. [12]

Global warming, and therefore climate change due to anthropogenic factors, can be curbed if collective effort is taken by, both, countries and multinational companies.

The benefits experienced in the long run will far outweigh the early disruption to the market, and by extension, the economic performance of the global economy.

 

 

 

References

  1.     Enerdata: Global Energy Statistical Yearbook 2017: Total Energy Consumption. (Online) https://yearbook.enerdata.net/total-energy/world-consumption-statistics.html Accessed on 25 January 2018.
  2.     Worldometers. (Online) http://www.worldometers.info/ Accessed on 25 January 2018.
  3.     NASA: Global Climate Change: Vital Signs: Global Temperature. (Online) https://climate.nasa.gov/vital-signs/global-temperature/ Accessed on 25 January 2018.
  4.     NASA: Global Climate Change: Vital Signs: Carbon Dioxide. (Online) https://climate.nasa.gov/vital-signs/carbon-dioxide/ Accessed on 25 January 2018.
  5.     NASA: Global Climate Change: Evidence. (Online) https://climate.nasa.gov/evidence/ Accessed on 25 January 2018.
  6.     The Balance: Climate Change Facts and Effect on the Economy. (Online) https://www.thebalance.com/economic-impact-of-climate-change-3305682 Accessed on 25 January 2018.
  7.     Schroders: The Impact of Climate Change on the Global Economy. (Online) http://www.schroders.com/en/sysglobalassets/digital/us/pdfs/the-impact-of-climate-change.pdf Accessed on 25 January 2018.
  8.     Time: Climate Change Could Wreck the Global Economy. (Online) http://time.com/4082328/climate-change-economic-impact/ Accessed on 25 January 2018.
  9.  United Nations: United Nations Framework Convention on Climate Change (UNFCC): Kyoto Protocol. (Online) http://unfccc.int/kyoto_protocol/items/2830.php Accessed on 26 January 2018.
  10.  Massachusetts Institute of Technology (MIT): MIT Technology Review: A Plan B for Climate Agreements. (Online) https://www.technologyreview.com/s/528106/a-plan-b-for-climate-agreements/ Accessed on 26 January 2018.
  11.   The New York Times: Nations Urged to Spend $45 Trillion to Battle Carbon Emissions. (Online) http://www.nytimes.com/2008/06/06/business/worldbusiness/06iht-energy.2.13521947.html Accessed on 26 January 2018.
  12.  Forbes: On Climate Change We Are All Shareholders. (Online) https://www.forbes.com/sites/dinamedland/2015/05/02/on-climate-change-we-are-all-shareholders/#39ba302148ed Accessed on 26 January 2018.