For Most Sectors, Climate Impact Uncertain
Climate change is likely to affect economic sectors ranging from energy production, heating and cooling, and water, to insurance, health and tourism, but there is not yet sufficient evidence to predict effects on other industries, according to the latest report from the Intergovernmental Panel on Climate Change.
Not all key economic sectors have been subject to detailed research. Few studies have evaluated the possible impacts of climate change on mining, manufacturing or most services, the IPCC says. More research and better analysis is needed to further assess these impacts.
And for most economic sectors, the impact of climate change will likely be small relative to the impacts of other drivers, such as changes in population, age, income, technology, relative prices, lifestyle, regulation and governance.
Overall, the report finds, the impacts of climate change may decrease productivity and economic growth. But the magnitude of this effect is not well understood.
Globally aggregated economic impacts of global warming are a small fraction of income up until a global temperature rise of 3°C. A rise of 2.5 C may lead to global aggregated economic losses between 0.2 and 2.0 percent of income, and losses increase with greater warming.
The IPCC said effects for certain sectors can, however, be predicted with greater certainty:
Commercial energy use – heating/cooling: Climate change will reduce demand for heating and increase energy for cooling in the commercial and residential sectors, although the balance depends on geographic, socioeconomic and technological conditions.
Energy sources: Climate change will affect different energy sources and technologies differently, depending on the resources, technological processes and locations involved. For thermal and nuclear power plants, climate-induced changes in the availability and temperature of water for cooling are the main concern.
Pipelines and grids: Climate change may influence the integrity and reliability of this infrastructure, although these structures have been designed to higher tolerance levels than most transportation infrastructure.
Water supply and demand: Climate change will have positive and negative impacts, varying in scale and intensity, on water supply infrastructure and water demand, but the economic implications are not well understood. Economic impacts include flooding, scarcity and cross-sectoral competition.
Transport: Climate change may negatively affect transport infrastructure, although the evidence is still limited. Paved roads are particularly vulnerable to temperature extremes, while unpaved roads and bridges are vulnerable to precipitation extremes.
Tourism and recreation: Climate change will affect tourism resorts, particularly ski, beach and nature resorts. Tourists may spend their vacations at higher altitudes and latitudes, creating an economic benefit for those locations, with losses for other countries.
Insurance: More frequent and/or intensive weather disasters in some regions will increase losses and loss variability, and challenge insurance systems to offer affordable coverage while raising more risk-based capital, particularly in low- and middle-income countries. Effective coping mechanisms could include large-scale public-private risk prevention initiatives and government insurance of the non-diversifiable portion of risk, as well as commercial reinsurance and risk-linked securitization markets.
Health: Climate change will affect the sector through increases in the frequency, intensity, and extent of extreme weather events as well as increasing demands for health care services and facilities.
Takeaway: The latest IPCC report teases apart climate change’s implications for several key sectors, although the wider economic impacts are still hard to predict.
Tamar Wilner is Senior Editor at Environmental Leader PRO.
Chart: An excerpt from the IPCC report.
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