Anthropogenic climate change will be a significant challenge humanity faces and a major driver of economic instability, health crises, and environmental degradation. Economists caution that the world’s next major economic crisis will be triggered by climate change, not pandemics. Hurricane Katrina, one of the most destructive natural disasters in US history, caused damage worth $170 billion. This exemplifies the substantial financial loss alongside human and environmental toll. Climate change is undeniably a global emergency, sparking heated discussions for decades. Humanity, as a whole, is emitting greenhouse gases on a large scale due to the Industrial Revolution. Reports suggest that temperatures have increased by 0.3 degrees Celsius more than the temperature rise from the Industrial Revolution in the 1850s to 1900s. It is not hidden that the ever-increasing temperature of the Earth including heat waves, sudden storms, an outbreak of pandemic etc. will wreak havoc in our capital and our entire economy. Consequently, the Swiss Re Institute warns that 18% of the world’s GDP could be wiped out if the global temperature increases by 3.2 degrees Celsius by 2050.
The impact of climate change is indeed multifaceted and interconnected. Extreme weather events such as floods, landslides, and hurricanes damage infrastructures. As a result, economic prosperity is directly harmed by disruptions in agricultural productivity. The IPCC has alerted that decreasing productivity of food sources such as fisheries, grain, rice, and maize crops may lead to food shortages and price volatility. Countries like Nepal which solely depends on agriculture will face severe issues further impacting the citizens’ food security. Especially, in rural areas with no adequate security and infrastructure, citizens would confront food crises on an unprecedented scale. These areas often rely heavily on agriculture making them particularly vulnerable to the impacts of climate change such as drought, floods, and landslides. Furthermore, limited market interaction and insufficient storage can amplify the challenges rural communities face.
Nevertheless, we should not forget other consequences. The lack of drinking water combined with increasing humidity, temperature, and pollution may harm our health severely. We have been hearing news like, ‘Don’t leave home without wearing a mask’ not because we are back to the COVID era, but because pollution has escalated to the point that authorities plead citizens to wear masks when venturing outdoors. Pollution has increased the risk of severe health diseases like lung cancer, asthma, malaria, dengue, etc. There’s a fundamental rule in economics: when demand increases, prices rise if the supply remains unchanged. Thus, economic costs related to health have now skyrocketed as demand for health facilities has increased. Insurance companies and financial markets are at the highest risk because of increased claims regarding extreme weather events, property damages, business interruptions, health-related casualties, and many more. If we believe reports, disasters cost the global economy $146 billion in 2019 while the insurers covered $60 billion of that amount. This underscores why we need to focus on the economic repercussions of climate change.
Moreover, prolonged droughts cause water on rivers to drain significantly impacting hydroelectricity production. This will further hamper industries’ production processes as electricity becomes scarce and expensive. Additionally, the melting of ice caps causes sea levels to rise, which threatens coastal communities and infrastructure ultimately leading to population displacement. The latest data from the World Meteorological Organization shows that the global mean sea level reached a new record high in 2021, rising an average of 4.5 millimeters per year over the period 2013 to 2021. Tens of millions of people have been displaced from their homes due to extreme weather. When the population is displaced into a new area, the area needs more space to accommodate people, further driving industrialization and urbanization.
Fluctuations in solar, volcanic, and oceanic activity have contributed to changes in the atmosphere. Additionally, climate change impacts the availability and cost of energy resources, including fossil fuels and renewable energy sources. These fluctuations have significant effects on global economics, influencing everything from energy prices to industrial production costs. The transition to renewable energy and the shift away from fossil fuels are essential steps in mitigating climate change, but they require substantial investments and can lead to economic disruptions in the short term.
Climate change is certainly the biggest challenge faced by human existence. Climate change not only slows down economic growth but also raises conflicts and wars due to poverty. Disasters have become more frequent and severe with economic shocks frequently impacting the production capacity of agriculture and financial stability. Many industries are in fact, bracing for even bigger losses in the future. Adapting to this growing crisis has undoubtedly challenged policymakers, environmentalists, and business houses worldwide. If the business houses and industries don’t take into account their actions we are not far from the next biggest financial crisis. According to the data published in the World Economic Forum, the global economy could lose 10% of its total economic value by 2050 due to climate change. The IPCC emphasizes that the growth of the human economy is the primary culprit.
There is an interesting aspect of the issue, since we caused it, we may be able to solve it. The world’s prominent speakers have been addressing this issue. Coca-Cola has emerged as the first one to initiate such a business model, becoming one of the biggest advocates for preserving ecosystems to ensure water availability. Business operations will be significantly hindered if we don’t keep the system intact. We keep encountering chilling stories about climate change in the media, underscoring the urgency of the action. In conclusion, climate change poses threats not only to our ecosystem but also to our global economy and public health. Global warming can be lessened if more decisive actions are taken to meet the target of the Paris Agreement. This landmark agreement aims to limit global temperature rise to well below 2 degrees Celsius above pre-industrial levels, with efforts to limit it to 1.5 degrees Celsius. Achieving these targets requires collective efforts from nations worldwide to reduce greenhouse gas emissions, transition to renewable energy sources, and implement adaptation measures. Countries like Japan, the USA, and China have also committed to reducing greenhouse emissions by 2030. Effective cooperation between the public and private sectors on the issue can avert a huge catastrophe.
