Ringing Up the Costs of Climate Change

Written by David Connell on . Posted in Learn

With a recent White House panel recommending that the U.S. government plan for climate change, I was pondering the question of whether the world should start investing more in adapting to climate change. After all, we aren’t making a lot of progress in the U.S. or the U.N. on reducing the emissions that contribute to climate change.

Frankly, I think it is late to start investing in adaptation. Nature has already decided for us, and we are already paying.

The Asian Development Bank just released a report estimating the costs of reconstruction from the floods in Pakistan – $10 billion. To the extent that the record breaking monsoonal flooding was climate-related (impossible to prove scientifically, but consistent with our scientific understanding of expected climate impacts) then we can put a fair bit of those costs into the climate change adaptation accounting ledger.

How about the forest fires in Russia? Again, to the extent that the record-breaking heat wave and associated drought was symptomatic of scientific predictions of climate change, this is also a big entry in the adaptation ledger. A recent estimate suggested that the direct and indirect economic cost was about $15 billion, or about 1% of Russia’s GDP. That is significant at a macroeconomic scale for Russia.

But Russia isn’t the only country bearing the costs. Russia is a major wheat producer, and it lost about 1/3 of its wheat production as a result of the fires and drought. The Russian government imposed restrictions on wheat exports, which caused a spike in global what prices since Russia is such a big producer. Wheat prices today, on global markets, are 42% higher than they were a year ago.

What does that mean for the rest of the world? Well, it means billions more in economic losses for other countries.

Take Egypt for example. Bread is the principal staple in Egypt and the Egyptian government provides subsidies for 78 million people. The last time there was a spike in wheat prices – in 2008 when oil prices in excess of $100 per barrel drove up costs for a wide range of primary commodities – the Egyptian government couldn’t afford to keep the same subsidies in place. The results were price hikes and shortages. And that led to bread riots in the streets of Cairo.

No government wants to face that, so this time, the Egyptian government is prepared to spend an additional $5-6 billion to buy higher-priced wheat in global markets and still maintain the subsidies. So, there were no riots in Cairo this summer. But the Egyptian economy sacrificed .2% of its GDP to foreign farmers – resources that otherwise would have been available for schools and childhood immunization in Egypt – or improved conservation of the Nile watershed.

Egypt is only one country. Multiply their costs by those of all of the other wheat-importing countries and we see that the world already is paying billions and billions of dollars to adapt to climate change, just for our daily bread.

So, yes, it is late. But you know what they say – better late than never.

Post by: Andrew Deutz, director of International Government Relations, The Nature Conservancy

Photo: Pakistan floods: Oxfam water tanks. By Oxfam International, used under a creative commons license.

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Comments (2)

  • Powaybob

    |

    Gore-inspired rubbish.

    Reply

    • Jenay

      |

      The purchases I make are entirely based on these acrtiles.

      Reply

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