Expected impact of climate change on Asian economic growth

Victor Mallet writes in the Financial Times about a recent Asian Development Bank study that calculates the effect on GDP in six Asian countries if they maintain a “business as usual” scenario for global carbon emissions.

Climate change to slash south Asian GDP, ADB warns

South Asian economies will be badly squeezed by climate change within a few decades if no action is taken to reduce the greenhouse gas emissions responsible for global warming, according to a report published on Tuesday by the Asian Development Bank.

The report calculates that the six countries studied – India, Bangladesh, Nepal, Sri Lanka, Bhutan and the Maldives – would on average lose 1.8 per cent of their gross domestic product by 2050 and 8.8 per cent by the end of the century under a “business as usual” scenario for global carbon emissions. Economic damage would be “higher still if losses due to extreme weather events are added”.

“Economic findings using [an] integrated assessment model suggest that the total climate change cost in South Asia will increase over time and be prohibitively high in the long term,” the authors write.

“This report has shown that even under optimistic climate change scenarios, huge impacts are likely on vulnerable sectors across South Asia, resulting in significant losses in gross domestic product and, hence, in economic growth and poverty reduction.”

The ADB says that if the world follows the recommendations of scientists and cuts fossil fuel use to keep the global mean temperature rise to 2C or less – the so-called “Cancún-Copenhagen” scenario, named after climate change summits in 2009 and 2010 – south Asia would lose just 1.3 per cent of GDP by 2050 and 2.5 per cent by 2100. However, few analysts now believe the 2C target is likely to be achieved.

Climate scientists have warned for years that south Asia will be particularly hard hit by global warming, with the densely populated territories south of the Himalayas suffering more intense and variable monsoon rains and sharp rises in average temperatures.

A report by UK and Indian government scientists in 2012 warned that before the end of this century Indian annual average temperatures would rise by 2.9C-4.3C from the 1961-1990 baseline, assuming continued high emissions of greenhouse gases.

The ADB study, however, is among the first to try to assess the economic impacts of climate change on the region. Add neighbouring Pakistan, which was not included in the study, and 1.7bn people, or nearly a quarter of the world’s population, live in south Asia.

The impact on already vulnerable economies near the Himalayas will include more storms and flooding in low-lying parts of Bangladesh, damage to property and infrastructure, “devastation of agricultural crops”, reduced electricity generation from hydroelectric dams and more disease.

“The coastal areas of Bangladesh, India, the Maldives and Sri Lanka are at high risk from projected sea-level rise that may cause displacement of human settlements, saltwater intrusion, loss of agricultural land and wetlands, and a negative impact on tourism and fisheries,” the ADB adds.

For the six countries, the cost of adapting to climate change in the next 40 years is highly dependent on global efforts to limit warming, ranging from about $14bn a year or 0.2 per cent of GDP in the best case to $198bn or 2.3 per cent of GDP in the worst.