Economic Impact of Climate Change in the Pacific Islands: Some by 7lz011A


									 Economic Impact of Climate
Change in the Pacific Islands:
Some Issues and Challenges

               Biman Prasad
Professor and Dean of the Faculty of Business
 and Economics, The University of the South

   Introduction
   Impacts: why be concerned?
   Magnitude of Economic Impacts
   Lessons from Stern Review
   What are the challenges to
    minimize adverse impacts
   Policy Responses
    Financial crisis presents opportunities for climate
     change policies
    Fiscal stimulus not only to create demand but to
     promote sustainable development
   Australian Govt- action on climate change is
     economically responsible- delaying it will increase
     the cost by 15%
   190 nations seeking to conclude a new UN treaty in
     Copenhagen next year
    Serious Implications on agriculture and water
    Environmental Kuznet’s Hypothesis should be
     revisited by large developing countries
  Impacts: Why be concerned?
Climate change impacts are complex
Direct and Indirect impacts
climate change and sea level rise of the
magnitude predicted by IPCC would affect many
natural systems which will affect the survival
and provision for human beings
Regional Changes in climate change
El Nino SO (ENSO) importance to Pacific
El Nino brings drought- more frequent since
the 1970s
          Impacts: Examples
Changes in natural productivity and biodiversity

Decrease in cereal output in most tropical countries
Increased water shortages
Adverse economic impacts
Risk of flooding in small and low lying islands
Increase threats to human health
 increase inequities between poor and rich countries
Risk of irreversible climate changes
Magnitude of Economic Impacts
                 Stern Review findings (1)

   A simple conclusion: the benefits of strong and early
    action far outweigh the economic costs of not acting

   Climate change will affect the basic elements of life for
    people around the world –access to water, food production,
    health, and the environment

   Hundreds of millions of people could suffer hunger, water
    shortages and coastal flooding as the world
          Stern review (2)
   The review estimates that cost of no action could
    cost 5% of global GDP per annum now and for
   If a wider range of risk is taken into account the
    cost could be 20% of GDP
   In contrast cost of reducing greenhouse gas
    emissions would only amount to 1% of GDP with a
    range of +/-3% reflecting the uncertainties
   China $4.8b of a 100-year high water tide- cost of
    action would cost $400m
Current and Emerging threats in
      the Pacific Islands
   Natural disasters- cyclones, typhoons,
    hurricanes and floods are getting more
   Sea level rise, innundation, storm surges
    and coastal erosion- Pacific countries
    most vulnerable
   Fresh water scarcity- due to drought
    through high average temperatures and
    contamination from industrial pollution
   Food scarcity- due to land erosion and
    water scarcity
    Economic Impact of Natural
      Disasters in the Pacific
    Prasad, Mckenzie and Kaloumaira
     (2005 study)

    Direct and Indirect impacts and it is
     not easy to estimate.

    The official damage assessments
     omit many of the indirect costs.
                Impacts on PICs (1)

   In the 1990s, for example, cost of extreme events in the
    Pacific Island region is estimated to have exceeded US$1
    billion (Bettencourt and Warrick, 2000).

   This included the cost of Cyclones Ofa and Val, which hit
    Samoa in 1990/91, causing losses of US$440 million, which
    was greater than the country’s average annual gross
    domestic product (GDP) in recent years.

   In Niue, Cyclone Heta is estimated to have caused an
    impact of about NZ$37.7 million, which is approximately
    25% of its GDP (Prasad, Mckenzie and Kaloumaira, 2005)
         Impacts on PICs (2)
Cyclone Ami and related flooding in Fiji
Sectors            Subsectors          Total Cost (FJ$)
Social             Housing             $28,737,506
Economic Sectors   Tourism             $65,277,448
Infrastructure     Roads               $5,792,435
                   Water supply
Utilities          Telecommunicatins   $4,580,400
                   Power supply
Total                                  $104,387,789
                  Impacts on PICs (3)

   Climate Change in the Pacific is also expected to have
    wide ranging impacts on key economic sectors on which
    countries are heavily reliant

   These include subsistence food production, agriculture,
    fisheries, forestry, tourism, infrastructure, water, energy ,
    transport and health. Assessments in agriculture (Singh
    (1990), fisheries (Lehodey (2000) and tourism (Beccken
    (20O4) for example, indicate that economic losses are
    expected to be significant.
    Challenges for minimizing the impacts

   Building capacity and tools for appropriate
   Collection of appropriate data
   4 Steps
      1.     Gather background information
             on the natural hazard event
      2.     Sectoral Assessments
      3.     Cross sectoral assessments
      4.     Overall Impact Assessment
   Allocation in the budget for mitigation and
    Policy Responses to Climate
         Change Impacts (1)
     PICs are small players in reducing
      the extent of climate change

     For them policy responses to reduce
      the negative impact of climate change
      on the economy is important

     Public policy to manage resources
      efficiently- both market based and
      governmental action
    Policy Responses to Climate
         Change Impacts (2)
     New technologies to reduce the risk of damages

     Managing wastes

     Developing better water infrastructure- less prone to damage by
      natural disasters

     Reducing negative impacts on agriculture and fisheries- food security

     Promote public-private partnerships in developing appropriate
      infrastructure to reduce the economic risk

     Providing better social safety networks-reduce burden on government

     Education and economic incentives to prepare communities so that
      the negative impacts could be minimized

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