Japan, India and New Zealand will lose 10 per cent of their income, researchers said. (Mint)
Japan, India and New Zealand will lose 10 per cent of their income, researchers said. (Mint)

Climate change may shrink India's economy by 10%: Study

  • Prevailing economic research anticipates the burden of climate change falling on hot or poor nations, said researchers from the University of Cambridge in the UK
  • Some predict that cooler or wealthier economies will be unaffected or even see benefits from higher temperatures

LONDON : Climate change may shrink India's economy by 10% by the end of the century, according to a study published Monday which suggests that virtually all countries -- whether rich or poor, hot or cold -- will suffer economically unless Paris Agreement holds.

Prevailing economic research anticipates the burden of climate change falling on hot or poor nations, said researchers from the University of Cambridge in the UK, who used data from 174 countries dating back to 1960.

Some predict that cooler or wealthier economies will be unaffected or even see benefits from higher temperatures, they said.

However, the study published by the National Bureau of Economic Research suggests that -- on average -- richer, colder countries would lose as much income to climate change as poorer, hotter nations.

Under a "business as usual" emissions scenario, average global temperatures are projected to rise over four degrees Celsius by the end of the century.

This would cause the US to lose 10.5 per cent of its gross domestic product (GDP) by 2100 -- a substantial economic hit, researchers said.

Japan, India and New Zealand will lose 10 per cent of their income, they said.

Canada, which some claim will benefit economically from temperature increase, would lose over 13 per cent of its income by 2100, the researchers said.

The study shows that keeping to the Paris Agreement, which aims to keep the increase in global average temperature to well below two degrees Celsius, limits the losses of both North American nations to under two per cent of GDP.

Researchers said that seven per cent of global GDP is likely to vanish by the end of the century unless "action is taken".

Switzerland is likely to have an economy that is 12 per cent smaller by 2100. Russia would be shorn of nine per cent of its GDP, with the UK down by four per cent.

The team argues that it isn't just about the number on the thermometer, but the deviation of temperature from its "historical norm" -- the climate conditions to which countries are accustomed -- that determines the size of income loss.

"Whether cold snaps or heat waves, droughts, floods or natural disasters, all deviations of climate conditions from their historical norms have adverse economic effects," said Kamiar Mohaddes, a co-author of the study from Cambridge's Faculty of Economics.

"Without mitigation and adaptation policies, many countries are likely to experience sustained temperature increases relative to historical norms and suffer major income losses as a result. This holds for both rich and poor countries as well as hot and cold regions," said Mohaddes.

"Canada is warming up twice as fast as rest of the world. There are risks to its physical infrastructure, coastal and northern communities, human health and wellness, ecosystems and fisheries -- all of which has a cost," he said.

"The UK recently had its hottest day on record. Train tracks buckled, roads melted, and thousands were stranded because it was out of the norm.

"Such events take an economic toll, and will only become more frequent and severe without policies to address the threats of climate change," said Mohaddes.

Using data from 174 countries dating back to 1960, the research team estimated the link between above-the-norm temperatures and income levels.

They then modelled the income effects under a continuation of business-as-usual emissions as well as a scenario in which the world "gets its act together" and holds to the Paris Agreement.

Researchers acknowledge that economies will adapt to changing climates, but argue that their modelling work shows adaptation alone will not be enough.

The scientific consensus suggests that adapting to climate change takes an average of 30 years, as everything from infrastructure to cultural practice slowly adjusts.

"Cross-country studies are important for the big picture, but averaging data at national levels leads to loss of information in geographically-diverse nations, such as Brazil, China or the United States," said Mohaddes.

"By concentrating on the US, we were able to compare whether economic activity in hot or wet areas responds to temperature fluctuations around historical norms in the same way as that in cold or dry areas within a single large nation," he said.

They looked at ten sectors ranging from manufacturing and services to retail and wholesale trade across 48 US states, and found each sector in every state suffered economically from at least one aspect of climate change -- whether heat, flood, drought or freeze.

When scaled up, these are the effects that will create economic losses at the national and global levels, even in advanced and allegedly resilient economies, said the researchers.

"The economics of climate change stretch far beyond the impact on growing crops," said Mohaddes.

"Heavy rainfall prevents mountain access for mining and affects commodity prices. Cold snaps raise heating bills and high street spending drops. Heatwaves cause transport networks to shut down. All these things add up," he said.

"The idea that rich, temperate nations are economically immune to climate change, or could even double and triple their wealth as a result, just seems implausible," Mohaddes said.

Close