Climate change directly affects the economic well-being of states: a decrease in agricultural production is leading the world to a global food crisis and increases the likelihood of rising inflation, Gulcin Ozkan, Professor of Finance at King’s Business School in London, told Report.
“Clearly, extreme weather events have become commonplace in recent times: floods, hurricanes, droughts, and even the spread of infectious diseases have become almost the norm rather than a rarity. These weather shocks lead to loss of capital stock, reducing the productivity of the production processes, and resulting in lower national output and income,” she noted.
“Energy demand is also likely to increase to cope with colder winters and hotter summers, pushing energy prices up, and further contributing to higher inflation. Given their greater exposure to climate risk and their greater vulnerability, the less developed countries are expected to be impacted much more negatively. Existing research identifies parts of Africa and South Eastern Asia as among the most vulnerable,” she added.
Speaking about economic measures to combat climate change, the professor noted that the world economy will be impacted negatively during the transition period where total production and income will be lower than it would have been with no climate action.
“Estimates put the output losses from global warming at levels as high as close to 40 percent (for ASEAN countries), for example, by mid-century if temperatures rise by more than 3 percent relative to the pre-industrial levels,” she said.