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ECONOMIC IMPACT OF CLIMATE CHANGE

Posted on: September 24, 2021

Climate change to spur rising losses in Asia: Swiss Re

THIS POST IS A CRITICAL REVIEW OF AN ONLINE ARTICLE ON THE ADVERSE IMPACT OF GLOBAL WARMING ON THE GLOBAL ECONOMY. LINK TO SOURCE: https://www.weforum.org/agenda/2021/06/impact-climate-change-global-gdp/

The Davos Manifesto: Towards a better kind of capitalism | World Economic  Forum

PART-1: WHAT THE SOURCE ARTICLE SAYS (IN JUNE 2021)

The largest impact of climate change is that it could wipe off up to 18% of GDP off the worldwide economy by 2050 if global temperatures rise by 3.2°C, the Swiss Re Institute warns. Forecast based on temperature increases staying on the current trajectory and the Paris Agreement and net-zero emissions targets not being met. This figure could rise to 18% of GDP by mid-century if temperatures increase by 3.2°C in the most severe scenario. Climate change is a systemic risk that must be addressed now, warns Swiss Re. The global economy could lose 10% of its total economic value by 2050 due to climate change, according to new research. The report The economics of climate change: no action not an option, published by the Swiss Re InASIANstitute, said the forecast about the impact of climate change was based on temperature increases staying on the current trajectory and Paris Agreement and net-zero emission targets not being met. Economists support ‘immediate and drastic action’ against climate change. Climate change will be sudden and cataclysmic. We need to act fast with climate action that could slow global warming. However, the the 10% loss forecast contins uncertainty such that the actual loss could could be as high as 18% if no action is taken and temperatures continue to rise. Climate science has warmed that without climate action, the temperature rise since pre industrial could be as high as 3.2C. The Swiss Re Institute’s Climate Economics Index stress tests how global warming will affect 48 countries – representing 90% of the world economy – and ranks their climate resilience. Global temperature rises will negatively impact GDP in all regions by mid-century. The Swiss Institute’s economics of climate change lays out the expected impact on global GDP by 2050 under four different scenarios compared to a world without climate change. These are: 4% if Paris Agreement targets are met (a well-below 2°C increase), 11% if further mitigating actions are taken (2°C increase), 14% if some mitigating actions are taken (2.6°C increase), 18% if no mitigating actions are taken (3.2°C increase). The impact of climate change has been forecast to be the hardest hit for Asian economies, with a 5.5% hit to GDP in the best-case scenario, and 26.5% hit in a severe scenario. However, there were significant regional variations in the data. Advanced Asian economies are predicted to see GDP losses of 3.3% in case of a below-2°C rise and 15.4% in a severe scenario, while ASEAN countries are forecast to see drops of 4.2% and 37.4% respectively. China is at risk of losing nearly 24% of its GDP in a severe scenario compared to forecast losses of 10% for the US, Canada and the UK and 11% for Europe. The Middle East & Africa, meanwhile, would see a drop of 4.7% if temperature rises stay below 2°C and 27.6°C in the severe case scenario, the report added. Many Asian economies most vulnerable to physical risks. Data showed that economies in South and South-east Asia were the most susceptible to the physical risks associated with global warming. Countries most negatively impacted – including Malaysia, Thailand, India, the Philippines and Indonesia – were often the ones with the least resources to mitigate and adapt to the effects of global warming. However, such nations also have the most to gain from global efforts to reduce temperature rises. Many advanced economies in the northern hemisphere were comparatively less vulnerable, being less exposed to adverse weather patterns linked to global warming and also better resourced to cope with the impact of climate change. The US, Canada, Switzerland and Germany were among countries deemed least likely to be significantly impacted. The World Economic Forum’s Global Risks Report 2021 identified climate action failure as the most impactful and second-most likely long term risk facing the world in a year when populations continued to struggle mitigating the impact of the COVID-19 pandemic. The report warned that billions across the world were at a heightened risk of missing out on future economic opportunities and the benefits of a resilient global community. The WEF emphasizes “Mitigating the impact of climate change”. This is echoed in the Swiss Re Institute report. “Climate risk affects every society, every company and every individual,” says Thierry Léger, group chief underwriting officer and chairman of the Swiss Re Institute. “By 2050, the world population will grow to almost 10 billion people, especially in regions most impacted by climate change. So we must act now to mitigate the risks and to reach net-zero targets. The Institute’s research concludes that the impact of climate change can be lessened if more decisive action is taken to meet the targets of the Paris Agreement. This will require cooperation between the public and private sectors to speed up the transition to net zero, it says.

PART-2: CRITICAL COMMENTARY

ITEM#1: ECONOMISTS SUPPORT IMMEDIATE AND DRASTIC ACTION AGAINST CLIMATE CHANGE. “.

RESPONSE#1: THIS STATEMENT IS AN ADMISSION THAT THE ECONOMIC ASSESSMENTS PROPOSED HERE BY THESE SAME ECONOMISTS ARE NOT THE PRODUCT OF UNBIASED AND OBJECTIVE RESEARCH BUT THAT THE ECONOMISTS HAVE MADE THEIR ECONOMICS ASSESSMENTS AS PART OF A CLIMATE ACTIVISM AGENDA. THESE ASSESSMENTS ARE THEREFORE BIASED BY THE CLIMATE ACTIVISM OF THE ECONOMISTS.

ITEM#2: CLIMATE CHANGE COULD WIPE OFF UP TO 18% OF GDP OF THE GLOBAL ECONOMY BY 2050.

RESPONSE#2: THE NEED FOR THE WORDS “COULD” AND “IF” IN THE SAME SENTENCE IMPLIES THAT THE ASSESSMENT DOES NOT DERIVE FROM DATA OR INFORMATION BUT FROM SUPPOSITONS. CONDITIONAL STATEMENTS OF THIS NATURE MAY CONTAIN USEFUL INFORMATION IN THE STUDY OF THE RELEVANT DATA BUT THESE STATEMENTS ARE NOT FORECASTS AND THEY CANNOT BE INTERPRETED AS SUCH.

ITEM#3: CLIMATE CHANGE IS A SYSTEMIC RISK THAT MUST BE ADDRESSED NOW.

RESPONSE#3: THE PHRASE “SYSTEMIC RISK” IS A TERM IN ECONOMICS THAT REFERS TO THE THE RISK OF COLLAPSE OF A BUSINESS ENTERPRISE, AN INDUSTRY, OR AN ENTIRE ECONOMY BECAUSE OF HOW IT IS STRUCTURED AND HOW IT WORKS. THE USUAL EXAMPLE OF SYSTEMIC RISK IS THE 2008 FINANCIAL CRISIS: LINK: https://tambonthongchai.com/2020/02/21/brianwesbury/ THE USE OF THIS ECONOMICS JARGON IN THE ASSESSMENT OF THE IMPACT OF CLIMATE CHANGE ON THE ECONOMY IMPLIES THAT THE RISK WE FACE IS NOT BECAUSE AN ANOMALY OR A FLAW OR WHAT WE DID, BUT THAT THE RISK DERIVES FROM THE NATURE OF THE BEAST – IN THIS CASE THE NATURE OF HOW THE ECONOMY OR THE CLIMATE WORKS. THE CONTRADICTION HERE IS THAT SYSTEMIC RISK DOES NOT IMPLY THAT HERE IS A KNOWN CAUSE AND EFFECT PPHENOMENON, THAT WE DID SOMETHING WRONG THAT NEEDS TO BE FIXED. INSTEAD, BY THE INHERENT NATURE OF HOW CLIMATE IS EXPECTED TO BEHAVE. YET, THE CLIMATE SCIENCE POSITION IS THAT WHAT WE ARE UP AGAINST IN THE CLIMATE CHANGE ISSUE IS NOT SYSTEMIC RISK BUT THE HUMAN INTERVENTION IN THE SYSTEM IN TERMS OF THE FOSSIL FUEL EMISSIONS OF THE INDUSTRIAL ECONOMY. THIS ISSUE IS DESCRIBED IN A RELATED POST: https://tambonthongchai.com/2020/06/19/vegandiet/ .

ITEM#4: UNCERTAINTY: IT IS STATED THAT THE 10% ECONOMIC LOSS FORECAST CONTAINS UNCERTAINTY SUCH THAT IT COULD BE AS HIGH AS 18% AND THE EXPECTEDE TEMPERATURE RISE OF 2C COULD BE AS HIGH AS 3.2C. THEREFORE THE RISK WE FACE WITHOUT CLIMATE ACTION IS MUCH HIGHER THAN PREVIOUSLY THOUGHT.

RESPONSE#4: THAT EXPECTED VALUE (MEAN) OF THE ECONOMIC LOSS IS 10% OF THE GLOBAL ECONOMY WITH RANGE THAT REACHES TO 18% ON THE HIGH SIDE IMPLIES THAT THE MIDPOINT OF THE UNCERTAINTY RANGE IS 10% WITH AN UNCERTAINTY RANGE OF 2% TO 18%. THE IMPLICATION OF THIS LARGE UNCERTAINTY, THOUGH INTERPRETED AS “OH LOOK HOW HIGH IT COULD BE” IS A BIASED VIEW. THE UNBIASED AND OBJECTIVE INTERPRETATION OF UNCERTAINTY IS THAT WE DON’T REALLY KNOW AND THE BIGGER THE UNCERTAINTY THE LESS WE KNOW. THEREFORE THE UNBIASED VIEW OF THE UNCERTAINTY IS NOT OH LOOK HOW IT COULD BE BUT RATHER OH LOOK HOW MUCH WE DON’T KNOW ABOUT THIS SYSTEM. THE GREATER THE UNCERTAINTY THE HIGHER IT COULD BE AND IN THE COMPLETE ABSENCE OF INFORMATION IT COULD BE AS HIGH AS INFINITY BECAUSE THE ANSWER IS NOT CONSTRAINED BY INFORMATION. THIS ODD INTERPRETATION OF UNCERTAINTY IS ALSO FOUND IN CLIMATE SCIENCE AS EXPLAINED IN A RELATED POST ON THIS SITE:

LINK: https://tambonthongchai.com/2020/04/22/climate-science-uncertainty/

ITEM#5: SIMILARLY, IN REGIONAL ECONOMIC FORECASTS WE FIND LARGE UNCERTAINTIES IN THE FORECASTS THAT CLIMATE CHANGE WILL CAUSE ECONOMIC DECLINES OF 5.5% TO 26.5%, OR 4.7% TO 27.6%, 3.3%T 15.4%, AND 4.2% TO 37.4%. IN ALL OF THESE CASES THE LARGE UNCERTAINIES ARE INTERPRETED AS “OH LOOK HOW HIGH IT COULD BE”.

RESPONSE#5: THIS INTERPRETATION, ALSO FOUND IN CLIMATE SCIENCE AS STATED ABOVE, IS A FLAWED UNDERSTANDING OF UNCERTAINTY. LARGE UNDERTAINTIES DO NOT MEAN “OH LOOK HOW IT COULD BE”. IT MEANS WE DON’T KNOW. THE LESS WE KNOW THE HGHER IT COULD BE AND IN PERFECT IGNORANCE IT COULD BE AS HIGH AS INFINITY BECAUSE THE ANSWER IS NOT CONSTRAINED BY INFORMATION.

The Davos Manifesto: Towards a better kind of capitalism | World Economic  Forum

CONCLUSION: THE SIGNIFICANT RESEARCH PAPER COMPILED BY LEADING ECONOMISTS TO PROVIDE SUPPORT FOR CLIMATE ACTION IN THE UPCOMING GLASGOW COP26 IS AN ADMIRABLE EFFORT AND SURELY WELL INTENTIONED BUT IT IS UNDONE BY TWO FLAWS IN THE LOGIC. THE FIRST IS THE BIAS IN THE INTERPRETATION OF UNCERTAINTY IN TERMS THE THE HIGH SIDE OF THE CONFIDENCE INTERVAL. THE SECOND IS THE NOTION THAT UNITED NATIONS CONFERENCE OF PARTIES (COP) MEETINGS CAN BE EXPECTED TO FORMULATE AND IMPLEMENT CLIMATE ACTION PLANS WITH READILY AVAILABLE HISTORY OF SUCH MEETINGS WITH NO EVIDENCE FOR SUCH AN INTERPRETATION OF COPS.

DETAILS IN RELATED POSTS LINKED BELOW:

MORE ABOUT THE UNITED NATIONS#1:

LINK: https://tambonthongchai.com/2020/03/18/the-eco-crisis-ambition-of-the-un/

Donald Trump Paris Agreement Withdraw Would Challenge World | Time

RELATED POST#1: COP26: LINK: https://tambonthongchai.com/2021/08/21/cop26-glasgow-2021/

RELATED POST#2: THE PARIS AGREEMENT: LINK: https://tambonthongchai.com/2021/06/05/the-paris-agreement/

Climate change could wipe off up to 18% of GDP off the worldwide economy by 2050 if global temperatures rise by 3.2°C.

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