Monthly Archives: November 2020

“In a world, where profit is consistently put before both the people and the planet, climate economics has everything to do with ethics & morality.”

Naomi Klein, Canadian author, and activist

ASIA: Earth’s largest and the most populated continent, covering about 30% of earth’s total land area and 8.7% of its total surface area. China and India alternated in being the largest economies in the world from 1 to 1800 C.E. China was major economic power and attracted many to the east, and for many, the legendary wealth and prosperity of the ancient culture of Asia personified ASIA.

The earth’s climate is changing for more than 10,000 years of relative stability, and Asia is on the front line. Climate science speaks that absence of adaptation and mitigation of the climate hazards the region faces in the future, from heat waves to flooding, the impacts could be more intense and severe in ASIA compared to the other parts of the world. As Asia seeks to grow its economy and remain the key source of growth for the rest of the wo

rld, the climate is a critical challenge that the region will need to manage.

Off the top five global pollution emitters, Asia homes three (3) of the top five (5) emitters. China, India, and Japan have been ranked as the 1st, third and fifth, respectively, in the top 5 global polluters list. Being the most populous continent globally, the population boom ensures Asia emits more CO2 than any other region. Adding to the above problem is t

he desire to industrialize and rise to the eastern continents’ levels. With this desire and the historical differences (in terms of growth and industrialization), the developing countries have time and again agreed to continue to increase their carbon emissions (the catch is: developing countries industrialize more and developed countries should reduce more on carbon emissions).

Asia is regularly identified as one of the regions that are hit the hardest due to global warming. The U.N. Framework Convention on Climate Change has noted that Asia’s large population, the frequency of natural disasters, and a chaotic urbanization process with population relocated to coastal crises make Asia vulnerable to climate change.

According to The World Bank: “more than half of South Asia will see a decline in living standards due to rising temperature, impacting agricultural production and likely triggering mass migration.”

Amongst all the Asian countries, Vietnam will be one of the most severely impacted by climate change due to the long coastline. This long coastline is highly vulnerable to storms and floods. Because of its large low-lying areas, the country is always in danger both in climate disasters and economic development. One of the significant provinces is in the southern Mekong Delta, one of the most productive areas contributing to the Vietnamese economy’s substantial economic growth. The researchers estimate that most of the Mekong Delta will

be submerged into water due to rising sea levels resulting in a significant financial crunch for the economy.

Knowing ASIA and its overall demographics in terms of climate change, it is essential to understand (in brief) what impact climate change has on global and Asian economies. Let’s understand

IMPACTS OF CLIMATE CHANGE ON GLOBAL ECONOMY

The impacts of climate change are many and diverse. Determining whether these impacts are beneficial or detrimental, small or large, will depend on the sector, location, and time being considered. To understand various aspects like crops hit by worsening drought crops growing faster due to CO2 fertilization, increasing heat stress, decreasing cold pressure, rising sea-level, increasing energy demand for cooling, species going extinct, etc..…. the list is long and endless. Thus, we need aggregate indicators to assess whether climate change is

, on balance, a good or bad thing and whether the climate change problem is large or small compared to other issues the society (at large) faces.

The global economy will be at least smaller by 3% by 2050 owed solely to the effects of climate change, including weather and rising sea levels. The above figure has been laid in “framework from data experts at the Economist Intelligence Unit in 2019”.

Africa is the least resilient region to the impact of climate change, and its economy will likely contract by at least 4.7% by 2050. Latin America would contract at least by 3.8% by 2050, followed by the Middle East and Eastern Europe that will contract by 3.7% and 3%, respectively. Asian Pacific economy would contract the least to an estimate of 2.6% by 2050.

The Economist Intelligence Unit (EIU) forecasted in 2019 that the North American economy would contract by 1.1% by 2050 while Western Europe prepares itself for contraction by 1.7%. Both these regions are wealthier and are more equipped to handle climate change effects from an institutional viewpoint than the other counterparts in the globe. According to John Ferguson (Group’s Country Analysis Director, EIU): the economic impacts will grow over time, and a 3% loss of real GDP in 2050 is highly significant for the global economy.

According to International Monetary Fund, 2008: the impact of climate change will not be uniformly distributed across the globe; it is the developing countries like

Africa and Asia that are most at risk and are most likely to disproportionately experience the negative impacts of climate change and also, the negativity in the economy. The aftermath of natural disasters may lead to revenue reductions due to negative impacts on tourism, agriculture, and the fishing sector.

According to a report by Hallegatte, Dumas, Hourcade, 2010, the developing economies would have two-fold negative impacts.

· The first of these would be in the form of increased strain on domestic budgets, fewer resources in the form of aid, and economic development funds.

· The second will be towards the governments forced to divert funds towards funding and monetizing climate adversities rather than productive projects.

Adding to the above two, the report suggested that such countries will have less capacity to rebuild and less time recovering from natural disasters.

According to the World Bank, ASIA would be amongst the worst affected by climate change, and its economy will contract largely due to its inability to deal with the adversities and constantly being on the restructuring path rather than on the productive and growth path. This is because of the low latitude position of the continent.

It is a well-known phenomenon that the economy would be impacted greatly by the rising climate, and ASIA is the worst impacted.

BUT HOW?????

I WANT TO UNDERSTAND THIS……. LET’S UNDERSTAND THIS TOGETHER……!!!!!!

IMPACT OF CLIMATE CHANGE ON ASIA

“The financial climate, it seems, has been as unforgiving as the atmospheric one!”

Both the climate and the economic experts believe that ASIA is the worst impacted and is the most vulnerable region to climate change on the planet. With more than 60% of the world’s population living in ASIA alone, this phenomenon poses a serious concern for policymakers.

Although economic analysis of climate change is a comparatively new issue, numerous studies have been conducted worldwide that estimates the impact of climate change economically on various nations. Within ASIA, south-east Asia is the region that is most vulnerable to climate change and, thus, would be maximum impacted by climate change economically as well.

Being the developing continent compared to its counterparts, the Asian continent has seen rapid economic growth that has uplifted its economic standards over the decades. However, the development pattern has not been environmentally sustainable, and its increase in CO2 emissions (over 5% annually) has made it as fastest-growing CO2 emitters driving climate change amongst all its peers.

According to the Asian Development Bank (ADB)… if the trend persists, Asia (particularly in south-east Asia) will sustain bigger economic losses than estimated. A study conducted by ADB suggests that if it is business as usual (BAU), i.e., no control by the governments of the Asian countries than an estimated 11% of GDP would be lost by 2100.

Along with the physical risks (that can be viewed over time), the long term economic risks would be severe and intense. So what are these economic risks???

Let’s take a look:

A. Increased risk of river flooding, coastal induation, and sea-level rise

By 2100 there would be an increase in sea level rise by 70 cms and this would mean loss of land and salinity intrusion (means the movement of saltwater to freshwater that will lead to water degradation). This loss of land could be about 1% of land by 2050. Salinity intrusion could cause the loss of thousands of hectares of productive paddy and agricultural land, making farmers jobless and at a loss of work. This will impact the economy drastically.

B. Increased Water Stress

With the development there comes the use of water resources to a great extent. The water resources are going to be under stress due to excess demand, ultimately leading to water stress for nearly 190 million people by 2050. With development, there is increased emissions that will ultimately increase evaporation of water, hence, reduced water supply for drinking water and agriculture—a direct impact on the economy at large.

C. Increased risk from intense cyclones and storms

An increase or change in climate will lead to an increase in cyclones and storms across Asia, and the same would be with higher intensity. The increase of these cyclones would impact the areas highly, resulting in a huge amount of damage to life and property. Since, growth of any economy is possible if all its sectors grow together having a collaborative and coordinated effort and hence, the growth would be derailed and badly affected.

D. Decline of agricultural production and productivity

Agriculture is conditioned by temperature and rainfall, and thus, it is vulnerable to climatic conditions. An increase in temperature can cause heat stress and crop sterility, while a reduction in night temperature may reduce yields. Changes in rainfall will lead to water deficit stress, flooding losses, changes to seasonal duration that often cause production declines.

South-East Asia produces nearly 30% of rice supply and the fluctuating temperature will result in a decline in rice production by up to 5% between 2010-2050. In addition to this, approximately 7% of the land of Vietnam could submerge into the water due to a 1-meter-sea-level rise.

E. Increased risk of heat-related mortality and water-and vector-borne diseases

Rising temperature leads to a change in climate and ultimately increases the risk of mortality from cardiovascular and respiratory diseases. It also increases the thermal stress and proliferation of water-and-vector-borne diseases. All these infections and the various diseases will lead to a high rate of mortality by the end of the 21st century.

All these diseases will impact the economy badly since a healthy economy can be achieved only when the economy has healthy human resources.

F. Loss of labor productivity

Human labor is only possible without medical risk up to a certain humidity-adjusted temperature limit- this phenomenon is as wet-bulb globe temperature (WBGT). The decrease in labor productivity will add on to the business leaders wows and the growth process will slow down. This will additionally add on to the government’s stress as loss of productivity will lead to unemployment, ultimately derailing the growth of the economy as a whole.

G. Higher resources demand

With rising sea levels, storms, floods, and many such natural disasters, infrastructure at the coastal regions will face a high amount of destruction requiring much more repair, reconstruction, and increased reinforcement.

Furthermore, the increased climate will influence the need for more energy in order to meet the demand for cooling equipment. These cooling equipment will add to the demand for electricity. According to Bosello et al. 2012, it is estimated that electricity demand is going to increase by 12% in DA5 countries against a no-climate-change baseline, mainly driven by cooling needs.

H. Coral reef extinction and coastal ecosystem collapse

About 40% of the world’s coral reefs are found in Asia, with the world’s most diverse reef communities in the “coral triangle” as well as extensive seagrass beds supporting most of the world’s seagrass species.

With under 4°C of warming within the 21st century, virtually all coral reefs within Asia will be extinct, along with the marine system that it supports. This will ultimately hamper the businesses that are based on marine ecology, and thus, this will directly impact the economy and its growth, making society less productive as a whole.

I. Loss of terrestrial forests and biodiversity

Plant and trees have a relatively long life span and have limited ability to migrate or adapt quickly as per the change in climatic conditions or rising temperatures. This results in limited ability to adapt to changes in floods, deadly diseases, epidemics or pandemics, etc. ultimately leading to drought-like situations, thus, ensuring the emergence of drought-like situations more frequent and prevalent.

The climate fluctuations will lead to a risk of loss of around 30% of tropical forest area (according to Zelazowskict at, 2011) in Asia. When endemic flora is lost, the fauna is also at risk of extinction. Loss of natural forests will eliminate supplies of energy, food, timber, fiber, etc. along with crucial ecosystem services.

All this loss will impact the economy hugely as the economic and business processes are directly or indirectly impacted by the availability of natural resources.

These are huge risks that need immediate attention and action on the part of the governments and the corporates. Collaborative and collective action is the need of the hour. This would entail shifting to a low-carbon economy or an economy that is based on carbon sources that have minimal GHG (Green House Gases) emissions.

By now, it is a well-established fact that Asian countries are at a huge risk in terms of impact on its economy due to environmental conditions. It is also well-known that Asian countries can lead the way to global climate action by shifting towards a low-carbon economy. It is now on the countries or on the economies (including the most important aspect: “manpower”) as a whole to decide collectively how they can achieve the massive target of low or zero carbon emissions. It is imperative that the governments of each and every country have to brainstorm greatly to first start working within so that they can make the global impact being….. “FELT”.

It is extremely important that we start saving our home first and then move to our neighbors to help achieve environmental sustainability.

“It is easier said it done.”

Having understood all this, I want to know….. How can I protect my home????? Also, I want to understand how can I contribute (as a citizen) to achieve environmental sustainability??? In addition to these, I also want to know how my government and the business leaders work together (and also independently) in achieving the curb of GHG (Green House Gases) so that environment is a better place to live in and breathe in…????

Lastly, I want to understand how my country (India) is preparing to achieve zero carbon emissions and make the environment cleaner and greener for the generations to come……

Let’s analyze…..

“Every single C.E.O. and board is having to figure out what their carbon footprint is and what they are going to do about it”

Paul Tudor Jones II, the investor and founder of Just Capital, Jan 2020

Imagine a scenario where rationing on water has become mandatory in California, delay in rains leads to widespread hunger in Africa, China becoming the dominant user of the energy consumption………..

SCARY……. Isn’t it????

Concerns about climate change has been rising since a decade now, and the situation is worsening with each passing month/ year. Rising temperatures have led to the tensions amongst the business leaders across the globe that are stemming from trade, geo-political and domestic conflicts.

The Inter-governmental Panel on Climate Change (IPCC) suggests that the likely costs of just 2°C of global warming would be of the order of 0.5-2.0% of global GDP by the middle of the century; even if strong adaption measures (to reach environmental sustainability) are taken. In the United States, reports from the Risky Business Project (that uses a standard risk-assessment approach to determine the range of potential consequences to each region of the US-as well as for selected sectors of the economy-if the Americans continue with their existing path of climate conservation. To add further: the research focused on the clearest and most economically significant of these risks namely damage to coastal property and infrastructure from the rising sea-levels and increased storm surge, climate driven changes in agricultural production and energy demand, and the impact of higher temperature on labor productivity and public health) show that the economic impacts of Climate Change will likely grow. For example: within the next 15 years, the higher sea levels combined with storm surge will likely increase the average annual cost of coastal storms along the Eastern Seaboard and the Gulf of Mexico by $2 billion to $3.5 billion.

Saving the planet takes a lot of money and money is both the theme and the sub-text of initiating action in the climate process. The United Nations process that initially started with coming to the climate change conferences and observe and advice about the adversities of the rising climate (due to increased use of fossil fuels) is now all about the “show-and-tell” virtue. There has been a dramatic shift in the manner the UN conducts its climate conferences now. “Momentum is there”- declared Paul Polman, the former Unilever CEO (after having attended the UN conferences in previous years). According to him: “Climate change is the biggest opportunity of all times and we are close to several policy tipping points”.

According to the experts, there is mounting pressure for change to mitigate and adapt to the direct impacts of climate risk and its connected downstream risks. Businesses are also facing huge risks internally as well…..from its employees being unhappy about the management’s climate change initiatives and not being able to project the organization as the environmental friendly one.

In addition to the above, the industry insiders (on the condition of being anonyms) do confirm about the sky high pressure that the corporations are witnessing from its investors. The industry stalwarts do acknowledge that the leaders today are facing great heat from all of its stakeholders to engage in low-carbon transition or net-zero emissions plans to sustain in competition in the long run. In addition to this, financial regulators are also demanding for transparency against climate scenario like making the climate risk disclosure legislation and litigation against the companies mandatory. The companies that fail to disclose the climate risk should face serious consequences from both the government and the stakeholders. Example: Bank of England that stresses upon testing banks and insurers on the above mentioned parameters.

As the former CEO of Unilever Paul Polman mentioned that we are close to several tipping points… the companies need to be more strategically resilient and should be able to convert risks to significant opportunities in order to align themselves in the direction of change. To be able to do so, the companies can adopt some of below mentioned approaches:

a. Take a TRIM TAB Approach to climate change

According to Amy Edmondson: “business leaders are often depicted as greedy and short-sighted, who refuse to face crucial issue like climate change and subsequently find it difficult to change the perception.”

The term “bully-point” was coined by Theodore Roosevelt where “bully” meant “terrific.” The term was coined to explain the power and potential of speaking out and influencing public opinion. In today’s time, the same is used to describe any position with the potential to get public’s attention.

With the above explained concept Amy Edmondson wanted to explain that the business leaders today have bully point that is unparalled in history, provided they are ready to take the advantage of the opportunity.

Having access to various social media platforms and various forms of communication, it is very easy for the leaders to voice their opinion about climate change and also, to explain what all steps they are undertaking to minimize its impact.

This exemplify a simply fact that the leaders in today’s time do acknowledge the threat to the society in the decades to come, created by their operations; but with the selfish motive to earn quarterly profits, they refuse or in other words, choose to ignore the same. In fact, behind the close doors many thoughtful leaders throw up their arms thinking “my company is just a drop in the bucket” OR “until regulations happen” OR “there is nothing that my company can do or make a difference”.

This is where TRIM and TAB comes in!!!!

To maintain the business of climate change and to be economically and strategically sustainable, business leaders must recognize this principle and just get started. In other words, to be a flag-bearer in bringing about change and accepting climate change as an important stake holder, it is imperative that the leader take small steps and inching closer to sustainability with each step. In short,

Just “Trim & Tab”

b. Tackling Climate Change will cost less than We Think

Yes, it’s true!!!!

Prof. Rebecca Henderson argues that an inaction on the climate change will prove to be a costly affair than the timely action. According to United Nations estimates: roughly 1% of the world’s GDP a year or about $840 billion would be needed to curb the impact of climate change.

The above seems to be small number in comparison to the various studies that has been undertaken over the years. According to a study published in the Proceedings of the National Academy of Sciences: damages from uncontrolled Climate Change (an increase of 3.4 degree Celsius) could cost $12 trillion (2.8% global output) by 2095. Moreover, the same study suggests that delaying action could increase mitigation cost by 40% every decade, making it impossible to climate change impacts.

Building an energy efficient, decarbonized economy is a massive shift and will require the transformation of almost every company’s business model. Making changes in the business model is a major shift and involves a lot of planning and persistence on behalf of the leaders. However, having said so, it is still an achievable task. How??? Let’s discuss with an example:

There have been many investments in the field of energy conservation and many

of such investments have already been NPV (Net Profit Value) positive. A very

recent report (pdf) estimated that an investment of $3.2 trillion worldwide in

energy conservation would avoid new supply investments of $3 trillion and would

pay for itself within 3-5 years, while a recent Department of Defense sponsored

study (pdf) concluded that using LEED-silver or equivalent standards in the design

and construction of new buildings increased construction by less than 1% while

reducing energy costs by between 5-30% over the life of the building. Between

1990-2012 IBM reduced electricity consumption by 6.1 billion KWh, saving $477

Million through energy conservation alone.

There can be plenty of such examples on energy conservation. The idea behind citing these examples is that business on one hand is greatly impacted by climate change but on the other hand, non-action on the part of business leaders will impact the business to a larger extent and that too negatively. Ultimately, every leader aims to sustain in the competitive scenario in the long run. Whether it sustains after investing small amount today or by investing huge chunks tomorrow……..

IS DECISION THAT NEEDS TO BE MADE?

c. Need a miracle: Nuclear Energy can be the Answer

According to Joe Lassiter: nuclear power is the answer to the dangerous carbon emissions.

Various world’s governments- the United States, the European Union, Japan, China, India and the rest confirms that they fully expect their citizens to continue burning fossil fuels and releasing CO2 emissions at the above rates that by 2100. This will outstrip the cumulative amount of atmospheric CO2 needed to increase the average world temperature by 2°C if not by 6°C; and after 2100, world will have to live with the elevated temperatures and acidified oceans for 100 years or more.

Apart from China, all the other nations pledge to keep their emissions flat. But, the urge for economic growth makes the usage of fossil fuels and fuel emissions by the Chinese firms at an alarmingly high rate. This is devastating for the world at large and it need to be curbed. To curb this there is a form of energy that needs to be adopted and promoted by all the leaders. This is “nuclear power energy” and this needs to be replaced with the traditional use of energy.

This nuclear power is not the traditional one but is the one that is much safer even with today’s reactors. This energy form can run on today’s uranium as radioactive waste fuels like thorium (a waste product of rare earth mining) and depleted uranium (the waste product left is spent nuclear fuel rods).

The above is a great option but for any business leader to adopt them there are large barriers: such as outdated nuclear regulations that scare most of the leaders. According to Prof. Lassiter, it is difficult to adopt nuclear energy as the new means but it is imperative that the leaders today become nuclear driven entrepreneurs and must act today in order to conserve environment.

d. The ABC’s: Business Perspective

The business of climate change requires active participation on the part of leaders to ensure that the diversity is addressed in a proper manner. It involves that the focus should be on bringing about the change and cut down on the distraction on the part of the leaders. Prof. John Macomber (Senior lecturer of Business Administration) proposes ABC’s for the business leaders to address climate change in a more economic efficient way and to stay more sustainable in the competitive world. These ABC’s are:

· Actuarial thinking: means assessing probabilities and portfolio risks for the companies to look at what might or might not happen while a natural calamity. It’s a way where financial managers cover the possibility of unlikely but high event impacts.

· Basic Resources: society needs to collectively address the basics of water, energy, waste and transit so that we (as a business house) do a lot more with the resources and in a more efficient way so that the needs of the society as a whole are met with. Investments in efficiency and access benefits many sectors and this, in turn, gives enough opportunities to the business leaders to think out of the box and create value for them and sustainable environment within and outside the organization.

· Cities: For any business leader to be sustainable yet be competitively at the top, it becomes imperative that he works in accordance of the laws of the land and work closely with local leaders/ mayors. This is particularly important mainly for two reasons: first being the local leaders are more aware about the availability of resources and hence, the business leader can devise its strategy in accordance of the availability; and second working closely with these local leaders helps the business houses to allocate resources in a balanced manner making the development in sync for both the smaller and larger cities.

Another important aspect is working with local leaders is that these leaders together with the national leaders make the growth inclusive with active participation of the local citizens as well making the issue of climate change look smaller and well achievable. As the former Mayor of NYC Michael Bloomberg said “Nations talk, cities act”.

· Demand Management: it is difficult to manage the adversity of climate change and still have economically profitable and sustainable business. Still, if the leader aims at having modern ways and means in managing demand, the resources will not get wasted and the complexity of climate change will be well under control. Example: Ener NOC in the demand response space, and Johnson Controls, in the energy performance space that creates business value by stretching resources further.

· Finance: Prof. John D Macomber lays the greatest emphasis on finance. According to him, the projects needs to be additive so that funding is collective and the projects become competitive, resource efficient as a whole. It is greatly emphasized that the projects that are being carried out should be done by organizations/ companies/ individuals that are well-versed with their job. This leads to less wastage of available resources and the project is completed faster. Also, making the cash flow tradable makes the leaders have more capital that can be invested in reducing wasted energy, less CO2 and less wasted water.

These ABC’s help the leaders to adopt sustainable practices in improving environmental conditions and stay competitive alongside.

e. An Aggressive CEO

Scientists have reached consensus about the consequences of climate change and at the same time corporations have achieved unprecedented political war. CEO’s in today’s time are like rockstars those enjoy position to educate public and policy makers the climate change is critical for stable long-term economic growth.

However, it is imperative that CEO’s become aggressive in voicing their opinion about climate change in order to become economically viable and environmentally sustainable. An aggressive leader can approach the complexity of climate change with both the public and the decision makers together so as to make its voice heard and, hence, bring about change.

Knowing all this, the obvious question that arises:

“Which CEO will be the flag-bearer for Climate Change & Economic Sustainability”??