Climate change is likely to have a greater impact on countries and regions that have lower per capita GDP levels as they are likely to be more exposed to it, claimed a new climate risk report from McKinsey Global Institute.
“Poorer regions often have climates that are closer to physical thresholds. They rely more on outdoor work and natural capital and have less financial means to adapt quickly,” the report said.
For example, the report noted that a changing climate “could both improve and degrade food system performance.” According to McKinsey, while there can be an increase in crop yields in some regions, other regions could see complete failure of crops because of changing environmental conditions.
There can be slight benefits of climate change for countries such as Canada, Russia, and parts of northern Europe as there can be greater agricultural yield in those countries because of warmer temperatures, said the report from the global consulting firm.
The key to management of climate change risks is adaptation, said Jonathan Woetzel, director of the McKinsey Global Institute. “Mobilizing finance to fund adaptation measures, particularly in developing countries, is also crucial,” and it may require more public-private partnerships, according to the director. Key adaptation measures include protecting people and assets, building resilience, reducing exposure, and ensuring that appropriate financing and insurance are in place, Woetzel said.
He said that to address the impact of climate change, “governments of developing nations are increasingly looking to insurance/reinsurance carriers and other capital markets to improve their resiliency to natural disasters as well as give assurances to institutions that are considering investments in a particular region.”
The average global temperature has increased by 1.1 degree Celsius since the 1880s evbeh though the increase has not been uniform, according to McKinsey.
There are likely to be broader physical impact, affecting more regions because of intensifying hazards because of climate change. The workability indicator, which measures outdoor working hours lost to extreme heat and humidity, would in turn be hit because of the above, McKinsey said. It also factors in hazards like heat stress, heatstroke and other human health conditions affected by the change in climate.
By 2050, there will be a much smaller increase in risks for the top quartile of countries, based on GDP per capita, compared to those at the bottom quartile with respect to workability indicator, the McKinsey study has also found.
The most at risk would be those countries that a generate a significant percentage of their GDP from agriculture, according to the National Bureau of Economic Research. This is because crops would be killed an fieldwork would be delayed because of intense heat and precipitation.
The report concludes that there will be no winner in terms of the effects of climate change. By 2100, there would be a 7.22 per cent reduction in real GDP per capita of the world by an increase in average global temperature by 0.04 degrees Celsius per year, claimed a 2019 study by the National Bureau of Economic Research.
(Adapted from CNBC.com)