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Spotlight on Climate Change and Economic Growth
Both economic growth and climate change are topics interconnected topics of essential significance. So, we’re taking a closer look at how climate change and economic growth intersect to understand how they impact one another.
The state of the climate in 2021
According to Ralph Keeling, head of the CO2 programme at the Scripps Institution of Oceanography, in 2020, the amount of CO2 in the atmosphere reached record high levels when it hit 417 parts per million in May. Just to put things into perspective, the last time the CO2 levels exceeded 400 parts per million was over 400 million years ago during the Pliocene era.
Even though we were in a lockdown for the better part of the last year, the World Meteorological Organisation has said that this didn’t do much in terms of reducing CO2 emissions.
The CO2 levels also impact heat, and the past decade is the hottest on record. These warm temperatures are causing ice to melt (which causes oceans to rise) and are also responsible for the increasing number of wildfires we are seeing.
“Everything is interconnected. If one part of the climate system changes, the rest of the system will respond,” says Julienne Stroeve, a polar scientist from University College London.
The Global Economy in 2021
The World Bank predicts that the global economy will expand by 5.6% this year, which is its strongest post-recession pace in 80 years; however, this recovery is expected to be uneven and reflect sharp rebounds in some major economies while growth will be limited elsewhere. Moreover, this outlook is subject to further Covid-19 waves and financial stress amid high EMDE levels.
Economic Growth and Climate Change
A study published in Nature Climate Change compared day-to-day temperature fluctuations between 1979 and 2018 with the corresponding regional economic data from more than 1,500 regions worldwide. They found that an extra degree Celsius of variability—up or down—results in an average five percentage-point reduction in regional growth rates. The authors said that parts of the economy hit by these daily temperature swings include crop yields, human health, and sales.
But this is just the tip of the iceberg. Led by Pierre Gravellini, Riskworx’s Principle Financial Engineer, some of our team took a closer look at whether economic growth can continue if we radically minimize our CO2 usage and significantly lessen our carbon footprint. Once the constraints of CO2 emissions and climate change are better understood, then the financial system actors can explore ways to adapt and foster sustainable development. Read more here