The effects of climate change on the economy

Global warming is a global reality – through climate change some areas will get hotter, others wetter, and others drier, almost thoroughly unpredictable. Climate change is undeniably an environmental problem, but it is also an economic one. LEAP looks at the impact that it will have on the lives of people living in South Africa.

Industries like agriculture, fisheries and forestry are the most negatively affected by climate change. Hotter temperatures, a shift in growing seasons and changes in water supply, will reduce crop production and impact employment and exports. This will all have an adverse effect on food security and shortages will have a knock-on effect that will likely result in increased food prices and inflation.

With greater fluctuations in temperature, people will want their offices and homes hotter in the extreme cold months, and cooler in the extreme hot months, thus increasing the demand on energy sources. Healthcare costs too, will rise as the mercury does, due to temperature-related illnesses such as heat stress, and heart and lung diseases.

Additionally, a large portion of the population live in informal settlements, making them vulnerable to extreme weather events like large storms, and so there is the risk of infectious diseases spreading quickly. In the event that there are an increasing number of natural disasters, insurance costs would have to follow suit, to cover damages to property and infrastructure. Businesses in these zones would have to consider relocating, resulting in periods of disruption, leading to a fall in productivity.

Of particular concern too, are biodiversity hotspots, like the Karoo biomes and Cape fynbos, which are sensitive to changes and their ecosystems will be disrupted by hotter temperatures, impacting wildlife in the area, as well as tourism, which South Africa can scarcely afford.

According to a recent study published by professors from Standford University and UC, Berkeley, climate change is likely to reduce the income of an average person by about 23% in 2100. The study analysed data from countries around the world, over a period of 50 years, looking at the relationship between temperature and economic productivity. What it found was that warmer temperatures cause economic productivity to decline. Additionally, people make more cognitive errors, potentially causing a range of accidents that impact productivity and profit. They also highlight the link between warmer temperatures and an increase in human conflict.

Climate change is expected to reshape the global economy, and it will have serious consequences especially in lower-income countries. Africa is already experiencing the impact of climate change, and this is why bold and proactive leadership and innovation is required. According to Kofi Annan, Africa has a major role to play in promoting low-carbon, climate-smart energy options, and shifting to more sustainable practices in agriculture and forestry.

The continent has an immense potential for cleaner energy, through water, sun and wind, and utilising these sources would drive growth and create jobs. To unlock Africa’s potential, we need an innovative, creative and urgent response, and this opens the door to entrepreneurs to create new opportunities for investment, growth and employment. This is the moment that Africa could lead the world.

At LEAP we provide expert advice, thanks to our experienced team and networks of associates within the group. With innovative thinking and the latest technology, we provide cost-effective and robust solutions that benefit development organisations, entrepreneurs and the communities we work in. For more information on how we can help you, call LEAP today on 011 449 7974 or visit www.leapco.co.za.

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LEAP Blog 6 Nov 2015nov03