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Beyond the borders
Riccardo Sorrentino, born in 1964, has worked at Il Sole-24 Ore since 1992. In the past years, he has attended several international summits, including the Palermo G-7 of Finance Ministers and Central Bankers in 2001, and the WTO conferences of Cancun (2003) and Hong Kong (2005) and he has covered several G-10 central bank meetings at the BIS and ECB press conferences. As a special correspondent, he has been in The Netherlands; in the US; in Iceland, in Hungary, in Singapore, in Indonesia, in India, in Norway, in Thailand, in Pakistan, in Armenia. In the 2003-2004 winter and in the 2006 summer, he worked at Il Sole 24 Ore's North American bureau in New York.
Climate changes, GDP falls
November16, 2007

It is a frightening tale, partly because it is told not by a recluse prophet of doom, but by a sensible international organization, the International monetary fund, which wants to cope more and more boldly with the issues of climate change and global warming. Let's read: "The global pattern of rainfall is likely to change, with many already dry areas expected to become even drier" in Africa, in Australia, in South Asia in Middle East and in Mediterranean.
Other effects are possible "on rainfall in many tropical zones as well as on seasonal patterns, potentially affecting the livelihoods of large human populations, and critical natural resources. Flood risk is projected to increase due to more intense rainfall and sea-level rise. The frequency and/or severity of extreme weather events, including hurricanes, floods, heat waves, and droughts, are expected to increase, most seriously in Africa, Asia, and the Caribbean".
It is not the worst-case scenario, just the more likely outcome. "There may exist 'tipping points' - adds the Imf - which, if passed, would result in more dramatic and irreversible climate effects. These include the potential for rapid glacial melting, reversal of the Gulf Stream, and large-scale tundra thawing in Canada, China, and Russia". With a very undesiderable consequence: a massive methane release.
The impact on economic growth, and on financial and migratory flows will be important everywhere, even if uncertainties are substantial. "Estimates of the macroeconomic effects of climate change at different levels of warming span a wide range of possible economic costs-ranging from negligible (even positive at low levels of warming) to a 10 percent reduction in world GDP for average global warming of 6 degrees Celsius". Six degrees are a large quantity: "Warming of 5°C would be roughly comparable to the difference between temperatures during the most recent ice age and today". But that hypothesis cannot be ignored, because its effects are heavy.
Costs "are also likely to vary across regions", even across countries: smaller and poorer economies "are likely the most affected by climate change". For instance, according an estimate by Richard Tol at Economic and Research Institute of Dublin, at 2.5°C warming, there could be "overall positive economic effects, reflecting output gains in rich countries", but also "GDP losses of about 4 percent in Africa". "At higher levels of warming - explains the Imf - similar distributional effects persist, although economic effects become universally negative (but with the range of uncertainty becoming wider)".
More precisely, what could be expected? According the Imf, without government intervention, there would be a "direct negative impact on output and productivity from long-term temperature change and more intense and/or frequent extreme weather events, particularly in the agriculture, fisheries, and tourism sectors", and a consequent worsening of balance of payments in some economies; even if "Northern (often more prosperous) areas may benefit from temperature increases of 1°-3°C". It would be likely a GDP reduction: "One study estimates that a one meter increase would reduce GDP by close to 10 percent for several countries, including Bangladesh, Egypt, Mauritania, and Vietnam". Damages by bad whether could increase the "risk of widespread migration and conflict", whereas "damage to transport infrastructure (ports and roads) may disrupt trade flows". Fiscal positions could be deteriorated.
Policy responses are needed. Rightly or wrongly, at the dock are men and women and their economic activity, and policymakers are called for acting. The problem is that government need certainties, that are very difficult to obtain in this field: the central tendency, by John Reilly at Massachusetts Institute of technology, "suggest that aggregate economic costs of climate change are likely to be small", but "it summarizes the gamut of scenarios ranging from relatively favorable to catastrophic effects of climate change; and policymakers may be particularly concerned about the tails of the distribution".
There is another problem, according the Imf. "The social consequences of emitting
the greenhouse gases (GHGs) that drive the process are not borne fully by those emitting the gases, but are shared across the world-with low-income countries likely to be most seriously affected. This raises significant problems of international coordination". This is partly because, as noted William Pizer at Resources for the future, "for the business sector in countries considering joining an international agreement, the critical issue is whether it would remain competitive with producers from non-participating countries".
This is why the starting point is sodisappointing. According the Progressive Policy Institute, a U.S based democratic think thank, there are 98 Multilateral Environmental Agreements and 170 regional agreements: "No single organization has clear responsibility for environmental policy". Moreover, some efforts to limit emissions are strictly domestic, like these currently undertaken by parties not bound by the Kyoto Protocol, notably Australia and the United States. Those initiatives "have supported the development and diffusion of new technologies designed to promote energy efficiency. In addition, some countries have made efforts to reform energy pricing and reduce deforestation". In is clear that all this falls short of what is needed, and policymakers have to act as soon as possible. Because, says the Imf, "most scientists think there is a 10-15-year window to deal with the emissions issue".
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