Context:
- World Economic Outlook of the IMF, highlights the damaging macroeconomic impact of weather shocks, particularly for low-income countries.
- It notes that for the median emerging market economy, growth goes down by 0.9 percentage point because of a 1-degree Celsius increase from a temperature of 22 degrees Celsius
- Climate change is serious challenge for India where about 50% of the population directly or indirectly depends on agriculture for a livelihood
Consequences of climate change:
- Productivity will starts declining strongly
- Countries located in areas with higher temperature will face a disproportionate impact of global warming.
- Loss of output and lower productivity also affects capital formation, which has a bearing on medium- to long-term growth prospects.
Present scenario:
- Consensus was attained under the Paris Agreement to contain the rise in global temperature to below 2 degrees Celsius from the pre industrial levels
- But now Trump administration in the US is not keen on continuing with the Paris Agreement.
- It is being reported that advanced economies may not meet their commitment of reducing emissions
- The lack of will among industrialized economies to contain emissions, could lead to consequences that go beyond the realm of macroeconomics.
Necessary steps that needs to be taken:
- Emerging market and low-income economies have to build significant macroeconomic resilience.
- The IMF notes that right policies and institutions in place may help attenuate the effects of temperature shocks, to some extent.
Way forwards:
- Strengthen macroeconomic stability to be able to deal with such shocks.
- Work on programmes that will help improve the quality of land and reduce the risk of climate change.
- In Ethiopia, food and cash is provided to the poor who participate in local environmental programmes. (Use this as a case study in Answers)
- This has resulted in reduction in soil loss and has increased the availability of water
- India can use employment under the MGNREGA in a better way to enhance soil and water conservation.
- Strengthen its overall capability by investing in and adopting technology as the impact of climate change is not limited to agriculture
- For instance, better use of technology can reduce energy consumption for air conditioning. A district cooling system is being constructed in Gujarat International Finance Tec-City.
- It can be adopted in other cities as well.
Source: