The Climate Emergency and The Economy

Posted on Posted in 2. February, 2020-2021, News

The Climate Emergency and The Economy

By L. Eleazar

 

On November 24 of 2020, the House Committee on Disaster Resilience approved House Resolution No. 535 to declare a climate emergency. The resolution aims for a whole-of-government, whole-of-society, and whole-of-nation policy response to mitigate the impacts, consequences, and causes of climate change. This then raises a few questions such as ‘what would declaring a climate emergency mean for our economy?’ And ‘with more pressing issues currently at hand, such as the global pandemic and the largest recession of the Philippine economy since 1981, should we really be putting effort into an environmental issue?’ This article will give an overview of climate change and its consequences and provide insight as to whether more focus on climate justice could help heal the Philippine economy and safeguard our nation for future generations.

 

What is Climate Change?

Before learning about the effects of declaring a climate emergency, we must understand what climate change is and why the current situation is so drastic. According to NASA, “Climate change is a long-term change in the average weather patterns that have come to define Earth’s local, regional and global climates” (n.d.). This change is caused by an increase of heat-trapping greenhouse gases within Earth’s atmosphere. While many greenhouse gases are naturally occurring and essential to life on Earth, there has been an unnatural and steady escalation of these gases for more than a century and a half. Due to human activities such as industrialization, deforestation, and large scale agriculture, greenhouse gases have peaked at levels not seen for the last three million years. This surge in greenhouse gases then trap heat and steadily warm Earth’s atmosphere, causing natural disasters and phenomena that affect people all over the globe (United Nations Climate Change, n.d.).

According to the Global Peace Index 2019 report published by the Institute for Economics and Peace, the Philippines is the most at risk due to the climate crisis. Because of our country’s geographical position, extreme weather such as typhoons are inevitable. However, increased sea temperatures due to global warming have led to typhoons being more severe within the past two decades, with some of the deadliest occurring since 2006. Super Typhoon Yolanda, globally known as Haiyan, in 2013 was recorded to have wind speeds of up to 195 mph, killed 6,300 people, and left millions homeless (Amnesty International UK, 2020). More recent travesties that come to mind are Super Typhoon Rolly and Typhoon Ulysses that decimated regions in Luzon and caused the devastating flooding in Marikina City and the Cagayan Province just this past November.

Furthermore, future generations of the Philippines will feel the overwhelming effects of climate change. It is predicted that on our current trajectory, the melting of the polar ice caps due to increasing global temperatures will cause sea levels to rise and submerge large portions of the National Capital Region. Even more so, increasing temperatures in the ocean will negatively affect sea life. With the Philippines being the 8th largest fishing nation in the world, its yearly haul estimated to be worth $2.5 billion USD, it is easy to understand how climate change can drastically affect many people’s livelihoods (Amnesty International UK, 2020).

 

How Does Climate Change Affect The Economy? 

Aside from the staggering losses of life, homes, and livelihoods, climate change also negatively affects the economy of the country. The Philippines Catastrophe Risk Model done by AIR Worldwide and World Bank shows that the country faces an annual average loss of Php 133.2 billion from tropical cyclones alone (National Economic and Development Authority, 2013). Loans for relief aid of natural disasters pushes the Philippines further into debt while destruction left in the wake of such disasters leaves many people unemployed and many sectors at a loss. While some may argue that devastation can actually create jobs, this is a common misconception referred to as the “Broken Window fallacy.” When something is destroyed, resources and labor are used to rebuild and replace what was lost. However, had the disaster not happened, those same resources could have been used to create and add more benefit to society, rather than just replacing what was lost. Overall, there is no net benefit gained from destruction. Destruction by climate change is not good for the economy.

The most notably hit sector is agriculture. While the agricultural sector’s presence in the economy has been decreasing in recent years, it still makes up roughly 8 percent of the country’s GDP, with an increase in 2020 withstanding the global pandemic (PSA, 2020). Taking into consideration how business from agriculture can also help fuel other sectors, for example, the service sector transports agricultural goods, runs restaurants that use those goods, etc., the ruin brought on by typhoons, rising sea levels, and other such disasters have the capacity to noticeably affect GDP (Simeon, 2020). Between 2006 and 2013, about 75 natural disasters (i.e., cyclones, tropical storms, and floods) ravaged the Philippines which caused about $3.8 billion USD in accumulated damage and losses in the agricultural sector. The Philippine’s Climate Risk profile states that “an estimated annual GDP loss of up to 2.2 percent is projected by 2100 due to climate impacts on agriculture” (USAID, 2017). 

Even worse, climate change also affects other sectors of the economy. Together with relentless deforestation and deterioration of the environment, climate change has major fallouts on the coastal regions’ ecosystems like oceans and mangroves. Marine resources provide more than 60 percent of livelihood to coastal populations, while coral reefs and mangroves contribute to fishing, tourism, and storm protections, putting their annual value at $2 billion USD and $83 million USD, respectively. These ecosystems are vulnerable to increasing sea levels, ocean temperature, and salinity caused by climate change. Another area that is threatened by climate change is urban infrastructure. In 2009, Typhoon Ondoy, globally known as Ketsana, caused $33 million USD in repairs to roads and bridges. With sea levels rapidly rising, infrastructure and settlements in more than 25 coastal cities are in danger (USAID, 2017).

Overall, the Philippines stands to lose substantial amounts of resources and lives to the climate crisis. A report from the Stanford Institute of Economic Policy Research estimates that by 2100, the Philippine will be one of the low-income countries to be hit hardest by the economic consequences of climate change (Nunn et al., 2019). Declaring a climate emergency would stress the urgent need for policy changes and decisions in regards to lessening these consequences. 

 

The Climate Crisis, The Economy, and COVID-19

The question remains: with the global pandemic and recession still happening, should we really be putting effort into an environmental issue? Currently, the Philippines is experiencing its largest recession since the 1980s due to the COVID-19 pandemic and the months-long quarantine. Many businesses have shut down, many sectors experienced significant loss, the GDP indicator fell by -16.5 percent year-on-year in the second quarter, and at the strictest point in the quarantine, 7.3 million Filipinos were left jobless and unemployment levels reached an all time high at 17.7 percent, according to the PSA ( as cited in, Andrade, 2021). In order to reverse this predicament, many might point to industrialization as a solution. Yet, studies show that greenhouse gases increase with industrialization, which seemingly puts the economy and the environment in dispute. However, this is not necessarily the case.

The World Bank argues that with healing the economy, countries may also want to revisit decarbonization of the economy and green stimulus frameworks. As of the moment, resources and aid should be focused on medical workers and those drastically affected by pandemic by giving “adaptive safety nets” and using “existing social protective systems” to provide stability and hopefully end the health crisis soon (Hallegette et al., 2020). But in order to move forward and out of this recession, attention may be given to more environmentally friendly methods for economic growth. Globally, the World Bank estimates that a shift to low-carbon could create 65 million net new jobs by 2030. In developing countries, investments in resilient infrastructure could produce $4.2 trillion USD over the lifetime of the new infrastructure since it avoids costly repairs and minimizes the consequences of natural disasters (World Bank, 2020). 

Still, what is crucial now is making policy choices that will reap benefits in both the short-term and long-term. For example, recultivating forestlands may create many jobs in the short-term while simultaneously bringing about benefits such as a boost in carbon sequestration, watershed protection, better crop yield, and forest products which could amount to billions of dollars in the long-term. Another specific example is to make large investments in retrofitting buildings so they are more energy efficient and better adapted to higher temperatures in the future. This would create more jobs and support economic recovery, according to the World Bank. Especially now, with oil prices at a low, governments have the opportunity to reexamine their approach on fossil fuels and redirect resources and efforts towards more sustainable ways to promote growth and reduce poverty (Hallegette et al., 2020). Other ideas and policies that can be revisited are investments in green technology, such as electric vehicles and renewable energy, and carbon pricing, which was discussed in the Philippines as early as 2017 but has since been discontinued (Bisbey et al., 2020).* House representatives who approved the declaration of climate emergency stated that “the Philippines can leverage its position as an emerging market and a potent labor source for new industrialization to pursue an official foreign policy of international climate justice and can also use its domestic policies as moral leverage in pursuing financial claims for rehabilitation and climate-proofing” (Cervantes, 2020).

However, this is not to say that going green is the ultimate solution to our economic predicament. As with any decisions, there are risks to be taken. According to an International Monetary Fund article by Kenneth Gillingham of Yale University, while it is possible to keep the global temperature rise this century below 2 degrees Celsius (a goal of the Paris Agreement that would help mitigate the worse consequences of climate change), Gillingham explains that a large-scale shift into a decarbonized economy would have high costs if done too quickly. Oftentimes, environmental initiatives have high short-term costs whereas its benefits, such as reducing social cost, lessening environmental degradation cost, and minimizing resources needed to rebuild after natural disasters, can only be seen in the long-term. As said by Gillingham (2019) in Carbon Calculus,

 

…a vast transformation of the energy system will be costly and challenging if attempted all at once, especially considering the large short-term costs of the transition for fossil-fuel-reliant developing nations. There are certainly inexpensive measures that can be implemented today…The costs of these measures are already lower than the damage from climate change they would avert, based on estimates of carbon’s social cost. But many other approaches are quite costly in the short term, especially efforts to promote new low-carbon technologies (p. 11).

 

Yet, with this being said, Gillingham still believes that the key to decarbonizing the economy is to consider the long term. Furthermore, he goes on to point out that with attention on green technology, there will be innovations that would likely lead to more cost-efficient ways to slow global warming and simultaneously grow the economy. It is crucial for our economy to shift to more environment-friendly methods so that we can mitigate the destruction and costs brought about by climate change (2020). Yet, at the time of recession and the pandemic, can we really afford to think that way? 

Whether we can or we cannot is ultimately up to policy makers to decide. With the House panel approval of House Resolution No. 535 to declare a climate emergency this past November, it seems as though there may be a consensus that, yes, we can and must push efforts for more environmentally sustainable economic growth. As Albay Rep. Joey Sarte Salceda, the author of the resolution, said “We will eventually defeat Covid-19, as we have beaten all other pandemics. But the climate emergency will be here to stay. Unless we act now to make our communities safer, and to seek international climate justice, we will suffer the long-term consequences of this crisis” (as cited in, Cervantes, 2020).

*take note that each of these suggestions deserve an entire article dedicated to examining their costs and benefits in more detail

References

Amnesty International UK. (2020). Philippines country most at risk from climate crisis. 

https://www.amnesty.org.uk/philippines-country-most-risk-climate-crisis

 

Andrade, M.H.A. (2021, January 31). Philippine economy Enters COVID-19 induced 

recession. http://admuaea.org/2021/01/31/philippine-economy-enters-covid-19-induced-recession/

 

Bisbey, J., & Huang, Z. (2020, May 8). Economic and Social Survey of Asia and the Pacific 

2020 Towards sustainable economies. https://www.unescap.org/sites/default/d8files/WB%20Group%20presentation%20%28Thailand%2C%20Philippines%2C%20Malaysia%29.pdf

 

Cervantes, F. (2020, November 24). House panel approves climate emergency declaration. 

PNA. https://www.pna.gov.ph/articles/1122807

 

Gillingham, K. (2019, December). Carbon Calculus. Finance and Development, 7-11. 

https://www.imf.org/external/pubs/ft/fandd/2019/12/pdf/fd1219.pdf

* this is the citation for the indirect reference, you can also get the same info from this source: https://www.adb.org/sites/default/files/linked-documents/54022-001-ssa.pdf

 

Hallegatte, S., & Hammer, S. (2020, March 30). Thinking ahead: For a sustainable recovery 

from Covid-19 (Coronavirus). https://blogs.worldbank.org/climatechange/thinking-ahead-sustainable-recovery-covid-19-coronavirus

 

NASA. (2021). Overview: Weather, global warming and climate change. 

https://climate.nasa.gov/resources/global-warming-vs-climate-change/

 

National Economics and Development Authority. (2013). Reconstruction Assistance on 

Yolanda. https://www.neda.gov.ph/wp-content/uploads/2020/11/RAY-1-Build-Back-Better.pdf

 

Nunn, R., O’Donnell, J., Shambaugh, J., Goulder, L., Kolstad, C., & Long, X. (2019, October 

23). Ten facts about the economics of climate change and climate policy. https://www.brookings.edu/research/ten-facts-about-the-economics-of-climate-change-and-climate-policy/

 

Simeon, L. M. (2020, July 2). Agriculture contributing less to GDP for past 5 years. Philippine 

Star. https://www.philstar.com/business/2020/07/02/2024932/agriculture-contributing-less-gdp-past-5-years

 

Philippine Statistics Authority. (2020). Highlights, Second Quarter 2020; GDP growth rate 

drops by 16.5 percent in the second quarter of 2020; the lowest starting 1981 series. https://psa.gov.ph/system/files/Highlights_Q2-2020_NAP%20ao%2005%20Aug%20FIN.pdf

 

United Nations. (n.d.). Climate change.

https://www.un.org/en/sections/issues-depth/climate-change/

 

USAID. (2017). CLIMATE CHANGE RISK PROFILE PHILIPPINES

https://www.climatelinks.org/sites/default/files/asset/document/2017_Climate%20Change%20Risk%20Profile_Philippines.pdf

 

World Bank. (2020). Climate Change: Overview: Context. Retrieved February 02, 2021, from 

https://www.worldbank.org/en/topic/climatechange/overview

 

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