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Shaira Eunice T.

Autor
FM-3A
FINALS
The Problem and its Background
Climate change will wipe $2.5tn off global financial assets: Study
Losses could soar to $24tn and wreck the global economy in worst case scenario,
first economic modelling estimate suggests

The economic impact of climate


change could play havoc with the
world economy, according to an
LSE study. Photograph: Carlo
Allegri/Reuters
Climate change could cut the
value of the worlds financial
assets
by
$2.5tn
(1.7tn),
according to the first estimate from economic modelling.
In the worst case scenarios, often used by regulators to check the financial health
of companies and economies, the losses could soar to $24tn, or 17% of the worlds
assets, and wreck the global economy.
The research also showed the financial sense in taking action to keep climate
change under the 2C danger limit agreed by the worlds nations. In this scenario,
the value of financial assets would fall by $315bn less, even when the costs of
cutting emissions are included.

Massive carbon capture investment 'needed to slow global warming'


Our work suggests to long-term investors that we would be better off in a lowcarbon world, said Prof Simon Dietz of the London School of Economics, the
lead author of the study. Pension funds should be getting on top of this issue, and
many of them are. He said, however, that awareness in the financial sector was
low.

Mark Campanale of the thinktank Carbon Tracker Initiative said the actual
financial losses from unchecked global warming could be higher than estimated by
the financial model behind the new study. It could be a lot worse. The loss of
financial capital can be a lot higher and faster than the GDP losses [used to model
the costs of climate change in the study]. Just look at value of coal giant Peabody
Energy. It was worth billions just a few years ago and now it is worth nothing.
The Bank of England and World Bank have warned of the risks to the global
economy of climate change and the G20 has asked the international Financial
Stability Board to investigate the issue. In January, the World Economic Forum
said a catastrophe caused by climate change was the biggest potential threat to the
global economy in 2016.
Physical climate change impacts are a systemic risk on a massive scale, said Ben
Caldecott, the director of the sustainable finance programme at the University of
Oxford. Investors can do much more to differentiate between companies more or
less exposed and they can help reduce the risk to the global economy by supporting
ambitious action on climate change.
The new study, published in the peer-reviewed journal Nature Climate Change,
used economic modelling to estimate the impact of unchecked climate change. It
found that in that scenario, the assets were effectively overvalued today by $2.5tn,
but that there was a 1% chance that the overvaluation could be as high as $24tn.

A street in York, UK. Weather events triggered by climate change have a wide
ranging impact on the wider economy. Photograph: Jeff J Mitchell/Getty Images
The losses would be caused by the direct destruction of assets by increasingly
extreme weather events and also by a reduction in earnings for those affected by
high temperatures, drought and other climate change impacts.
If action is taken to tackle climate change, the study found the financial losses
would be reduced overall, but that other assets such as fossil fuel companies would
lose value. Scientists have shown that most of the coal, oil and gas reserves such
companies own will have stay in the ground if the global rise in temperature is to
be kept under 2C. The total stock market capitalisation of fossil fuel companies
today is about $5tn.

There is no scenario in which the risk to financial assets are unaffected by climate
change. That is just a fiction, said Dietz. There will be winners and losers.
Major investors such as Norways sovereign wealth fund the worlds biggest
have already begun selling off high-carbon stocks such as coal companies.
Investors have also been warned about investing in new coal and gas fired power
stations after 2017 by a second new study. The research shows that, to meet the 2C
target, no new carbon-emitting power stations can be built anywhere in the world
unless they are later closed down or retrofitted with carbon capture and storage
technology.
Investors putting money into new carbon-emitting infrastructure need to ask hard
questions about how long those assets will operate for, and assess the risk of future
shut-downs and write-offs, said Prof Cameron Hepburn of the University of
Oxford.

Questions:
1. Make a comprehensive discussion of the above case and try to formulate a
solution to solve the global issues on climate change.
Answer:
The above case stated clearly that climate change has several global issues. One
of which is that it could cut the value of the worlds financial assets by $2.5tn
(1.7tn), according to the first estimate from economic modelling. In the worst
case scenarios also, the losses could soar to $24tn, or 17% of the worlds assets,
and wreck the global economy. Another scenario is that the value of financial
assets would fall by $315bn less, even when the costs of cutting emissions are
included. The Bank of England and World Bank also warned of the risks to the
global economy of climate. In January, the World Economic Forum said a
catastrophe caused by climate change was the biggest potential threat to the global
economy in 2016.
These are just some of the global issues we are facing because of climate
change. It have become more prominent now because of the global warming which
is a global concern. Thats why, it is time to analyze causes and formulate
solutions. In my opinion, our economy would be better off in a low-carbon world
like what Prof Simon Dietz of the London School of Economics said. We could
just substitute energy sources such as solar power, wind force, hydro-electricity,
and subterranean steam power. Because there are substantial benefits for going
down the low carbon route, such as security of energy supply and better air quality.
We may not completely solve the issues but we can improve the present condition
somehow.

2. What are the measures that the international, national and the local government
can do to address the issues?
Answer:

International government can establish agreements to be followed in achieving


CO2 emission reduction and impose economic sanctions to countries who will not
abide to such agreements. While the national government can ensure that
agreements are to be followed and monitor the local government. And the local
government can monitor on a microscale if agreements are being followed.
3. What are the effects of climate change to the Philippines especially to the export
products (examples agri products, mangoes etc)?
Answer:
Since our country is a tropical country and our agricultural export is strong,
climate change would directly impact the cycle of weather in our country. Crops
are almost absolutely dependent on the current climate and weather if either wet or
dry seasons gets prolonged. For example, crops which adept with the unchanged
climate may struggle or even die, hence be unprofitable, due to inability to quickly
adapt with the changing climate.
4. What can you do as a student to address the climate change issue?
Results and Discussion
Answer:
As a student, on my own small way, I won't contribute to the over emission of
CO2 and as much as possible by doing simple things like unplugging electronic
devices when not in used, to apply the three Rs Reduce, Reuse, Recycle, and to
support activities like tree planting, etc. On the other hand, I will not support
activities that are the least bit concerned on controlling their emissions.