Anticipating Climate Change’s Social and Economic Impacts
The latest report from McKinsey shows that these leaders’ failures in calculating the impacts of climate change could result in financial losses of trillions of US dollars and threaten hundreds of millions of lives.
By
Ahmad Arif
·4 minutes read
JAKARTA, KOMPAS – Government and business leaders have been urged to adapt to the Earth’s uncertain conditions caused by the climate crisis. The latest report from McKinsey shows that these leaders’ failures in calculating the impacts of climate change could result in financial losses of trillions of US dollars and threaten hundreds of millions of lives.
“Much as thinking about information systems and cyber-risks has become integrated into corporate and public-sector decision making, climate change and its resulting risks will also need to feature as a major factor in decisions,” McKinsey Global Institute director and McKinsey Shanghai senior partner Jonathan Woetzel said in a written statement that accompanied the report’s publication on Thursday (16/1/2020).
Woetzel said that the report could assess the physical factors of climate change and help insurers, investors, lenders, governments, regulators, non-finance companies and individuals make calculations for their decisions.
Much as thinking about information systems and cyber-risks has become integrated into corporate and public-sector decision making.
The study finds that, if greenhouse gas emissions spike without control and no adaptation efforts are made to mitigate temperature increases, drought and sea level rise, hundreds of millions of lives will be threatened. Climate change will also result in economic losses of trillions of US dollars and threaten physical and natural capital, which includes ecosystems like rainforests and coral reefs that benefit people’s lives.
The report uses climate model projections to assess threats and uncertainties up to 2050. On a conservative climate projection called the Representative Concentration Pathway (RCP) 8.5, McKinsey researchers model a scenario of increasing greenhouse gas concentration in the next 30 years.
They then assess the impacts of climate change in nine case studies, including changing living spaces and work conditions in India and the Mediterranean, disruptions in the global food system, destruction of homes due to storms in Florida, sea level rise and supply chain disruptions.
More extreme
Researchers warn that the social and economic impacts of climate change are becoming more extreme and harder to predict as the thresholds of the climate system have been exceeded. For instance, flood control dam systems can fail to anticipate extreme weather and lead to even more devastating disasters.
In relation to food systems, the researchers saw a probability of rising annual crop failures. The possibility of crop failures of more than 15 percent, which usually occurs every 10 years, could increase from 10 percent today to 18 percent in 2030. Potential crop failure in the next decade could increase from 45 percent to 70 percent. Meanwhile, sea warming may reduce fishing yields and affect the livelihoods of between 650 million and 800 million people.
India and Pakistan, under the RCP 8.5 emission scenario, will be hotter and more humid, leading to a possible reduction of outdoor working hours. The risk of deadly heat waves will also increase, which will hit gross domestic product. In the report, Indonesia is listed among the countries that will be affected by rising temperatures and humidity, which may reduce people’s ability to work.
In 2020, Indonesia may suffer a loss of Rp 102.36 trillion in fisheries and coastal, water-based agriculture and health sectors.
Coastal cities will also be hit harshly. Ho Chi Minh City in Vietnam is expected to suffer from a rise of losses from centenary flooding from US$200 million to US$1 billion by 2050. Properties on coastal Florida and Indonesia may also face huge risks.
The National Development Planning Agency in the Indonesia National Adaptation Plan cites that 90 percent of villages in Indonesia are prone to impacts of climate change. In 2020, Indonesia may suffer a loss of Rp 102.36 trillion in fisheries and coastal, water-based agriculture and health sectors.
As part of the effort to address the impacts of climate change, the agency’s environment director Medrilzam recently said that Indonesia had a low-carbon development plan, but there were challenges that should be addressed.