China Daily: "Is El Nino's economic risk too hot to handle?"
by Yang Gao
"Heat kills — both lives and livelihoods," said Gernot Wagner, a climate economist at Columbia Business School.
"And it is often rather small changes in the average that lead to large threshold effects," he said.
He cited research showing that "only one additional day above 32 C in any given year lowers annual payroll by 0.04 percent".
"That may seem like a small effect. It is not," Wagner told China Daily. "One hot day in any given year shows up in annual productivity statistics, and El Nino only exacerbates these effects."
Wagner said the impacts extend well beyond labor productivity.
"'Climateflation' is a real phenomenon, and one that can already be measured," he said.
"Single heat waves lead to often large spikes in prices of individual agricultural products, which reverberate throughout the economy," he said.
Strengths, weaknesses
As climate risks become more synchronized across regions, globalization has created new vulnerabilities, Wagner, the climate economist at Columbia Business School, said.
"The more globalized — and hence specialized — our supply chains become, the higher the vulnerability of such extreme events, whether heat, droughts, floods, or other weather extremes that, due to climate change, are increasingly correlated," he said.
That growing correlation, he said, is changing the economics of risk itself.
"Single extreme events are costly. Correlation due to climate change makes them all the more costly," he said.
He compared the problem to insurance.
"The way to ensure against individual extreme events is by hedging — one flood or wildfire in one region may be bad, but others will be fine.
"With climate change, that is increasingly no longer the case — droughts and floods and other extremes the world over are suddenly connected, correlated with each other. Hedging away from extremes in one place is increasingly no longer possible," he said.
The solution, Wagner argued, lies in both adaptation and emissions reductions.
"Invest, invest, invest — in resiliency measures, of course, but also in cutting greenhouse gas pollution in the first place. Only by cutting additional carbon dioxide going into the atmosphere to zero will we be able to stabilize global climate over the long term," he said.
Full text via chinadaily.com.cn.
