Impacts of climate change on growth and development (página 3)

4.3 Direct implications of climate change for health, livelihoods and growth: what can be learnt from natural disasters? The impact of climate change on poor countries is likely to be severe through both the effects of extreme weather events and a longer-term decline in the environment. The impact of previous extreme weather events provides an insight into the potential consequences of climate change. Many developing countries are already struggling to cope with their current climate. Both the economic costs of natural disasters and their frequency have increased dramatically in the recent past. Global losses from weather related disasters amounted to a total of around $83 billion during the 1970s, increasing to a total of around $440 billion in the 1990s with the number of "great natural catastrophe" events increasing from 29 to 74 between those decades.32 The financial costs of extreme weather events represent a greater proportion of GDP loss in developing countries, even if the absolute costs are more in developed countries given the higher monetary value of infrastructure.33 And over 96% of all disaster related deaths worldwide in recent years have occurred in developing countries. Climatic shocks can – and do – cause setbacks to economic and social development in developing countries. The IMF, for example, estimates costs of over 5% of GDP per large disaster on average in low- income countries between 1997 and 2001.34

Climate change will exacerbate the existing vulnerability of developing countries to an often difficult and changing climate. This section focuses on those aspects that will likely feel the largest impacts: health, livelihoods and growth. The analysis draws on evidence from past and current exposure to climate variability to demonstrate the mechanisms at work.

Despite some beneficial effects in colder regions, climate change is expected to worsen health outcomes substantially. Climate change will alter the distribution and incidence of climate-related health impacts, ranging from a reduction in cold-related deaths to greater mortality and illness associated with heat stress, droughts and floods. Equally the geographic incidence of illnesses such as malaria will change.

As noted in Chapter 3, if there is no change in malaria control efforts, an additional 40 to 60 million people in Africa could be exposed to malaria with a 2°C rise in temperature, increasing to 70 to 80 million at 3 – 4°C.35 Though some regions such as parts of West Africa may experience a reduction in exposure to vector borne diseases (see Chapter 3), previously unaffected regions may not have appropriate health systems to cope with and control malaria outbreaks. For poor people in slums, a greater prevalence of malaria – or cholera – may lead to higher mortality rates given poor sanitation and water quality, as well as malnutrition. In Delhi, for example, gastroenteritis cases increased by 25% during a recent heat wave as slum dwellers had to drink contaminated water.36

The additional heath risks will not only cost lives, but also increase poverty. Malnutrition, for example, reduces peoples" capacity to work and affects a child"s mental development and educational achievements with life-long effects. The drought in Zimbabwe in 2000, for example, is estimated to have contributed to a loss of 7-12% of lifetime earnings for the children who suffered from malnutrition.37 Managing the consequences of these health impacts can in itself lead to further impoverishment. Households face higher personal health expenditures through clinic fees, anti-malarial drugs and burials, for example. This was seen in the case of Vietnam where rising health expenditures were found to have pushed about 3.5% of the population into absolute poverty in both 1993 and 1998.38 The effects can be macroeconomic in scale: malaria is estimated to have reduced growth in the most-affected countries by 1.3% per year.39

Falling agricultural output and deteriorating conditions in rural areas caused by climate change will directly increase poverty of households in poor countries. Current experience of extreme weather events underlines how devastating droughts and floods can be for household incomes. For example:

• In North-Eastern Ethiopia, drought induced losses in crop and livestock between 1998 – 2000 were estimated at $266 per household – greater than the annual average cash income for more than 75% of households in the study region;40

• In Ecuador the 1997-98 El Niño contributed to a loss of harvest and rise in unemployment that together increased poverty incidence by 10 percentage points in the affected municipalities.41

These immediate impacts are often compounded by the rising cost of food – following the drought in Zimbabwe in 1991-92, for example, food prices increased by 72%42 – and loss of environmental assets and ecosystems that would otherwise provide a safety net for poor people.

These risks and the scale of impacts may increase with climate change if people remain highly exposed to the agricultural sector and have limited resources to invest in water management or crop development. As discussed in Chapter 1, climate change is likely to result in more heatwaves, droughts, and severe floods. In addition to these short-term shocks in output, climate change also risks a long-term decline in agricultural productivity in tropical regions. As Chapter 3 notes, yields of the key crops across Africa and Western Asia may fall by between 15% to 35% or 5% to 20% (assuming a weak or high carbon fertilisation respectively) once temperatures reach 3 or 4°C. Such a decline in productivity would pose a real challenge for the poorest countries, especially those already facing water scarcity. In sub- Saharan Africa, for example, only 4% of arable land is currently irrigated and the effects of climate change may constrain the long-term feasibility of this investment.43 Some extreme scenarios suggest that by 2100 the Nile could face a decrease in flow of up to 75%,44 with normal irrigation practices having been found to cease when annual flow is reduced by more than 20%.45

Strategies to manage the risks and impacts of an adverse climate can lock people into long-term poverty traps. The survival strategies adopted by poor people to cope with a changing climate may damage their long-term prospects. Equally, if there is a risk of more frequent extreme weather events, then households may also have shorter periods in which to recover, thus increasing the possibility of being pushed into a poverty-trap (as illustrated in Figure 4.4).46 There are two aspects to this:

• Risk-managing: Poor households may switch to low risk crops. In India, for example, poor households have been found to allocate a larger share of land to safer traditional varieties of rice and castor than to riskier but high-return varieties. This response in itself can reduce the average income of these people. Households in Tanzania that allocated more of their land to sweet potatoes (a low return, low risk crop), for example, were found to have a lower return per adult.47

• Risk-coping: Poor households may also be forced to sell their only assets (such as cattle and land). This can then compromise their long-term prospects as they are unable to educate their children, or raise levels of income over time. Following the 1991-92 droughts in Zimbabwe, many households had to sell their goats that were intended as a form of savings to pay, for example, for secondary education.48 ,49 Alternatively, to try and avoid permanent destitution households may decide to reduce their current consumption levels. This strategy can have long-term effects on health and human capital.50 Reductions in consumption levels during a drought in Zimbabwe, for example, led to permanent and irreversible growth losses among children – losses that would reduce their future educational and economic achievement.51

Climate change and variability cuts the revenues and increases the spending of nations, worsening their budget situation. Dealing with climate change and extreme variability will also place a strain on government budgets, as illustrated in the case of Zimbabwe following the drought of 1991-92 (Box 4.2). The severity of the effect on government revenues will in part depend on the structure of the economy. For example, the drought in southern Africa in 1991-92 resulted in a fall in income of over 8% in Malawi where agriculture contributed 45% of GDP at the time, but only 2% of GDP in South Africa where just 5% of GDP was obtained from agriculture.52 Climate change will also necessitate an increase in spending at the national level to deal with the aftermath of extreme weather events and the consequences of a gradual reduction in food and water supplies. For example, the logistical costs of importing cereal into drought affected southern African countries in 1991-92 alone were $500million.53 In some cases, the expenditure requirements may be beyond the government"s capacity. This was the case following Hurricane Mitch in 1998 where the Honduras government (with a GNP of $850 per capita) faced reconstruction costs equivalent to $1250 per capita.54

Box 4.2 Economic Impacts of Drought in Zimbabwe, 1991-92 In late 1991 to early 1992, Zimbabwe was hit by a severe drought. This resulted in a fall in production of maize, cotton and sugarcane by 83%, 72% and 61% respectively; the death/slaughter of more than 23% of the national herd; water shortages that led to the deterioration in quality and price of Zimbabwean tobacco; and reduction in hydro-electricity generation that affected industry and the mineral export sector. The direct impacts of the drought contributed to a doubling of the current account deficit from 6% to 12% of GDP between 1991 and 1992 and an increase in external debt from 36% of GDP in 1991 to 60% in 1992 and 75% by 1995. Government revenues fell in 1992-93 due to drought-induced loss of incomes, slowdown in non-food imports and slow-down in the private sector. Current expenditures increased by 2 percentage points of GDP in 1992-93 due predominantly to drought-related emergency outlays. Government expenditures on health and education were reduced as a share of the budget, in particular for primary education. By the end of 1992, real GDP had fallen by 9% and inflation increased to 46% with food prices having increased by 72%.

At the time of the drought the country was one of the better educated and more functional of states in sub-Saharan Africa. The more recent difficulties with governance, mismanagement and inflation, for example, were not anywhere near as problematic at the time of the drought.

Source: IMF (2003)

When governments face financial constraints, their response to the impacts of climate change and extreme variability – ranging from expenditure switching to additional financing through increasing debt levels – can itself amplify the negative effect on the growth and development of the economy. For example, if key investments to raise economic performance are deferred indefinitely.55 In reality Official Development Assistance (ODA) will often step in to help fill this financing gap, as was the case in Honduras following Hurricane Mitch for example. However these emergency funds are rarely additional and often reallocated funds or existing commitments within multi-year country programmes brought forward.

The experience of past extreme weather events and episodes testifies to the damaging effect that an adverse climate can have on social and economic prospects in developing countries. If climate change increases the frequency and severity of these events, as the science suggests, the costs on developing countries will grow significantly unless considerable effort is made today to reduce their vulnerability and exposure. And coupled with this will be a longer-term decline in the environment that will have to be managed. This will exert greater pressure still on resources and declines in the productivity and output of climate sensitive sectors.

4.4 What do global climate change models predict for developing countries? Climate models predict a range of impacts on developing countries from a decrease in agricultural output and food security to a loss of vital river flows. The impacts are predominantly negative. Evidence from the past and current extreme climate variability demonstrates the effect that a hostile climate can have on development. This section summarises some of the key findings from climate change impact studies undertaken by academics from particular developing regions to contribute to the Stern Review. These reports can be found on the Stern Review website (www.sternreview.org.uk). These summaries are not intended to be comprehensive but are rather more to highlight the key areas where climate change will be seen.

South Asia56

• India"s economy and societal infrastructures are vulnerable to even small changes in monsoon rainfall. Climate change may increase the intensity of heavy rainfall events (the Mumbai floods of 2005 may be an example)57 whilst the number of rainy days may decrease. Floods could become more extreme as a result with droughts remaining just as likely. Temperatures will increase for all months. Consequently, during the dry pre- monsoon months of April and May, the incidence of extreme heat is likely to increase, leading to greater mortality.

• Changes in the intensity of rainfall events, and the active / break cycles of the monsoon – combined with an increased risk of critical temperatures being exceeded more frequently – could significantly change crop yields. For example, mean yields for some crops in northern India could be reduced by up to 70% by 2100.58 This is set against a background of a rapidly rising population that will need an additional 5 million tons of food production per year just to keep pace with the predicted increase in population to about 1.5 billion by 2030.

• Meltwater from Himalayan glaciers and snowfields currently supplies up to 85% of the dry season flow of the great rivers of the Northern Indian Plain. This could be reduced to about 30% of its current contribution over the next 50 years, if forecasts of climate change and glacial retreat are realised. This will have major implications for water management and irrigated crop production, as well as introducing additional hazards to highland communities through increasingly unstable terrain.59

Sub-Saharan Africa60

• Africa will be under severe pressure from climate change. Many vulnerable regions, embracing millions of people, are likely to be adversely affected by climate change, including the mixed arid-semiarid systems in the Sahel, arid-semiarid rangeland systems in parts of eastern Africa, the systems in the Great Lakes region of eastern Africa, the coastal regions of eastern Africa, and many of the drier zones of southern Africa (see Thornton et al).61

• Between 250–550 million additional people may be at risk of hunger with a temperature increase of 3°C, with more than half of these people concentrated in Africa and Western Asia.62 And there are risks of higher temperatures still. Climate change is also predicted to decrease – and/or shift – the areas of suitable climate for 81% to 97% of Africa"s plant species. By 2085, 25% – 42% of plant species could find they no longer have any suitable habitat.63

• Tens of millions of additional people could be at risk of malaria by the 2080s.64

Previously unsuitable areas for malaria in Zimbabwe could become suitable for transmission with slight temperature and precipitations variations, whist in South Africa the area suitable for malaria may double with 7.8 million people at risk by 2100.65

• Water pressures may be intensified as rainfall becomes more erratic, glaciers retreat and rivers dry up. While there is much uncertainty about flow of the Nile, several models suggest a decrease in river flow, with nine recent climate scenario impacts ranging from no change to more than 75% reduction in flows by 2100.66 This will have a significant impact on the millions of people that have competing claims on its supplies.

• Many large cities in Africa that lie on or very close to the coast could suffer severe damages from sea level rise. According to national communications to the UNFCCC, a 1 meter sea-level rise (a possibility by the end of the century) could result in the complete submergence of the capital city of Gambia, and losses of more than $470 million in Kenya for damage to three crops (mangoes, cashew nuts and coconuts).67

Latin America68

• Countries in Latin American and the Caribbean are significantly affected by climate variability and extremes, particularly the ENSO events.69 The region"s economy is strongly dependent on natural resources linked to climate, and patterns of income distribution and poverty exacerbate the impacts of climate change for specific sub- regions, countries and populations.

• Living conditions and livelihood opportunities for millions of people may be affected. By 2055 subsistence farmers" maize production (the main source of food security) in the Andean countries and Central America could fall by around 15% on average, for example, based on projections of HadCM2.70 The potential die-back, or even collapse, of the Amazon rainforest (discussed in Chapter 3) presents a great threat to the region. The Amazonian forests are home to around 1 million people of 400 different indigenous groups, and provide a source of income and medical and pharmaceutical supplies to millions more.

• Climate change could contribute to a 70% rise in the projected number of people with severe difficulties in accessing safe water by 2025. About 40 million people may be at risk of water supply for human consumption, hydro-power and agriculture in 2020, rising to 50 million in 2050 through the predicted melting of tropical Andean glaciers between 2010 and 2050. The cities of Quito, Lima and La Paz are likely to be most affected. Dengue transmission is likely to increase by 2 to 5 fold by the 2050s in most areas of South America and likely that new transmission areas will appear in the southern half of the continent and at higher elevations.

China71

• There is significant variation in climatic patterns across China"s regions including arid, temperate and mountainous regions. The average surface air temperature in China has increased by between 0.5 and 0.8°C over the 20th century with increases more marked in North China and Tibetan Plateau compared to southern regions. Temperature rise will lead to temperate zones in China moving north as well as an extension of arid regions. Cities such as Shangai are expected to experience an increase in the frequency and severity of heat waves causing significant discomfort to fast growing urban populations.

• Overall water scarcity is a critical problem in China with existing water shortages, particularly in the north (exacerbated by economic and population growth). Climate change is expected to increase water scarcity in northern provinces such as Ningxia, Gansu, Shanxi and Jilin province. An increase in average rainfall in southern provinces such as Fujian, Zhejiang and Jiangxi is anticipated over the next 50 to 100 years leading to more instances of flooding. From 1988 to 2004, China experienced economic losses from drought and flood equating to 1.2% and 0.8% of GDP respectively.

• Climate change is expected to have mixed effects on agricultural output and productivity across different regions with impacts closely related to changes in water availability. On average, irrigated land productivity is expected to decrease between 1.5% to 7% and rain fed land by between 1.1% to 12.6% under rain- fed conditions from 2020s to 2080s under HadCM2, CGCM1 and ECHAM4 scenarios in China.72

Overall a net decrease in agriculture production is anticipated with seven provinces in the north and northwest of China particularly vulnerable (accounting for ¼ of total arable land and 14% of China"s total agricultural output by value).73

Middle East and North Africa • The region is already very short of fresh water and faces difficulty meeting the needs of fast-growing populations. Most if not all the region may be adversely affected by changing rainfall patterns as a result of climate change. An additional 155 to 600 million people may be suffering an increase in water stress in North Africa with a 3°C rise in temperature according to one study.74 Yemen is particularly at risk given its low income levels, rapidly growing populations and acute water shortages today. Competition for water within the region and across its borders may grow, carrying the risk of conflict.

• Reduced water availability combined with even modestly higher temperatures will reduce agricultural productivity and in some areas may make crops unsustainable. Maize yields in North Africa, for example, could fall by between 15-25% with a 3°C rise in temperature according to one recent report.75

• Some parts of the region – notably the Nile Delta and the Gulf coast of the Arabian peninsula – are in addition vulnerable to flooding from rising sea levels which could lead to loss of agricultural land and/or threats to coastal cities. Others are vulnerable to increased desertification.

Climate change poses a wide range of potentially very severe threats to developing countries. Understanding the impact of climate change on developing countries – at both a regional and national level – is essential to get a better understanding of the scale of threat and urgency of mitigation action, but also to help prepare for some of the now inevitable impacts of climate change. To date, however, analysis undertaken in developing countries of potential threats and impacts has been very limited. Many climate changes are on the way and foresight and action will be crucial if damages to development progress are to be managed both by the private and by public sectors. Further work is required on studying the impacts of climate change on developing countries at a national, regional and global level.

4.5 Impact of climate change on economic growth prospects and implications for incomes and health Over time, there is a real risk that climate change will have adverse implications for growth. This section looks at how income levels and growth have been affected by extreme climate variability and then moves on to summarise illustrative modelling work undertaken as part of the review. If climate change results in lower output and growth levels than would otherwise be the case, there will be implications for poverty levels. But income levels also affect health, and mortality rates will rise above what they would otherwise have been, in addition to any immediate health impacts through illnesses such as malaria. The previous section reviewed a range of projected direct climate impacts on factors affecting lives and livelihoods that recent research has highlighted. This section provides an analysis of their possible impacts on income and health.

Extreme weather events can – and do – affect growth rates in developing countries. Climate change presents a greater threat still. The output of an economy in a given year depends on labour, environmental quality and capital available in that year (illustrated, for example, in Box 5.1 of Chapter 5). All three will be affected by climate change – be it through the damaging effects on the health and productivity of the labour force, the loss and damage to agriculture and infrastructure, or lower quality investment and capital. As the output and factors of production of an economy are repeatedly affected, so growth prospects will change. This will be particularly true for poorer economies with a stronger focus on agriculture and with less ability to diversify their economies.76

The effects of current extreme climate variability demonstrate the potential impact a changing climate can have on output and growth. Changes in the hydrological cycle can be especially damaging. Too much rainfall can inundate transport, for example, limiting trade potential and communication. It has been estimated that the 2000 floods in West Bengal destroyed 450km of rail track and 30 bridges and culverts, and adversely affected 1739km of district roads, 1173km of state highways and 328km of national highways.77 Too little rainfall will affect crop production but also reduce the flow of surface water that could provide irrigation and hydroelectricity production. The La Niña drought in Kenya, for example, caused damage to the country amounting to 16% of GDP in each of 1998–99 and 1999–2000 financial years, with 26% of these damages due to hydropower losses and 58% due to shortfalls in industrial production.78

Economy-wide, multi-market models that incorporate historical hydrological variability project that hydrological variability may cut average annual GDP growth rates in Ethiopia by up to 38% and increase poverty rates by 25%.79 These models capture the impacts of both deficit and excess rainfall on agricultural and non-agricultural sectors. As climate change increases the variability of rainfall, the scale of these growth impacts could rise significantly.

Slower growth could cause an increase in poverty and child mortality relative to a world without climate change, as found by illustrative modelling work undertaken by and for the Stern Review. The Stern Review has used the PAGE2002 model (an integrated assessment model that takes account of a wide range of risks and uncertainties) to assess how climate change may affect output and growth in the future.80 Integrated assessment models can be useful vehicles for exploring the kinds of costs that might follow from climate change. However, these are highly aggregative and simplified models and, as such, the results should be seen as illustrative only.

By 2100, under a baseline-climate-change scenario,81 the mean cost of climate change in India and South East Asia, and in Africa and the Middle East is predicted by PAGE200282 to be equivalent to around a 2.5% and 1.9% loss in GDP respectively, compared with what could have been achieved in a world without climate change. Under a high-climate-change scenario,83 the mean cost of climate change is predicted by PAGE2002 to be 3.5% in India and South East Asia, and 2.7% in Africa and the Middle East.

There are good reasons, however, for giving more emphasis to the higher (95th percentile) impacts predicted in these scenarios, as the model is unlikely to capture the full range of costs to developing countries. In particular:

• The poorest people will be hit the hardest by climate change, an effect for which the highly aggregated models do not allow; • There are specific effects, such as possible loss of Nile waters and the cumulative effects of extreme weather events (as discussed above), that aggregated global and regional models do not capture; • This is a long-term story. If emissions continue unabated, temperatures will rise to much higher levels in the next century, committing these regions to far greater impacts (as discussed in Chapters 3 and 6), including the risks associated with mass migration and conflict discussed in the next section; At the 95th percentile, and under the baseline-climate-change scenario, the projections rise to a 9% loss in GDP in India and South East Asia, and a 7% loss in Africa and the Middle East by 2100. And, under the high-climate-change scenario, the costs of climate change rise significantly to losses of 13% and 10% in GDP respectively (again at 95th percentile).

Given the strong correlation between growth and poverty reduction (see Box 4.3), a climate- driven reduction in GDP would increase the number of people below the $2 a day poverty line by 2100, and raise the child mortality rate compared with a world without climate change. This is illustrated below by modelling work undertaken for the Stern Review. This analysis assumes reductions in poverty and child mortality are driven primarily by GDP growth.84 As with the PAGE2002 model itself, projections that extend so far into the future should be treated with caution, but are useful for illustrative purposes. The projections summarised below focus only on income effects.

Box 4.3 Relationship between growth and development Countries with higher overall growth rates tend to have higher growth in incomes of poor people. Poverty is estimated to decline on average by 2% for a 1 percentage point rise in economic growth across countries.85 Kraay estimates that, over the short run, growth accounts for about 70% of the variation in poverty (as measured by a $1 a day poverty line). As the time horizon lengthens, that proportion increases to above 95%.86 There is a close relationship between growth and many non-income indicators of development, ranging from under-five mortality to educational attainment and peace and security. Income-earning opportunities provide citizens with a vested interest in avoiding conflict, and security allows governments to invest in productive assets and social expenditures, rather than defence. East Asia has grown rapidly (5.8% in the 80s and 6.3% in the 90s) and has seen the fastest fall in poverty in human history. An annual growth of more than 7% will be needed to halve severe poverty in Africa by 2015 (and a 5% annual growth is required just to keep the number of poor people from rising).87

While growth is clearly an important contributor to poverty reduction, much depends on how the benefits of this growth are distributed and the extent to which the additional resources generated are used to fund public services such as healthcare and education. Poor people benefit the most from economic growth when it occurs in those parts of the economy that offer higher returns for poor people"s assets.

Poverty projections By 2100, climate change could cause an additional 145 million people to be living on less than $2 a day in South Asia and sub-Saharan Africa (100 million people and 45 million people respectively) because of GDP losses alone at the 95th percentile of the baseline-climate- change scenario and runs, or 35 million people at the mean of these runs.

Under the high-climate-change scenario at the 95th percentile, up to an additional 220 million people could be living on less than $2 a day in South Asia and sub-Saharan Africa (150 million people and 70 million people respectively), because of GDP losses alone. The effects at the mean of the distribution are smaller but still significant: up to an additional 50 million people living on less than $2 a day per year.

These projections are illustrated in Box 4.4 below. If growth proceeds faster than predicted, then the overall numbers of people living on below $2 per day will be less, while if it is slower, there will be more people pushed into poverty. These calculations should be viewed as indicative of the risks.

Child mortality projections There is also a well-studied relationship between reduced income and child mortality. Falling income and GDP levels from what could have been achieved in a world without climate change will slow the improvement of child (and adult) health in developing countries.90 Lower per capita expenditures are likely on goods that improve health, such as safe water, food and basic sanitation at both a public and private level. Previous econometric studies have reported a range of values for the income elasticity of infant and child mortality, the vast majority falling between –0.3 and –0.7. Taking an elasticity of 0.4, for example, implies that a 5% fall in GDP from what could have been achieved in a world without climate change will lead to a 2% increase in infant mortality.91 This analysis uses a value of -0.5 for the elasticity of the child mortality rate (deaths per 1,000 births) with respect to per capita income, the mid- point of this range.92

Using the illustrative output and growth scenarios generated by PAGE2002, climate change could cause an additional 40,000 (mean) to 165,000 (95th percentile) child deaths per year in South Asia and sub-Saharan Africa through GDP losses alone under the baseline-climate- change scenario.

Under the high-climate-change scenario, climate change could cause an additional 60,000 (mean) to 250,000 (95th percentile) child deaths per year by 2100 in South Asia and sub- Saharan Africa through GDP losses alone 2100, and compared with a world without climate change. These projections are illustrated in Box 4.5 below.

The above projections pick up the pure income effect of climate change on poverty and child mortality through its dampening effect on GDP, and do not include the millions of people that will be exposed to heat stress or malaria, or risk losing their jobs, assets and livelihoods through extreme weather events, for example, as discussed in Section 4.3. This analysis and projections are simply illustrative of possible risks associated with a loss in income through climate change.

4.6 Population movement and risk of conflict Greater resource scarcity, desertification, risks of droughts and floods, and rising sea levels could drive many millions of people to migrate – a last-resort adaptation for individuals, but one that could be very costly to them and the world. The impacts of climate change, coupled with population growth in developing countries, will exert significant pressure for cross-border and internal population movement. There is already evidence of the pressure that an adverse climate can impose for migration. Approximately 7 million people migrated in order to obtain relief food out of the 80 million considered to be semi-starving in sub-Saharan Africa primarily due to environmental factors.93

Millions of people could be compelled to move between countries and regions, to seek new sources of water and food if these fall below critical thresholds. Rising sea levels may force others to move out of low-lying coastal zones. For example, if sea levels rise by 1 metre (a possible scenario by the end of the century, Chapter 3) and no dyke enforcement measures are taken, more than one-fifth of Bangladesh may be under water for example.94 And atolls and small islands are at particular risk of displacement with the added danger of complete abandonment. As one indication of this, the government of Tuvalu have already begun negotiating migration rights to New Zealand in the event of serious climate change impacts.95

The total number of people at risk of displacement or migration in developing countries is very large. This ranges from the millions of people at risk of malnutrition and lack of clean water to those currently living in flood plains. Worldwide, nearly 200 million people today live in coastal flood zones that are at risk; in South Asia alone, the number exceeds 60 million people.96 In addition, there are potentially between 30 to 200 million people at risk of hunger with temperature rises of 2 to 3°C – rising to 250 to 550 million people with a 3°C warming;97 and between 0.7 to 4.4 billion people who will experience growing water shortages with a temperature rise of 2°C,98 as discussed in Chapter 3.

The exact number of people who will actually be displaced or forced to migrate will depend on the level of investment, planning and resources at a government"s disposal to defend these areas or provide access to public services and food aid. The Thames Barrier, for example, protects large parts of London. In Shanghai and Tokyo, flood defences and pumped drainage prevent flooding of areas lying below normal tides.

Protection is expensive, however, particularly relative to income levels in developing countries. A project to construct 8,000 kilometres of river dykes in Bangladesh – a country with a GNI of $61 billion – is costing $10 billion. These high costs will discourage governments from investing. Defensive investments must be made early to be effective, but they may be politically unpopular if they would divert large amounts of money from programmes with more immediate impact such as infrastructure, health and education.

Drought and other climate-related shocks may spark conflict and violence, as they have done already in many parts of Africa. The effects of climate change – particularly when coupled with rapid population growth, and existing economic, political, ethnic or religious tensions – could be a contributory factor in both national and cross-border conflicts in some developing countries.

• Long-term climate deterioration (such as rising temperatures and sea levels) will exacerbate the competition for resources and may contribute to forced dislocation and migration that can generate destabilising pressures and tensions in neighbouring areas.

• Increased climate variability (such as periods of intense rain to prolonged dry periods) can result in adverse growth shocks and cause higher risks of conflict as work opportunities are reduced, making recruitment into rebel groups much easier. Support for this relationship has been provided by empirical work in Africa, using rainfall shocks as an instrument for growth shocks.99

Adverse climatic conditions already make societies more prone to violence and conflict across the developing world, both internally and cross-border. Long periods of drought in the 1970s and 1980s in Sudan"s Northern Darfur State, for example, resulted in deep, widespread poverty and, along with many other factors such as a breakdown in methods of coping with drought, has been identified by some studies as a contributor to the current crisis there.100

Whilst climate change can contribute to the risk of conflict, however, it is very unlikely to be the single driving factor. Empirical evidence shows that a changing and hostile climate has resulted in tension and conflict in some countries but not others. The risk of climate change sparking conflict is far greater if other factors such as poor governance and political instability, ethnic tensions and, in the case of declining water availability, high water interdependence are already present. In light of this, West Africa, the Nile Basin and Central Asia have been identified as regions potentially at risk of future tension and conflict. Box 4.6 indicates areas vulnerable to future tension and past conflicts where an adverse climate has played an important role.

Box 4.6 Future risks and past conflicts Future risks • West Africa: Whilst there is still much uncertainty surrounding the future changes in rainfall in this part of the world, the region is already exposed to declining average annual rainfall (ranging from 10% in the wet tropical zone to more than 30% in the Sahelian zone since the early 1970s) and falling discharge in major river systems of between 40 to 60% on average. Changes of this magnitude already give some indication of the magnitude of risks in the future given that we have only seen 0.7°C increase and 3°C or 4°C more could be on the way in the next 100 to 150 years. The implications of this are amplified by both the high water interdependence in the region – 17 countries share 25 transboundary watercourses – and plans by many of the countries to invest in large dams that will both increase water withdrawals and change natural water allocation patterns between riparian countries.101 The region faces a serious risk of water-related conflict in the future if cooperative mechanisms are not agreed.102

• The Nile: Ten countries share the Nile.103 While Egypt is water scarce and almost entirely dependent on water originating from the upstream Nile basin countries, approximately 70% of the Nile"s waters flow from the Ethiopian highlands. Climate change threatens an increase in competition for water in the region, compounded by rapid population growth that will increase demand for water. The population of the ten Nile countries is projected to increase from 280 million in 2000 to 860 million by 2050. A recent study by Strzepek et al (2001) found a propensity for lower Nile flows in 8 out of 8 climate scenarios, with impacts ranging from no change to a roughly 40% reduction in flows by 2025 to over 60% by 2050 in 3 of the flow scenarios.104 Regional cooperation will be critical to avoid future climate-driven conflict and tension in the region.

Past conflicts • National conflict: Drought in Mali in the 1970s and 1980s damaged the pastoral livelihoods of the semi-nomadic Tuareg. This resulted in many people having to seek refuge in camps or urban areas where they experienced social and economic marginalisation or migrated to other countries. On their return to Mali, these people faced unemployment and marginalisation which, coupled with the lack of social support networks for returning migrants, continuing drought and competition for resources between nomadic and settles peoples (among many other things), helped create the conditions for the "Second Tuareg Rebellion" in 1990. A similar scenario has played out in the Horn of Africa,105 and may now be replicating itself in northern Nigeria, where low rainfall combined with land-use pressures have reduced the productivity of grazing lands, and herders are responding by migrating southward into farm areas.106

Cross-border conflict: Following repeated droughts in the Senegal River Basin in the 1970s – 80s, the Senegal River Basin Development Authority was created by Mali, Mauritania and Senegal with the mandate of developing and implementing a major water infrastructure programme. Following the commissioning and completion of agreed dams, conflict erupted between Senegal and Mauritania when the river started to recede from adjacent floodplains.

The dispute and tension escalated with hundreds of Senegalese residents being killed in Mauritania and a curfew imposed by both Governments such that 75,000 Senegalese and 150,000 Mauritanians were repatriated by June 1989. Diplomatic relationships between the two countries were restored in 1992, but a virtual wall has effectively been erected along the river.107 Drought has also caused conflict between Ugandan and Kenyan pastoralists, and has led Ethiopian troops to move up north to stop the Somalis crossing the border in search of pasture and water for their livestock.108 Similarly, extreme weather events in 2000 that affected approximately 3 million people in Bangladesh resulted in migration and violence as tribal people in North India clashed with emigrating Bangladeshis.109

4.7 Implications of Climate Change on other Aspects of Development All development aspirations could be affected by climate change. Education and gender goals, for example, will be at risk to the effects of climate change, in turn further amplifying vulnerability to the impacts of climate change (as discussed in Box 4.7). Limited research has been undertaken on the impact of climate change to date on these important aspects of development. This merits much greater attention going forward.

Box 4.7 Impact of Climate change on Education and Gender Equality Education Climatic disasters can threaten educational infrastructure making it physically impossible for children to attend school. For example in 1998 Hurricane Mitch destroyed 25% of Honduras" schools.110 Education levels may also decline through climate-induced changes in income and health conditions. Schooling will become less affordable and accessible, especially for girls, as income, assets and employment opportunities are affected by climate change. Children will need to help more with household tasks or prematurely engage in paid employment leaving less time for schooling. Deteriorating health conditions will also affect both a child"s learning abilities and school attendance, and the supply of teachers. Children will be deprived of the long-term benefits of education and be more vulnerable to the effects of climate change. Better-educated farmers, for example, absorb new information quickly, use unfamiliar inputs, and are more willing to innovate. An additional year of education has been associated with an annual increase in farm output of between 2 to 5%.111

Gender equality Gender inequalities will likely worsen with climate change. Workloads and responsibilities such as collecting water, fuel and food will grow and become more time consuming in light of greater resource scarcity. This will allow less time for education or participation in market- based work. A particular burden will be imposed on those households that are short of labour, further exacerbated if the men migrate in times of extreme stress leaving women vulnerable to impoverishment, forced marriage, labour exploitation and trafficking.112 Women are "over- represented" in agriculture and the informal economy, sectors that will be hardest hit by climate change. This exposure is coupled with a low capacity to adapt given their unequal access to resources such as credit and transport. Women are also particularly vulnerable to the effects of natural disasters with women and children accounting for more than 75% of displaced persons following natural disasters.113

4.8 Conclusion The impacts of climate change will exacerbate poverty – in particular through its effects on health, income and future growth prospects. Equally, poverty makes developing countries more vulnerable to the impacts of climate change. This chapter has discussed some of the specific risks faced by developing countries. However it is the sum of the parts that creates perhaps the greatest concern. Poor households and governments may, for example, face falling food and water supplies that will increase poverty directly, while also facing greater health risks – for example, through malaria or as a result of extreme weather events. These impacts may be compounded if governments" have limited – or reduced – financial resources to manage these impacts, and to invest in building resilience against the future impacts of climate change. An important priority for future research will be to identify the type and scale of climate change impacts on developing countries and to understand more deeply the nature of these compounding, aggregated effects.

The threats posed by climate change increase the urgency of promoting growth and development today. This is key to reducing the vulnerability of developing countries to some of the now inevitable impacts of climate change, and enabling them to better manage these impacts. But adaptation can only mute the effects and there are limits to what it can achieve.

Unchecked, climate change could radically alter the prospects for growth and development in some of the poorest countries. This underlines the urgency of strong and early action to reduce greenhouse gas emissions. This is discussed further in part III of the report.

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Costs Of Climate Change In Developed Countries

Key Messages Climate change will have some positive effects for a few developed countries for moderate amounts of warming, but will become very damaging at the higher temperatures that threaten the world in the second half of this century. • In higher latitude regions, such as Canada, Russia and Scandinavia, climate change could bring net benefits up to 2 or 3°C through higher agricultural yields, lower winter mortality, lower heating requirements, and a potential boost to tourism. But these regions will also experience the most rapid rates of warming with serious consequences for biodiversity and local livelihoods.

• Developed countries in lower latitudes will be more vulnerable. Regions where water is already scarce will face serious difficulties and rising costs. Recent studies suggest a 2°C rise in global temperatures may lead to a 20% reduction in water availability and crop yields in southern Europe and a more erratic water supply in California, as the mountain snowpack melts by 25 – 40%.

• In the USA, one study predicts a mix of costs and benefits initially (± 1% GDP), but then declines in GDP even in the most optimistic scenarios once global temperatures exceed 3°C.

• The poorest will be the most vulnerable. People on lower incomes are more likely to live in poor- quality housing in higher-risk areas and have fewer financial resources to cope with climate change, including lack of comprehensive insurance cover.

The costs of extreme weather events, such as storms, floods, droughts, and heatwaves, will increase rapidly at higher temperatures, potentially counteracting some of the early benefits of climate change. Costs of extreme weather alone could reach 0.5 – 1% of world GDP by the middle of the century, and will keep rising as the world warms. • Damage from hurricanes and typhoons will increase substantially from even small increases in storm severity, because they scale as the cube of windspeed or more. A 5 – 10% increase in hurricane windspeed is predicted to approximately double annual damages, resulting in total losses of 0.13% of GDP each year on average in the USA alone.

• The costs of flooding in Europe are likely to increase, unless flood management is strengthened in line with the rising risk. In the UK, annual flood losses could increase from around 0.1% of GDP today to 0.2 – 0.4% of GDP once global temperature increases reach 3 to 4°C.

• Heatwaves like 2003 in Europe, when 35,000 people died and agricultural losses reached $15 billion, will be commonplace by the middle of the century.

At higher temperatures, developed economies face a growing risk of large-scale shocks. • Extreme weather events could affect trade and global financial markets through disruptions to communications and more volatile costs of insurance and capital.

• Major areas of the world could be devastated by the social and economic consequences of very high temperatures. As history shows, this could lead to large-scale and disruptive population movement and trigger regional conflict.

5.1 Introduction While the most serious impacts of climate change will fall on the poorest countries, the developed world will be far from immune. On the whole, developed countries will be less vulnerable to climate change because:1

• A smaller proportion of their economy is in sectors such as agriculture that are most sensitive to climate.

• They are located in cooler higher latitudes and therefore further from critical temperature thresholds for humans and crops. Higher latitudes are expected to warm faster than lower latitudes, but this effect is small compared with the initial difference in temperatures between regions.

• Adaptive capacity is higher. Richer countries have more resources to invest in adaptation, more flexible economies, and more liquid financial markets to increase resilience to climate change.

Nevertheless, the advances in the science over the last few years have shown that there are now significant risks of temperatures much higher than the 2 or 3°C that were the focus of analytical discourse up to a few years ago. The potential damages with temperature increases of 4 to 5°C and higher are likely to be very severe for all countries, rich and poor.

This chapter examines the potential costs and opportunities of climate change in developed countries, with a particular focus on the consequences for wealth and output. The analysis suggests that, while there may be benefits in some sectors for 1 or 2°C of warming, climate change will have increasingly negative effects on developed countries as the world warms, even under the most optimistic assumptions. In particular, at higher temperatures (4 or 5°C), the impacts will become disproportionately more damaging (Chapter 3). Extreme weather events (storms, floods, droughts and heatwaves) are likely to intensify in many cases. The risks of large-scale and abrupt impacts will increase significantly, such as melting/collapse of ice-sheets or shutdown of the thermohaline circulation (Gulf Stream). Large-scale shocks and financial contagion originating from poorer countries who are more vulnerable to climate change (Chapter 4) will also pose growing risks for rich countries, with increasing pressures for large- scale migration and political instability.

5.2 Impacts on wealth and output Climate change will have some positive effects for a few developed countries for moderate amounts of warming, but is likely to be very damaging for the much higher temperature increases that threaten the world in the second half of this century and beyond if emissions continue to grow. Climate change will influence economic output in the developed world via several different paths (Box 5.1), including the availability of commodities essential for economic growth, such as water, food and energy. While it will be possible to moderate increased costs through adaptation, this in itself will involve additional expenditure (Part V).

Water: Warming will have strong impacts on water availability in the developed world. Altered patterns of rainfall and snowmelt will affect supply through changes in runoff.2 Water availability will generally rise in higher latitude regions where rainfall becomes more intense. But regions with Mediterranean-like climates will have existing pressures on limited water resources exacerbated because of reduced rainfall and loss of snow/glacial meltwater. Population pressures and water-intensive activities, such as irrigation, already strain the water supplies in many of the regions expected to see falling supplies. Based on recent studies:

• In Southern Europe, summer water availability may fall by 20 – 30% due to warming of 2°C globally and 40 – 50% for 4°C.3

• The West Coast of the USA is likely to experience more erratic water supply as mountain snowpack decreases by 25 – 40% for a 2°C increase in global temperatures and 70 – 90% for 4°C.4 The snow will melt several weeks earlier in the spring, but the supply will eventually diminish as glaciers disappear later in the century.

• In Australia (the world"s driest continent) winter rainfall in the southwest and southeast is likely to decrease significantly, as storm tracks shift polewards and away from the continent itself. River flows in New South Wales, including those supplying Sydney, have been predicted to drop by 15% for a 1 – 2°C rise in temperature.5

Where Y is the output of the economy in year t and is a function of capital, K, labour, L, and environmental quality, E, which together are the factors of production. In this way, environmental quality is a (natural) capital asset that provides a flow of services on which output depends.

If the net impacts of climate change are negative, then environmental quality E is reduced. This will reduce the output obtainable with a given supply of capital and labour, because output is jointly dependent on all three factors of production. In practice, either the productivity of capital and labour is directly reduced, or a portion of the output produced in a given year is destroyed that same year by climate change, for example by an extreme weather event. The opposite of this story is true if climate change brings with it net benefits, thereby increasing environmental quality.

Adaptation to climate change will be an important economic option (Part V). Adaptation will reduce losses in E and/or enhance gains in E, but it too comes at a cost relative to a world without climate change. In this case, the opportunity cost of adaptation is lost consumption or investment diverted away from adding to K.

Food: While agriculture is only a small component of GDP in developed countries (1 – 2% in the USA, for example), it is highly sensitive to climate change and could contribute substantially to economy-wide changes in growth.6 In higher latitudes, such as Canada, Russia and Northern Europe, rising temperatures may initially increase production of some crops – but only if the carbon fertilisation effect is strong (still a key area of uncertainty; further details in Chapter 3) (Figure 5.1).7 In these regions, any benefits are likely to be short-lived, as conditions begin to exceed the tolerance threshold for crops at higher temperatures. In many lower latitude regions, such as Southern Europe, Western USA, and Western Australia, increasing water shortages in regions where water is already scarce are likely to limit the carbon fertilisation effect and lead to substantial declines in crop yields. This north-south disparity in impacts was observed during the 2003 heatwave when crop yields in southern Europe dropped by 25% while they increased in northern Europe (25% in Ireland and 5% in Scandinavia).8

Energy: In higher latitude regions, climate change will reduce heating demands, while increasing summer cooling demands; the latter effect seems smaller in most cases (Table 5.1).9 In lower latitude regions, overall energy use is expected to increase, as incremental air-conditioning demands in the summer outstrip the reduction in heating demands in the winter. In Italy, winter energy use is predicted to fall by 20% for a warming of 3°C globally, while summer energy use rises by 30%.10 Climate change could also disrupt energy production. During the 2003 heat wave in Europe, for example, energy production in France"s nuclear power stations fell because the river water was too hot to cool the power stations adequately. Similarly, at the height of the 2002 drought, Queensland"s power stations had to reduce output considerably. In California, hydropower generation is predicted to fall by 30% for a warming of 4°C globally as storage lakes deplete.11

The distribution of impacts is likely to follow a strong north-south gradient – with regions such as Canada, Russia and Scandinavia experiencing some net benefits from moderate levels of warming, while low latitude regions will be more vulnerable. At higher temperatures, the risks become severe for all regions of the developed world. Climate change will have widespread consequences across the developed world (major impacts set out in Box 5.2). The impacts will become more damaging from north to south. For example, in higher latitudes, where winter death rates are relatively high, more people are likely to be saved from cold-related death than will die from the heat in the summer.12 In lower latitude regions, summer deaths could outstrip declines in winter deaths, leading to an overall increase in mortality.13 Similarly, tourism may shift northwards, as cooler regions enjoy warmer summers, while warmer regions like southern Europe suffer increased heat wave frequency and reduce water availability. One study projected that Canada and Russia would both see a 30% increase in tourists with only 1°C of warming.14 On the other hand, mountain regions such as the Alps or the Rockies that rely on snow for winter recreation (skiing) may experience significant declines in income. Australia"s $32 billion tourism industry will suffer from almost complete bleaching of the Great Barrier Reef.15

This broad distribution of impacts across many sectors might stimulate a broad northward shift in economic activity and population in regions such as the North America or Europe, as southern regions begin to suffer disproportionate increases in risks to human health and extreme events, coupled with loss of competitiveness in agriculture and forestry, reduced water availability and rising energy costs.16 There could be additional knock-on consequences for long-run growth, as changes in economic output have knock-on effects on growth and investment, capital stock, and labour (more detail in Box 5.2 for the USA and in Chapter 6 more generally).

Arctic regions will not follow this general north-south trend. Warming will occur most rapidly here – average temperatures have already risen twice as fast as in other parts of the world in recent decades.17 For example, in Alaska and western Canada, winter temperatures have already increased by as much as 3 – 4°C in the past 50 years. Over the past 30 years, average sea ice extent has declined by 8% or nearly 1 million Km2, an area larger than all of Norway, Sweden and Denmark combined, and the melting trend is accelerating. Over half of all the ice could have disappeared by 2100. Loss of even a small fraction of sea ice will have devastating consequences for polar bears, seals and walrus, as well as for the livelihoods of Inuits and others who rely on these animals for food. Shrinking arctic tundra will also threaten grazing animals, such as Caribou and Reindeer, and breeding habitats for millions of migratory bird species.

Box 5.2 Summary of regional impacts of climate change USA • Climate change impacts in the USA will be unevenly distributed, with potential short-term benefits in the North and extensive damage possible in the South. In the short to medium term, the most costly impacts are expected from coastal flooding and extreme events. More powerful hurricanes raise risks along the eastern seaboard and Gulf of Mexico. Defensive investment could be substantial.

• Reduced snowfall and shorter winters will change snowmelt patterns – affecting water supply both along the Pacific coast and California and the farmlands of the Mississippi basin whose western tributaries are fed by snow melt.

• Impacts on overall agricultural yields should be moderate (or even positive with a strong carbon fertilisation effect) up to around 2 – 3ºC given adaptation to shifting crop varieties and planting times. But this depends on sufficient irrigation water particularly in the southeast and Southern Great Plains. Farm production in general is expected to shift northwards. Above 3ºC, total output could fall by 5 – 20% even with effective adaptation because of summer drought and high temperatures.

• The north could benefit from lower energy bills and fewer cold-related deaths as winter temperatures rise.

The south will see rising summer energy use for air-conditioning and refrigeration and more heat-related deaths. This rebalance of economic activity could also induce a northward population shift.

Canada • Canada has large areas of permafrost, forest and tundra. Melting permafrost raises the cost of protecting infrastructure and oil and gas installations from summer subsidence.

• Reduced sea-ice cover and shorter winters should increase the summer Arctic navigation period offering improved access to oil, gas and mineral resources and to isolated communities.

• But warmer summers and smaller ice packs will make life difficult for the polar bear, seal and other Arctic mammals and fish on which indigenous people depend.

• A warmer climate and carbon fertilisation could lengthen summer growing seasons and increase agricultural productivity. But thinner winter snow cover risks making winter wheat crops vulnerable.

UK • Infrastructure damage from flooding and storms is expected to increase substantially, especially in coastal regions, although effective flood management policies are likely to keep damage in check.

• Water availability will be increasingly constrained, as runoff in summer declines, particularly in the South East where population density is increasing. Serious droughts will occur more regularly.

• Milder winters will reduce cold-related mortality rates and energy demand for heating, while heatwaves will increase heat-related mortality. Cities will become more uncomfortable in summer.

• Agricultural productivity may initially increase because of longer growing seasons and the carbon fertilisation effect but this depends on adequate water and requires changing crops and sowing times.

Mainland Europe • Europe has large climatic variations from the Baltic to the Mediterranean and the Atlantic to the Black Sea and will be affected in a diverse fashion by climate change. The Mediterranean will see rising water stress, heat waves and forest fires. Spain, Portugal and Italy are likely to be worst affected. This could lead to a general northward shift in summer tourism, agriculture and ecosystems.

• Northern Europe could experience rising crop yields (with adaptation) and falling energy use for winter heating. But warmer summers will raise demand for air conditioning. Melting Alpine snow waters and more extreme rainfall patterns could lead to more frequent flooding in major river basins such as the Danube, Rhine and Rhone. Winter tourism will be severely affected.

• Many coastal countries across Europe are also vulnerable to rising sea levels: the Netherlands, where 70% of the population would be threatened by a 1-m sea level rise, is most at risk.

Russia • A vast swathe of northern Russia is permafrost, apart from a short, hot summer when the surface melts to form marshy lakes. Rising temperatures will push the permafrost boundary further north and deepen the surface melt. This has big implications for future oil, gas and other investment projects. De-stabilised, shifting permafrost conditions release greenhouse gases and could lead to flooding, but also require more expensive underpinning of buildings, refineries and other infrastructure such as the Baikal Amur railway and the planned East Siberia-Pacific export oil pipeline.

• Melting of the Arctic ice cap will prolong both the northern sea and Siberian river navigation seasons but could lead to more extreme weather patterns. At higher global temperatures there is a possibility that Arctic warming could be reversed if the Gulf Stream weakens before it reaches the Barents Sea.

• Agriculture, and tree growth in the vast Siberian pine forests, should benefit from a longer, warmer growing season and the carbon fertilisation effect. But the most fertile black earth regions of Southern Russia and Ukraine could suffer from increased drought.

• Warmer winters should reduce domestic heating costs and free energy for export. But higher summer temperatures will raise air conditioning energy use.

Japan • Japan consists of a long chain of narrow, mountainous islands on a seismic fault line, naturally subject to large climatic variations from north to south. Densely urbanised and heavily industrialised, Japan"s topography, lack of raw materials, and heavy dependence on international trade, ensure that most people are concentrated in highly industrialised port cities.

• Climate change will exacerbate Japan"s existing vulnerability to typhoons and coastal storms. Tokyo extends over a flat coastal plain, vulnerable both to typhoons and rising sea levels. Most other major cities are also heavily industrialised ports, with many factories, refineries, gas liquefaction and chemical plants, steel mills, shipyards, oil storage tanks and other vulnerable infrastructure.

• Agriculture, especially rice cultivation, is not significant economically but has strong cultural importance.

Higher temperatures will make rice more difficult to grow in the south. Fish are another key part of a national cuisine. Fish are vulnerable to rising ocean temperatures and increased acidity.

• Major cities will be increasingly affected by the urban heat island effect. Over 40% of summer power generation is consumed by air conditioning. Rising temperatures will make a fast ageing population more vulnerable both to heat and the spread of infectious diseases such as malaria and dengue fever.

Australia • Australia, as the world"s driest continent, is particularly vulnerable to the impact of rising sea temperatures on the major Pacific and Indian Ocean currents. These determine both overall rainfall patterns and unpredictable year-to-year variations.

• At the same time the east coast – home to over 70% of the population and location for most major cities – has suffered longer droughts and declining rainfall. The 2002 drought cut farm output by 30% and shaved 1.6% off GDP. Water supply to big cities will become more difficult – Melbourne"s could fall by 7 – 35% with only 2°C of warming. At the same time, water flow in the Murray-Darling system, Australia"s bread basket, could fall by one quarter18 .

• Drier and hotter summers threaten the survival of the Queensland rainforest. Warmer winters and reduced snowfall endanger the habitat of mountain top fauna and flora. Rising ocean temperatures threaten the future of Australia"s coral reefs and the $32 billion fishing and tourist industries. Over 60% of the Great Barrier Reef suffered coral bleaching in 2002, 10% of it permanent. Studies show ocean warming could be fatal to large tracts of reef within 40 years. Higher inland temperatures are likely to cause more bush fires.

• Tropical diseases are spreading southward. The dengue fever transmission zone could reach Brisbane and possibly Sy dney with 3°C of warming.

5.3 Key vulnerabilities The poorest in developed countries will be the most vulnerable to climate change. Low-income households will be disproportionately affected by increases in extreme weather events.19

• Those on lower incomes often live in higher-risk areas, marginal lands,20 and poor quality housing. In the UK, the Environment Agency found that the most deprived 10% of the population were eight times more likely to be living in the coastal floodplain than those from the least deprived 10%.21

• Lower-income groups will typically have fewer financial resources to cope with climate change, including lack of comprehensive insurance cover. In New Orleans, disproportionately more people (22%) were below the poverty line in areas flooded by Hurricane Katrina than in non-flooded areas (15%) (Box 5.4a). More than half the people in flooded areas did not own a car compared with one-third in non-flooded areas.22

• Residents in deprived areas are likely to be less aware and worse prepared for an extreme weather event like a flood. The health impacts will be more severe for those already characterised by poor health. Across Europe, a large majority of the 35,000 people who died during the 2003 heatwave were the elderly and the sick (Box 5.4b). The most deprived proportion of the population are more likely to be employed in outdoor labour and therefore have little relief from the heat at work.