Sunday, March 30, 2008

Global warming may melt Indian economy

MUMBAI: India may be a long way from melting polar ice caps, but its economy will be among the worst affect on account of climate change. According to a report by Lehman Brothers India’s GDP would dip by 5% for every two degree temperature rise.

Speaking to ET, John Llewellyn Lehman Brothers global economist, said, climate changes are likely to effect India in a host of ways. Both India and Bangladesh would face problems because of rising sea levels. Agricultural productivity would also be affected as monsoons will be short with intense bursts. Water supply would also suffer because of lesser snowfall in the Himalayas, which provide water for 40% of the world’s population.

The effect on GDP will be non-linear. Initially, every 2 degree rise in temperature would result in a 3% dip in global GDP. The next 2 degrees would do even more damage to the economy. However for India the effects are likely to be much more harmful. For every 2 degree rise in temperature the effect on GDP is 5% and for the next 6 degrees it would be 15-16%. He feels that India may lag China and be amongst the last of the major emitters to enact policy that seriously bears down on greenhouse gas emissions. According to Mr Llewellyn, there is both a direct and indirect effect due to climate changes and this differs from sector to sector and country to country.

Incidentally the largest developers of clean development mechanism (CDM) projects are in China, while India hosts the largest number of these projects. According to Mr Llewellyn these projects represents revenue transfers for countries like India. India will continue to reap the benefit for the next 5-10 years. At present, the carbon emitters in Europe pay up to e20 a tonne for their emissions.

As per the Kyoto Protocol on global warming, countries will have to pay for high carbon emissions and can also trade with deficient countries. While, the developed world, led by USA and Europe are among the high polluters, India, China, along with most developing countries are among the deficient countries who can earn revenues from trading in these emissions.

However, the US is still not signed the protocol which means it has still not started paying for its emissions. In its latest report “The Business of Climate Change II’, a sequel to its earlier report on climate change, Lehman Brothers has said the the US, the European Union, Japan and Russia are estimated to have accounted jointly for nearly 70% of the build-up of fossil-fuel CO2 between 1850 and 2004.

The report points that there are arguments on who should foot the climate change bill. India and other developing countries argue that developed countries grew rich through a fossil-fuel burning economic model of growth, and that it would be inequitable to seek to prevent them from following a similar path. However, many developed countries (particularly US) are unlikely to agree to be the only ones to pay for future abatement.

They argue that future emissions, and thereby the future stock of atmospheric greenhouse gases, stand increasingly to be the result of today’s developing countries, especially China and India, and that these countries’ industrial production is growing fast not only for export but also to serve their domestic demand.

But Mr Mr Llewellyn, said that some sort of a system could be in place for the US 2009-10, which will have some indications on the US stand on the issue, largely on account of competitive pressures.


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