Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN)

Economics of Climate Change in Latin America and the Caribbean Summary 2009
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November 2009
United Nations (UN) - Economic Commission for Latin America and the Caribbean (ECLAC)


Climate change is without a doubt one of the greatest challenges facing humanity in the twenty-first century. The increase in greenhouse gases (GHGs), which is fundamentally linked to various anthropogenic activities, is causing changes to climates, such as gradual but steady increases in temperature, alterations in precipitation patterns, the reduction of the cryosphere (the world's ice masses and snow deposits), rising sea levels and changes in the intensity and frequency of extreme weather events (IPCC, 2007a). The consequences of climate change for economic activity, populations and ecosystems are without a doubt immense. They will also increase over the course of the century and in many cases be difficult to reverse. In this context, the size of the estimated economic costs of the impacts (including those associated with adaptation) and of mitigation suggest that climate change will play an essential part in determining the characteristics and options for economic development in this century. The countries of Latin America and the Caribbean will therefore have to tackle the twin challenges of adapting to new climate conditions and participating in several international mitigation strategies. They will also have to ensure their economies are on the road towards sustainable development. The magnitude of the task requires the construction of a long-term strategy backed by sound science and a broad social consensus.

The economic analysis of climate change can provide essential input for identifying and drawing up strategies to help move countries closer towards solving the problems associated with climate change and towards attaining sustainable development. Such analysis is a complex undertaking, however natural, economic, social, technological, environmental and energy processes are involved, as are certain aspects of international politics. It deals with very long timeframes and has to take into account planet-wide natural phenomena, non-linear impacts, specific limits, asymmetric causes and consequences, intense feedback processes, high levels of uncertainty and complex risk management calculations, as well as ethical considerations. In this regard, it is important to acknowledge two fundamental aspects of the economic analysis of climate change:
  • The uncertainty margins are large because the analysis includes the complex process of assessing the risks associated with weather events that are sometimes catastrophic. The projections are thus merely scenarios that have a certain probability of occurring; they are not specific prognoses. There is an ethical component to the economic analysis of climate change inasmuch as it refers to the well-being of future generations and touches on matters that have no explicit market value, such as biodiversity and human life.
  • Designing proposals and strategies to tackle climate-change problems should not be seen as countering the pursuit of economic growth. On the contrary, it is failing to address the issue that will have a negative impact on economic growth. Tackling the problems brought about by climate change means redirecting the economy towards low-carbon growth that is compatible with sustainable development.

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