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Preparing for the Storm

Christian Lippitsch explores the myriad methods in which humanity can adapt to climate change. 

In late 2021, international broadcasters showcased a surprising variation of its media coverage of Scotland. Customarily, we might see footage depicting the scenic landscapes of the Highlands, or Scottish politicians commenting on the latest Brexit turmoil. But this year was different. At the end of October, international diplomats and protestors alike met in Glasgow for the next round of international climate negotiations, the 2021 Climate Change Conference: COP26. And, once again, commentators were likely to agree to disagree on the definition of substantial achievements and whether the summit’s own ecological footprint was worth promised emission reductions.

For as long as the fight against climate change has been on the international agenda, there have been economists referring to the process as “humanity’s biggest externality” – damage caused by individuals, industries and nations without paying for it. Achieving binding international commitment to forego short-term profits under the common goal of our future existence is the squaring of the circle that summits like COP26 put on their banner. Mitigation of climate change is an existential task and will remain so for generations to come. 

But the coin has a second side, one that is impossible to overlook. It does not require regularly produced long-term projections to understand the damage caused by climate change; just by refreshing your news feed in the morning you will be aware of the wildfires in California, continuing droughts in East Africa, a once-in-a-century flood in Germany. Rising temperature levels go hand in hand with rising weather fluctuations, manifesting itself in natural disasters. While human welfare is the product of high income levels and low risk, climate change poses the antithesis; falling wealth and rising volatility. Already today, the number of once-in-a-decade floods has gone up by 30% relative to the historic average, for heatwaves, the number is 280. Analysts predict that annual damages caused by these extreme weather events will amount to $400 billion in the developing world by 2030. When climate change mitigation is one side of the coin; then adaptation to climate change is the crucial second side.

You won’t always reap what you sow

A bitter irony of climate change is its link between cause and effect. For decades, industrialised countries have fuelled their prosperity engines with carbon dioxide, yet it is the Global South that is asked to pay the bill. The reasons why developing countries are disproportionately affected by climate change are rooted in their institutional capabilities, economic structure and geography. Whereas tight public budgets and resources limit the actions governments can undertake, their main vulnerability stems from sectoral labour allocation.

Consistent with patterns of structural transformation of countries’ sectoral composition, most developing countries remain highly agrarian. In some economies, up to almost 80% of people work on mostly small, family-run farms, feeding themselves and other parts of their country. On these, farmers use mostly natural inputs to produce natural outputs. The sector’s direct exposure to fluctuating temperature and precipitation levels may seem trivial, but certainly requires investigation in order to understand how agriculture is affected and what can be done about it.

As for the wellbeing of farmers themselves, their produce significantly depends on stable conditions, with every crop having its own individual optimal temperature. Experimental analysis demonstrates that reaching a temperature below the optimal creates relatively mild increases in yields. Go above this peak, however, and yields fall tremendously. Swapping a single day at 29 degrees for a day at 40 alone can reduce the average annual yield of corn by 7%. This highly non-linear effect accentuates the notion of current and projected losses at the hands of rising temperature levels.

This asymmetry in crop sensitivity further indicates the crucial nature of stable environmental conditions. We are living between two extremes. The rising frequency of heatwaves means more days will be spent above optimal crop temperatures, while heat stress can be deadly for livestock. Heavy rains can destroy infrastructure such as road networks which reduces essential market integration. At the other end of the spectrum, droughts destroy crops and let entire harvests fail. With the lack of alternative incomes, farmers are pushed to starvation when such natural disasters hit, while undersupplied local markets fail to feed the rest. On a macro scale, the close link between natural disasters and food imports is clear; on a micro scale, rural populations are increasingly reliant on public assistance to provide the next meal.

Smothering the externality

These losses have the potential to undo decades of rising welfare and poverty alleviation. But this is a potential scenario, not a given. For agriculture alone there are plenty of options to adapt to this new normal. While migration appears as an ultima ratio, farmers across the globe change their produce to more resilient crops at shifted planting dates, they apply soil conservation methods and invest in capital such as irrigation systems. The potential of this is immense. A meta-analysis by the IPCC found average yields of adapted crops to go up by between 7 and 15% for different climate and precipitation scenarios. Another summary study by the OECD finds effectiveness, that is reduced damage, for these adaptations in agriculture to range from 40 to 98%. Zooming in, examples of irrigation investments show reductions of drought-related damages up to 80%. 

Despite this potential, the long list of ways to adapt comes with another list of obstacles that prevent farmers from exploiting it. Ask farmers what stops them from adapting and their answers probably include insufficient information about weather, limited access to technology and technical support; and  an inability to raise enough investment credit. While this list is not exhaustive, it illustrates what the government’s role is in supporting the private fight against climate change and, once again, emphasises the meaning of functioning institutions.

A lot can be learned from existing programs that promote Climate Smart Agriculture i.e. a transformation of agriculture to jointly increase income and productivity, making the sector more resilient while reducing greenhouse gas emissions. Successful initiatives promote technology adoption through a combination of information about best-practice examples, education, and technical support to individuals and local social networks. To address increasing weather volatility, governments need to improve early warning systems and the dissemination of reliable weather information. This needs to be accompanied by investment in complementary infrastructure such road networks, energy grids and water supply.  On top of direct financial support, governments will need to tackle malfunctioning financial markets. This can be done, for instance, by establishing more secure property rights for land that can be used as collateral to obtain credit. Alongside improved access to credit, better functioning insurance markets would endorse products such as weather index insurance. This would enable farmers to invest in sustainable and resilient farming systems by providing them with the necessary financial resources and reduced risk.

Again, this list is not exhaustive. However, it shows the possible pathways for directed policies to address the impacts of climate change today and the future. This will not be cheap, and require vast sums of national budgets. Africa’s infrastructure alone has an annual financial need between $130-170 billion with an estimated investment gap of around 50-60%. Today, we stand at a decisive crossroads. One path will see billions of people in falling living conditions who will be deprived of their homes when climate change makes regions unbearable to live in. The other path, however, shows a chance to not only adapt to a new reality; but to see living standards on a rising trajectory through smart investments and rising productivity.

Governments of the Global South will not be able to carry this burden by themselves. So far, ambitious international commitments to mobilize money have not lived up to what was promised. The hope lies in summits like COP26. Supporting these countries is not a philanthropic deed, but a necessity for the global community. And to use, once again, the words of an economist, it will be the belated internalisation of humanity’s biggest externality. 

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