finance

South America to incur heavy costs of climate impacts 

A busy train station in Sao Paulo, Brazil. Reuters / Amanda Perobelli.

By Anders Lorenzen

The credit ratings agency Moody’s has warned that climate impacts in South America could cost the continent nearly a fifth of its gross domestic product (GDP) by the end of this century unless new policies are implemented to curb the impacts of climate change. This is according to its analytics report published this week.

The report analyses three possible scenarios for the continent. These involve extreme weather events, infrastructure damage and poorer health, as well as the costs of policy interventions to reduce climate change’s impacts.

A nightmare scenario

Moody’s warned that if no new policy action is taken, they predict a steady decline in GDP – losing 10% by 2075, and ending this century 16% down as the region would lose production capacity with losses mounting at increasing rates. The report refers to this scenario as a ‘nightmare scenario’. The report stated: ‘South American countries that would be more affected by climate change are the main fossil fuel producers and consumers: Venezuela, Colombia, Brazil and Mexico’.

Under all three scenarios, Moody’s analysed how the continent’s economic output would endure losses;- immediate policy actions targeting zero emissions by 2050, policies delayed until 2030 but then picking up pace, and no new climate policies enacted. 

Not surprisingly the first scenario of early policy intervention is the one that would incur the least losses. Under this scenario, Moody’s predicts higher inflation for the first 50 years with output losses falling below 4.5% and levelling down to 3.5% by 2100. 

In a late policy scenario, Moody’s sees output sinking more than 6% lower before recovering to a loss of 5% by 2080. Between 2030 and 2060 output losses would accelerate as decarbonisation advances with much higher inflation from more intensive prices and tariffs.

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