Global Warming Could Trigger Economic Meltdown

Climate change triggered by global warming could cause stagnation, slow economic growth, and rising prices all over the world, according to a recent report by Morgan Stanley. In other words, climate change has become serious enough to make a dent in the world economy.

The report says South Korea is one of the most vulnerable countries in the world to environmental damage. Elga Bartsch, a Europe Research Center economist at Morgan Stanley, an investment bank, said in a report “Climate Change Economics 101” released on Tuesday, “Climate change is highly likely to have an impact on the global economy at a comparable level to the collapse of communism and the Internet revolution.”

Climate Change Affects the Economy-

The report pointed out that concerns over climate change could fuel global protectionism.

It said that if the major developed countries strengthen their environmental regulations to curb climate change, developing countries and other developed countries might have difficulties in exporting their goods. Then these countries would raise trade barriers to protect their own industries, leading to price hikes due to constrained global trade. In the process, reduced production from each country could trigger stagflation, a condition characterized by price hikes and slow economic growth.

Developing countries are more likely to suffer from stagflation since natural disasters and diseases caused by climate change tend to strike developing countries with poor finances harder.

Morgan Stanley’s report predicted that climate change will greatly impact the global financial market. It expects that funds investing massively in technologies for climate change adaptation will lead the market.

The report said that currencies unable to adapt to climate change will also suffer in the financial market.

It also emphasized that the resources affected most by the changes are not air but the “quality and quantity of water.”

Developing Countries More Vulnerable to Climate Change-

Morgan Stanley conducted a survey of 25 countries--10 developed countries including the U.S. and Japan and 15 developing countries including Korea and China--on 76 items such as the remaining amount of natural resources, the level of contamination from past and present, environmental policies, the ability to improve the environment on the ESI or Environmental Sustainability Index, and measured greenhouse gas emissions.

In the ESI survey, South Korea is considered the most vulnerable to natural disasters and disease outbreaks, given its geographical location next to the world’s factory, China, and dense population, which increases the potential for environmental disaster.

The report, however, explained that Korea is unlikely to be hit in reality because it has a better capability to cope with climate changes, like public health management and preventive measures against pollution, than Pakistan, China, India, and South Africa.

Following Korea, Pakistan, China, India, South Africa were also listed as vulnerable to environmental disasters due to climate change in order.

Ukraine is the most vulnerable to the impact caused by greenhouse gas emission, followed by Russia, Saudi Arabia, and Iran. These developing countries with abundant natural resources like oil are vulnerable to climate changes due to the volatility of prices of natural resources and fewer energy efficient industries.

Europe and Japan Likely to Seize Opportunities-

According to the investment bank’s report, based on the combination of the ESI index and greenhouse gas emissions, Ukraine, Saudi Arabia, Russia, China, and Iran are the most vulnerable. Developing countries with plentiful natural resources experience rapid industrialization that involves natural resource development and pollution, creating high risks of natural disasters and disease outbreaks related to climate change.

The U.S. and Australia, which are rich with natural resources, Poland, and Korea (adjacent to the severely polluted Russia and China) are expected to suffer from economic setbacks to some extent since they are not free from the impact of climate change.

European countries like France, Germany, Spain, Italy, and Japan are expected to benefit from climate change. These countries have excellent R&D in environment-related technologies and are less likely to be exposed to environmental problems. They will not only be able to sell technologies, but also take the lead in a global market that will be influenced by climate change.