ADB Calculates the Cost of Climate Change for Asia

By Asia Sentinal 18 October 2013

As many as 12 million people in 23 Asian cities are likely to be caught in the coils of climate change, at risk from rising sea levels, severe storms and intensified drought that could jeopardize US$864 billion in assets, according to a new report from the Asian Development Bank. Three major conurbations—the Pearl River Delta, Shanghai and the Kyoto-Osaka region in Japan—are particularly at risk from rising sea waters.

Climate change can be mitigated over the 40 years to 2050, however, according to the exhaustive report, titled Economics of Climate Change in East Asia, at an aggregate cost amounting to less than 0.3 percent annually of the region’s gross domestic product, for infrastructure, coastal protection and agriculture. Averaged over the period 2010-50 using a medium climate scenario, the cost of adaptation, ignoring cyclone damage and flooding, is $22.9 billion per year, with another $4.2 billion per year spent on coastal protection and $9.5 billion per year for modification of agriculture. Despite that cost, the cost of doing nothing is going to be worse, the report says.

The report was edited by ADB researchers Michael Westphal, Gordon Hughes and Jörn Brömmelhörster from massive amounts of data collected from China, Japan, South Korea and Mongolia.

Protecting against extreme weather and rising seas is only part of the solution for the region, which produces 30 percent of the world’s CO2 emissions. Instead, the countries must adopt a combined approach, pooling emissions targets to create a regional carbon market to reduce the concentration of CO2 in the atmosphere, which recently passed 400 parts per million, which is considered a red line for the planet’s well-being.

The analysis of adapting to climate change focuses on three key sectors: infrastructure to protect water resources and guard against flooding, shoring up coastal zones against sea-level rise, and agriculture.

The combination of sea-level rise and higher storm surges will inevitably lead to heavy losses, especially in China, where the losses encompass the submergence and or erosion of dryland areas, the disappearance of coastal wetlands and the forced migration of tens or hundreds of thousands of people. The disruption and loss of economic output caused by forced migration account for the major part of the damage associated with sea-level rise.

Even without climate change, coastal subsidence, partly caused by urban development and the extraction of groundwater, will require significant expenditures on coastal protection not just in China but in Indonesia, Singapore and other countries where cities have been built on floodplains.

The costs for infrastructure cover a wide range from energy networks to schools and housing, which must be protected against both flooding and increasingly severe tropical storms. The costs are expected to be highest for housing and roads, with an average cost of planned adaptation for roads equivalent to nearly 8 percent of total spending.

“It is critical to understand the details of local weather and climate and their impacts on infrastructure,” the authors write. “While climate uncertainty in the region is large, this is no excuse for inaction: There no guarantee that future climate uncertainty will diminish. As a prudent and low-cost first step, all countries should ensure that design standards and new assets fully reflect the current climate and weather variability.”

Up to 2050, the impact of changes in temperature and precipitation are expected to actually increase crop production in Japan and South Korea but to reduce it by up to 10 percent in China. Wheat is likely to be the most affected, with crops diminishing by as much as 24 percent in China in the worst-case scenario, although it is likely to increase in Japan, Korea and Mongolia. Crop prices in Mongolia are expected to soar by up to 40 percent.

Adapting to climate change will probably have to include investment in irrigation and R&D to increase crop yields or possibly the provision of consumer subsidies to compensate for soaring prices, which would cost less than $10 billion in 2050, provided expenditure for irritation and R&D are increased by $1 billion a year.

The encouraging thing is that several East Asian countries, particularly Japan, South Korea and China—which admittedly has enormous problems from both pollution and greenhouse emissions—are committed to green growth that minimizes pollution and environmental impact and is efficient in the use of natural resources and which have the potential to provide new sources of growth.

Japan, shaken to the core by the Fukushima earthquake and nuclear disaster that led to the closure of much of its nuclear industry, is committed to energy and environmental policy redesign all the way up to the prime minister’s office. The country expects to increase the share of renewables from 2 percent to 35-30 percent by 2030, reducing energy consumption by 20 percent and reforming the power supply system.

South Korea, like Japan an energy-deficient country, has raised the issue of climate change to the presidential level and has set policies to mitigate greenhouse gas emissions in building codes, transport, industry and afforestation, reducing the use of fossil fuels, increasing the use of renewables and expanding nuclear capacity. It hopes to develop green technologies to boost its share of the world market to 8 percent within five years. The government will promote the greening of existing industries and encourage the growth of green-oriented exports.

As the report says, “a different model of economic development is needed for East Asia. This needs to build upon opportunities for ‘green growth.’”