Friday, December 26, 2008

Latin America and global warming (II)

A recent report by the United States Geological services, published by The Washington Post ( on December 25th ,indicate how severe the global warming problem is expected to be, toward the end of this century. It says for instance, that the global sea level, will rise by 4 feet , instead of the previously 1,5 feet estimated .Besides it states that previous research, might underestimated the real consequences of global warming, concerning climate shift. What is the best strategy for less developed countries?.
Poor countries should implement a trading scheme, for dealing with firms which contaminates the environment(asides of other instruments such tax incentives) . This scheme is like the microeconomics side of global warming ,and works as a secondary markets, which trade green bonds , issued by those firms which protect the environment, gaining a credit for it, because it has market value. As long as that bond get traded ,its value goes upward because those which contaminates want to buy it , making a sort of payment for the damage on the environment .
The microeconomics of this scheme, works on the basis that clean environment, has become a scarce good, which therefore has a price that market is willing to pay for. The more severe becomes the consequences of global warming, the more valuable those assets which set a price to such a consequences will be .-
1º C increase in temperatures ,is set to decrease growth rate in poor countries by
-1,09%,and up to -1,58% - 2,01%,considering a broader time span ,because of lagged response in productive sectors due to this temperatures changes .(NBER. June 2008 . WP 14132).-
The speed of adaptation make by itself another problem, because the effect of temperature shocks ,strength over time rather than diminish. There is little evidence, that poor countries adapt and eliminate the negative consequences of global warming, faster than rich countries do .Just to give a deeper insight ,1º C higher temperatures in poor countries is associated with 2,37% lower growth in agricultural product ,close to 50% of GDP in poor countries ,(0,34% in rich countries ,less than 10% in rich countries),and 2,44% in industry and a -3% drop in investment.
On the other side, higher temperatures has a direct effect on political instability, which in turn affect economic growth .This is so, because of expected riots, public demonstration and violence, due to the sharp change on productive conditions and therefore survive chances for populations segments, heavily dependent upon agricultural products. In fact, the real side consequence of 1º C higher, is a 1% falling in per capita income. Thus low speed of adaptation, and greater impact on income level on poor countries than rich countries make obvious what the best strategy is for overcoming the effect of global warming: Poor and Less developed countries , must have their own strategy to cope with global warming impact. .

Saturday, December 13, 2008

Latin America and global warming (I)

A recent World Bank report concerning global warming, assumes that Latin America countries have a very good chance to take the lead among the third world , to pursue a strong strategy to reduce its carbon dioxide emissions, actually 24% above world average .Even so, between 2005 and 2030, the expected carbon dioxide emission by Latin American countries, will be up by 33% above world average as well. What are the implications of these results? :
a.- This percentages , are a warning about the importance of working on a coordinated strategy to change the dependence from traditional against environment conservation, sources of energy . With such a huge reserve of natural resources, available for non traditional source of energy (gas, solar and wind energy ), Latin America has the key raw materials ,to move forward regarding those friendly environment, alternatives strategies.-

b.- It is worrisome that with huge world forest reserves (Brazil, Amazon),which consumes and therefore reduces dioxide of carbon emissions ,the pace of emission , is higher than the pace of reduction of those emissions. It follows that deforestation is taking place, at an unsustainable rate. Thus, the first component of such strategy ,might be to take control of the deforestation .-

c.- Solar and wind produced energies, should be massively implemented at local communities at first, to spread it out at larger cities later, wherever it is technically feasible . Tax incentives for producers on agricultural activities to works with these source of energy , and residents on urban areas ,and local development subsided programs ,based on the implementation of these source of energy ,should also be considered promptly .-

d.- A recent paper (Climate change and economic growth: Evidence form the last half a century ,NBER WP 14132,june 2008 by M. Dell ,B Jones and B. Olken),suggest three important conclusions:
Higher temperatures reduce economic growth in poor countries ,but it has little effect on rich ones.-
Higher temperatures appear to reduces growth rates in poor countries, rather than just the level output.
Higher temperatures have wide range effects in poor countries, reducing agricultural output, industrial output, investment and increasing political instability.
e.- Considering the conclusions mentioned above, the right strategy for Latin America countries, is no longer to wait for richer countries to take the lead on solutions about climate change, on the assumption that they have a higher share of problem to blame them about, because they will have less affected by it ,once it becomes critical.-

f.- Every Latin American citizen should also be part of a new friendly environment culture, just like Europeans have done for quite a while. Educational programs concerning the importance of protecting our own environment ,instead of waiting for other to protect theirs , will add up a better outcome in terms of controlling all kind of threats risky enough for the environment conservation .-