Presentation to the Jamaica Institution of Engineers Engineers Week Conference September 23, 2014

Transcription

1 Presentation to the Jamaica Institution of Engineers Engineers Week Conference September 23, 2014 The Effects of Climate Change on Economic Development in Jamaica I am delighted to join you in contemplating the theme for the day engineering change and within that theme to explore, even cursorily, the economic implications of climate change for Jamaica s development. In 2007, the UN Secretary General said that climate change poses at least as big a threat to the world as war. If this is true as the evidence is suggesting, the phenomenon is not something we can take for granted. The Inter-Governmental Panel on Climate Change (IPCC) has released a number of reports attesting to the reality of climate change and last year through the report Climate Change 2013: The Physical Science Basis the IPCC underlined the role of human intervention as the 1

2 dominant cause of observed warming since the mid-20th century. Our own regional and national climate scientists, such as Professors Anthony Chen and Michael Taylor have done groundbreaking work locally to point out that the scientific analysis of climate change is incontrovertible, that climate change is real, and that we must treat it as a critical variable in all our planning. Dr Michael Taylor in his inaugural professorial lecture earlier this year, Climate Matters stressed that for us in the Caribbean, there is an inextricable link between the climate and every facet of life. Taylor refers to us as climate sensitive people. In this one statement, he perhaps unknowingly challenges economists and engineers alike, to engineer the change for improvements both in living conditions and standards of living, as Jamaicans live with the reality of climate change. To underscore the climate sensitive nature of the economy, I highlight climate impacts on a few of our main sectors, namely agriculture, tourism and infrastructure. 2

3 Agriculture The impact of climate change on agriculture includes the following: Increased temperatures, which affect crop yield and heighten the risk of plant diseases Alternation between flood and drought causes a decline in food security and possibly an increase in the food import bill Heat stress can result in loss of livestock, lower reproduction rates and increase in parasitic diseases There is likely to be damage to fields and pasture lands Input costs are likely to increase with greater demand for water (for plant and livestock) Fisheries are likely to be negatively affected. The agriculture sector currently accounts for 6.7% of GDP, employs over 18.2% of the labour force, and has over 200,000 farmers, a third of whom are women. The sector is primarily rain-fed and is exposed to the ravages of climate and associated hazards, such as droughts, floods, storms, landslides and pests. We are currently in a period of drought and although the sector is responding positively to technological 3

4 developments (through the Agro Parks etc.), the impact of the drought is expected to result in a slowing of the rate of growth for the July September quarter. The drought has also contributed to shortages in vegetables and other short-term crops and has negatively impacted the prices of these. Between 2001 with Hurricane Michelle and 2012 with Hurricane Sandy, the agriculture sector has taken a beating from storm and related flood events. Cumulatively, the sector has suffered damage and losses amounting to $22 billion. Hurricanes Ivan in 2004 and Dean in 2007 were particularly devastating, resulting in damage and losses to the tune of $7.1 billion and $9.4 billion, respectively. These figures do not include or quantify the disruption to the livelihoods of farm families, contribution to inflation, the national debt burden, and impact on other economic parameters such as the foreign exchange costs of food imports. Hurricane Sandy in 2012 for example, destroyed some 66% of the banana crop, which saw exports declining to 76.6 tonnes in

5 (valued at US$62,000) from tonnes in 2012 (valued at US$120,000). Tourism Tourism is another highly climate sensitive sector, the attraction of which is heavily influenced by the quality of beaches and temperature. Currently, hotel and restaurants, a part of tourism, contributes 5.6% of GDP, employs 6.8% of the labour force and is one of the largest foreign exchange earners. The sector is however at great threat from climate change, recording losses totalling $1.8 billion since 2001, largely from the impact of hydro-meteorological events. There are a number of reasons for the sector's vulnerability, not the least of which are: sea level rise, beach erosion, storm surge and increase in sea surface temperature which impacts coral and other marine life. The generally fragile state of some ecosystems which are fundamental to the viability of the sun sea and sand model as well as eco-tourism are also being affected by climate change. Let me hasten to accept that there are a 5

6 number of other issues such as poor land use planning, deleterious fishing practices, land-based pollution, etc. which are pressuring the coastal resources. Worthy of particular note is the destruction of coral barrier reef and their protection services; this magnifies the threat of sea level rise to the integrity of beaches and the coastal eco-systems. Progressive loss of beach width has negative economic implications for tourism income and the projections are for this to continue and intensify with climate change. A study on the annual loss of consumer satisfaction associated with beach erosion suggests that, at current rates of erosion, Negril, MoBay and Ocho Rios, the three main tourism centres, could potentially lose US$19.2 million per year (over a ten-year period). With increased erosion due to reef degradation, such losses could increase to US$32.7 million/per annum. These numbers become starker when one considers that data on beach erosion provided by the National Environment and Planning Agency confirm ongoing beach 6

7 losses showing, for example, that between 2012 and 2013, among the 37 beaches monitored, 5 showed chronic erosion and 21, mild erosion. Tourism is also temperature sensitive, and we know that visitors are seeking the ideal temperature, thus with global warming intensifying, we could lose our competitive advantage. Such advantage could also be affected by increase in tropical diseases such as dengue, potential for heat stress and the associated high cost of cooling for hotels. The latter could potentially erode price competitiveness in an industry which already has a high import content. Taking all these things together, one UWI environmental economist projects that Jamaica could fail to meet its target for tourism visitors by It is otherwise estimated that the region's tourism revenues will fall by as much as US$900 million by 2050 because of the impacts of climate change. 7

8 Infrastructure As persons involved in the design and development of the built environment, the impact of climate change on the infrastructure sub sector is no doubt of interest to you. An assessment of the country s disaster risk profile undertaken by the IDB in 2009 indicated that there is approximately US$18.6 billion worth of assets exposed, most of which is in the coastal zone which generates approximately 90% of GDP and in which over 60% of the population resides. It stands to reason therefore, that with projections for increase in sea level rise, storm surge and extreme storms and floods events, climate change could have further deleterious effects on the country s infrastructure and thus derail its development aspirations. I use the word further because since 2001, infrastructure has been the most severely impacted by hydro-met events. The cost of such impacts amounts to over $54 billion and accounts for some 45% of total damage and losses. Disruptions in the infrastructure sector have a compounding effect on the overall 8

9 economy because of the central catalytic and enabling role of the transportation network (road, bridges), water & sewerage, electricity ports and airports. Natural disaster financing There was a time, when climate hazards were so infrequent that there was a Jamaican saying young bud no know storm. This saying no longer holds true. In fact, the occurrence of an average of one hydromet event (floods, droughts, storms) per year over the last 10 years along with climate projections of more intense, if less frequent extreme events, has underlined the necessity for the government to pay more serious attention to contingency planning and to mainstreaming risk planning. This of course has an economic cost; it means diverting resources from day-to-day needs to assist with the cost of hazard events. In this regard, since 2007, GOJ has spent approximately US$4 million annually under the Caribbean Catastrophe Risk Insurance Facility to purchase US$60 million worth of insurance coverage for 9

10 hurricanes. Jamaica has received no pay-outs to date because although we have been affected by several events since then, none has attained the required triggering point for us to benefit. Based on information from the Jamaica Survey of Living Conditions, less than one in 10 homeowners has home insurance. This is indicative of Jamaicans' low participation in insurance and other risk sharing ventures, and suggests a low level of risk transfer coverage (personal and sectoral) in place to deal with the impact of extreme events. This leaves the government, for the most part, as the insurer of last resort. Thus the GOJ after each event bears the brunt of financing for response, recovery and reconstruction. In this regard, GOJ is forced to assist householders, farmers and others to recover livelihood, replace property, and has to repair or replace damaged public social and economic infrastructure. This has often been done through budgetary readjustments, and increasing fiscal deficits and public debt. Hurricane Dean, Tropical Storm Gustav and Tropical Storm Nicole were all 10

11 instances in which the GOJ borrowed to assist the recovery process. In the most recent drought also, the GOJ has had to dedicate additional resources to the trucking of water. Other examples of the state picking up the slack include the payment of rehabilitation grants to households impacted by adverse weather, provision of fertilizers and planting materials to farmers and the recent completion and handing over of Hurricane Sandy housing units. This type of expenditure with negative implications for the budget is likely to increase given the projections associated with climate change. Ladies and gentlemen, I have only scratched the surface. I have not discussed the health implications of climate change and the associated costs, nor have I addressed housing or education; or water and sanitation. I have not talked about the potential increase in energy costs associated with the need for cooling in the face of increasing temperatures or the need for and cost of investments in renewables nor that of reforestation. More critically, I have not addressed the 11

12 need to retrofit or replace the ageing infrastructure to cope with the changing conditions. Need I say, all of these are critical to achieving Vision Notwithstanding the gaps, I hope I have established some of the key economic implications of climate change. Having done this, the question is what must the economist do to engineer change? Our role is one of influencing agenda setting, trade-offs, prioritization of action, and estimating the implications of inaction. We have to properly understand the issues as presented by the scientists; interrogate the issues for relevance; get the facts, including doing or facilitating research; interpret the facts; and recommend action, bearing in mind our development goals and the constraints of our context size, fiscal space and technical capacity. Critically, the economist has to quantify the issues and facilitate evidence-based decision making. Therefore, using the research of the climate scientists, environmentalists, engineers, planners and other professionals, the economist will 12

13 estimate the potential impact on geographic areas, communities, and sectors, and approximate costs for risk mitigation, resilience building, adaptation and contingency planning. For your part as engineers, you too have to be prepared to assist the country to find the best possible, most relevant, culturally appropriate and cost-effective measures to adapt to climate change. Your designs must incorporate resilience building; and use of low emission and technology-enabled options, all geared towards hardening the natural and built environments. We all need to make more effective use of the scientific evidence. At the PIOJ, for example, we have supported development of climate scenarios, both near and long term, and these are available to inform your work. We have been proactive and facilitated some multi-hazard risk mapping, facilitated change detection studies in specific geographic areas and collaborated on a number of economic and social studies which will provide useful input to every sphere of your work, which is ultimately people centred. Importantly, 13

14 as you seek to engineer change, please work with other professionals, within and across disciplines so that the solutions developed are proactive, responsive, comprehensive, and truly climate-resilient. If we all work together, we can engineer the future we want, our path will be sustainable and together, we can make Jamaica the place of choice to live, work, raise families and do business. Thank You. 14