By Ahmed Bayomi
Ahmed Bayomi is a researcher at think tank Egyptian Centre for Strategic Studie
Measuring the economic effects of climate change is of great importance to all countries.
It helps them determine the cost of rising temperature and carbon emissions, especially from fossil fuels, on development plans and the general economy.
This helps enhance countries’ proactive abilities to confront and adapt to these effects.
Egypt will be economically affected by climate change, especially when it comes to important sectors, such as tourism and agriculture.
This adds to other impacts on the population and water resources.
Measurement method
The economic repercussions of climate change are usually measured by determining its impact on market transactions and the GDP. If, for example, temperatures affect a specific crop on which a country’s economy depends, this may result in a GDP growth slowdown. Monetary non-market effects can be measured by impacts on human health and ecosystems. Although it is sometimes difficult to calculate this type of effect, it is done using discretionary methods.
Economists, such as Nordhaus (1977), Darge (1979), and Schelling (1992), sought to accurately determine the economic effects of climate change. They reached the conclusion that climate change has a negative external impact. Climate and the environment, in general, are non-priced goods, and thus it has been suggested that greenhouse gas emissions should be priced and taxed.
The effects of climate change have been linked to poverty, an obstacle for human development. Climate change is concerned primarily with three dimensions: concentrations of global warming in the atmosphere, mitigation policies, and adaptation policies. In this context, anti-poverty policies tended to shift the international focus from the adoption of mitigation policies to the application of more balanced policies that include mitigation and adaptation policies together in a manner that limits the negative effects on poverty around the world.
A large number of global economic reports and studies refer to the impact of climate change on macroeconomic indicators. One of those studies suggested that a global temperature increase of 2.5 degrees Celsius would make average people feel as if they had lost 1.3% of their income. Despite the lack of a theoretical basis for this result in economic models, it at least helps in understanding the nature of changes that may occur to economies due to climate change.
Local Repercussions
According to an Egyptian report prepared in co-operation with the United Nations in 2012 (the latest available), four negative changes will be caused by global warming on the Nile Basin, namely: temperature change according to the models that were used to measure the degree of evaporation in the High Dam Lake in Aswan, Nile flooding according to estimates prepared by the Coastal Research Institute, losses to agricultural production, housing units and roads at risk of flooding, and impact on tourism.
The results concluded that climate change will impact the flow of Nile waters, likely to decrease by about 10% by 2060 (this was before the construction of the Grand Ethiopian Renaissance Dam), and inundate parts of the Nile Delta. This will result in the loss of one-fifth of the farmland northern and eastern the delta.
It will also affect housing units and roads vulnerable to flooding, which was manifested in the last three years. There were unprecedented torrential rains in Egypt during 2019 and 2020. It is estimated that these floods will affect between 250,000 and 1 million housing units.
The value of these units will increase as people’s incomes increase, making the estimated cost range between 100 billion to 500 billion Egyptian pounds.
Agriculture is one of the sectors most affected by climate change. It is expected that climate change will negatively affect crops, which will lead to a significant increase in food prices. The decrease in employment in that sector will be inevitable, causing losses in the agricultural sector by 20 billion pounds, which will rise to 122 billion pounds by 2060. As for the air pollution caused by gas emissions, which increase deaths due to heat stress and breathing problems, the losses are estimated at about 24 billion pounds by 2060.
As for the tourism sector, climate change will cause damage to coral reefs and upset ecosystems. This will cause the tourism sector to lose about 19 billion pounds by 2030, which will rise to 85 billion pounds by 2060. Together with other losses that have not been exposed yet, these losses will reach 52 billion pounds in 2030 and 228 billion pounds in 2060, which represents approximately 3.9% of Egypt’s GDP.
This will make it challenging for Egypt to protect the economy, the environment and people. It also motivates it to formulate policies that address climate change.
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