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GLOBE-Net Special Feature

A Primer on Climate Change and Carbon Trading

What are the likely impacts of climate change?

The full effects of climate change are uncertain, as it is difficult to predict the level of temperature increase that will actually occur and the impacts that these changes will have on complex natural systems. At the lower level of projected temperature increases, impacts may be minimal, while at the higher end, catastrophic changes could occur that affect all human life. The IPCC notes that although a slight increase in temperature may be beneficial to some regions, the net impacts of climate change are likely to be negative for most areas.

Through melting of Arctic sea ice and continued retreat of glaciers around the world, global mean sea levels are projected to rise by between 9 and 88 centimetres by 2100. Many coastal areas and low-lying island states would be inundated with water, making areas uninhabitable or vulnerable to extreme weather. Coastal erosion, seawater intrusion into groundwater, and ecosystem changes are also predicted. Large-scale desertification could make much of the world's agricultural land unproductive and uninhabitable. As many as 200 million people may be displaced by rising sea levels, flooding, and drought.

Melting of the Arctic may also free up a polar transportation route that is currently covered in thick sea ice, making the Northwest Passage a viable shipping route for up to 120 days compared to 20-30 days currently, predicts the ACIA. Melting of permafrost and a northward expansion of woodlands will have an effect on the ecosystem in Canada’s North, threatening species such as polar bears and caribou that depend on current climate conditions.

Evidence also points to an increase in pests and human diseases with a rise in temperature, though the extent of this has not yet been agreed upon by scientists. The pine beetle infestation in Western Canada is one example of the possible effects of climate change, as warmer than usual winters have allowed the non-native species to survive, damaging an estimated 10 million hectares of forest worth hundreds of millions of dollars and threatening the livelihood of at least 25,000 families.

Agricultural productivity in temperate zones may actually improve with small increases in temperature, while larger increases could threaten crops. Biodiversity has already been impacted in many areas as species migrate north to maintain their ideal climate, and birds and flowers respond to spring-type weather earlier in the year. Marine fisheries may experience positive and negative changes, with possible redistribution of species - more research on this subject is expected with the next IPCC Assessment.

An increase in extreme weather events, such as hurricanes, droughts, and fire has also been projected. Though a concrete link has yet to be established, scientists have shown that an increase in sea surface temperatures coincides with an increase in the number of intense hurricanes in the Atlantic. More volatile weather patterns are expected in most areas. Many insurance companies have responded by making climate change a major strategy consideration, offering products that encourage emissions reductions and mitigations strategies to limit losses. Leading companies such as Swiss Re consider climate change to be one of the most pressing business issues of this century.

In terms of predicting the economic impacts of these global changes, there is again a great deal of uncertainty. Some models predict losses in the GDP of developing nations of hundreds of billions of dollars per year by as early as 2010. A comprehensive economic review by former World Bank Chief Economist Sir Nicholas Stern estimates that climate change could cost the world economy 5 percent of its GDP, or around $3 trillion per year, equivalent to economic collapses such as the Great Depression; if wider impacts are taken into account, the projection leaps to 20 percent of world GDP, enough to cripple the global economy.

In general, the long-term economic impacts are very difficult to quantify, but certainly worst-case scenarios projected in climate models would have catastrophic effects on the livelihoods of billions of people worldwide, with corresponding volatility in the global economy. From a risk management perspective, many insurance companies are taking the position that the large-scale effects of climate change are simply too enormous to ignore.