Climate change is a powerful issue in the world that is likely to have significant impacts on economies and markets in the future. The effects of climate change are severe, and governments need to have strong mitigation strategies to minimize their impact. The economic problems of climate change are complicated and will need long-term global cooperation to solve them (Gilding 30).
Current studies from the Intergovernmental Panel on Climate Change reveal that the effect of climate change will inflict costs that rise as worldwide temperatures increases. Carbon dioxide is the major source of greenhouse gases, and its emission is accelerated by growth in gross domestic product per person and increases in the populace. Developing countries such as India play a significant role in greenhouse emissions.
The Kyoto Protocol is a global system used by industrial nations to minimize greenhouse gases, which are a major cause of climate change (Gilding 33). Matters of competitiveness and other economic aspects have emerged in nations that have begun to execute the Kyoto Protocol. Businesses in these nations have requested their governments to reduce competitive demands through bills such as border taxes. Through taxing products from nations that do not inflict a carbon dioxide cap, businesses are compensated for the expenses caused by climate change bills.
As global warming intensifies, the universal pattern of comparative advantage will change. This will propel structural modifications within economies, at the local, as well as the international level (Gilding 39). There will be changes in global trade, in resources, and in the cost of goods and services. The macroeconomic impacts of climate change will extend irregularly across different regions. Undeveloped nations will be the first to experience the effect of climate change due to their overreliance on farming and the restricted capability to adapt. The water and health structures in poor nations will be threatened by the occurrence of natural disasters such as floods. Developed nations may be struck by spillovers from climate change in undeveloped nations.
Powerful economic strategies will be required to enable nations to adjust to climate change. Nations with more resources, powerful monetary placement, and well-founded financial markets are better placed to overcome the adverse effects of climate change. Nations that are vulnerable to extreme weather conditions are required to develop policies for controlling threats, such policies include the construction of reserves (Gilding 42). International collaboration in giving financial advice of weather-related threats will help poor nations adjust effectively to the impacts of climate change.
Managing the causes and impacts of climate change in the future at the least cost will need a combined effort of higher and upcoming economies. Climate change can be tackled without inflicting intense damages on the international economy or on specific nations. The economic effects of climate change, such as increased inflation rates, can be solved through strategies such as carbon pricing.
Carbon pricing policies should aim at creating a universal price for emissions (Gilding 50). This will enable developing nations to minimize emissions at lower costs than developed economies. For instance, if India has resources equivalent to those in Europe, India will have the capacity to reduce emissions significantly by minimizing the use of fossil fuels and adopting renewable sources of energy (Gilding 40). Moreover, nations can incorporate economic and financial strategies such as those in the international cap and trade system, which can raise exchange rates in beneficiary nations.
Gilding, Paul. The Great Disruption: How the Climate Crisis Will Transform the Global Economy. UK: A & C Black, 2012. Print.