The effects of climate change are no longer a myth.

Beyond Economics  What one doesn't realise that the cost will be borne by coming generations, argues ETIG's Krishna Kant THREE weeks ago, Investor's Guide carried a story about the likely impact of climate change on equity investors and the ways to mitigate this risk. This created a vigorous debate on the subject both outside and inside the office. While everyone agreed with the need to do something about it, many were sceptical about the economic rationale of the green initiatives. According to sceptics the switch to a low carbon economy would be financially prohibitive and will lower the economic growth. Put it other way, it would be business as usual on the economic front and as such investors can take it easy.      Is it really so? Can market participants afford to be unmindful of one of the biggest debates in the modern history? Before we answer this question, first let's dissect the issue of climate change itself. In layman's language, the climate change is the phenomenon of change in earth's climate or weather pattern due to human activity. While numerous human activities have impacted the environment over the centuries—mining, de-forestation, soildegradation and over-exploitation of water bodies—the focus of current debate is on the emissions of green house gases, especially carbon dioxide. The latter has the characteristic to capture sun's heat and thus warm up earth's atmosphere beyond its normal levels. In the last two centuries –since the advent of industrial revolution –human activity has led a persistent rise in concentration of CO2 over and above the natural concentration of the gas in the atmosphere. This means more CO2 molecules are in the atmosphere to heat up earth's atmosphere and that is precisely happening. But a warmer atmosphere has adverse social, political and economic consequences for humankind and situation will only worsen if we fail to take corrective steps. Warmer atmosphere has already started melting polar ice caps and glaciers gradually raising sea level and also releasing billions of tonnes of CO2 trapped therein, which only aggravates the problem.      A warmer atmosphere also means rise in sea temperature, which in turn will affect the pattern of precipitation (rain or snowfall) across the globe. This could disrupt the agriculture cycle and thus affect the supply of food and key industrial inputs. A warmer climate also have consequences for living beings on earth especially non-humans. As Indians know, summer brings with itself a season of pests, pathogens and seasonal infections & ailments that thrive in the heat. A warmer weather means more diseases and ailments especially the infectious ones that will also affect our crops and livestock. A persistently warm climate may in fact result in the genetic mutations and over a period of time will give rise to new sets of pathogens and pests. Moreover, a warmer climate may lead to a mass extinction of species on earth, as has happened in the past and will have profound impact of our society and economy. Just think of the various daily use goods, which owe their existence to various plants and animal species—food & beverages (both plants & animal based), textile & garments, furniture, colours & pigments and medicines among others. The supply chain of all these goods is under threat from global warming. So even if we refuse to make economic sacrifices in the short-run to arrest global warming, in the long-run climate change will anyway lower the economic growth and may even result in sudden and painful reduction in human prosperity and well-being. Just visualise the consequences of frequent floods or droughts in India's grain belt or a sudden spread to an unknown disease or drying-up of a major river and desertification of large tracts in North Western and Central India.      So in that sense, climate change policies cease to be about economy choice but rather it becomes an inter-generational battle. An inaction or less than adequate policy response by the current generation will put an ever rising social and economic cost on the next generation. The climate change policies also pit one community against the other. The most adverse impact of a warmer climate would be felt in tropical countries in Asia, Africa and Latin America, which are already more prone to natural disasters. But these are precisely the places where majority of humans reside and economic growth is the fastest. Only a foolish market participant can remain aloof to such a profound change on the horizon.      Not all is lost however. According to Intergovernmental Panel on Climate Change (IPCC) we still have decades left before climate change become irreversible. Are we willing to listen?      krishna.kant@timesgroup.com