China and India are jostling for greater geopolitical influence, within the emerging world and beyond. Their ambitions are manifold. For instance, China aims to lead the world in AI technology, India to take China’s manufacturing mantle. But over the long run, they won’t achieve their aims through armed conflict on some high Himalayan glacier.

Rather, they’ll only do so by working towards the same goal of limiting global warming – and, along the way, will ensure the survival of the glacier they both claim.

A major, concerted effort at limiting how much global temperatures rise over the coming decades will pay significant dividends not just in China and India but for emerging economies generally. Were developed and emerging countries to work together in limiting global warming, they could roughly halve the loss in output they face by the end of the century compared to if there were no further climate change.

Emerging economies are much more vulnerable to rising global temperatures than their advanced counterparts. For instance, major cities around the world face annual losses of between USD300 billion and USD1 trillion in output from climate change-related sea level rises, according to modelling by Oxford University’s Smith School, in a report sponsored by Pictet Asset Management. China alone has 15 cities that risk losing as much as 4.7 per cent in GDP per capita per year from rising sea levels.

But this is not where China’s worries about global warming end. Temperatures in the country have been rising faster than the global average. Current projections are for a 13 per cent fall in the country’s crop yields by 2050 compared with 2000.

Meanwhile, India stands to be one of the biggest losers from global warming, risking more than a 60 per cent shortfall in GDP per capita by the end of the century relative to if temperatures stayed the same. A hotter climate threatens the country’s productivity levels. Knock-on effects to education will prove a drag on the accumulation of human capital and thus economic development. Agricultural output will also decline.

In Brazil, climate change will have a major impact on water availability – by the end of this century, two-thirds of the country will be classified as arid. This will hurt harvests and also energy production – hydro power accounts for some 60 per cent of the country’s electricity supply. Similar issues confront Mexico, Indonesia and South Africa.

Of major emerging market economies, only Russia is likely to benefit from rising global temperatures – at least, on the face of it. A melting Arctic would free more of Russia’s coastline, opening the region to trade and the exploitation of the region’s wealth of natural resources. But there’s a caveat. This doesn’t factor in the impact climate change would have on other countries’ demand for Russian goods. Subdued GDP elsewhere would very likely hurt Russian exports.

Read more about the Oxford-Smith paper at this link.

Except otherwise indicated, all data on this page are sourced from the Climate Change and Emerging Markets after COVID-19 report, October 2020.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

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