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China science

Climate change to cost China US$389 billion, but impact on trade will make US a big loser too, study says

Washington’s protectionist stance on global trade could leave it counting the cost of increased natural disasters

PUBLISHED : Tuesday, 29 May, 2018, 10:31pm
UPDATED : Wednesday, 30 May, 2018, 6:29am

Flooding caused by climate change could cost China US$389 billion over the next two decades, far more than any other country, but the ripple effect of those natural disasters on global trade could see the United States coming out as a major loser too, a recent study has suggested.

In a report published in Nature Climate Change on Monday, researchers from the Potsdam Institute for Climate Impact Research in Germany and Columbia University in the US said the cost of flooding to China in the 2016-35 period was set to rise by 82 per cent from the previous 20 years.

In contrast, the US, which has a similar land mass to China, would face an economic hit of US$30 billion from river flooding in the years through 2035, while the damage to members of the European Union would fall somewhere between the two.

Although the initial cost to China of the flooding – which damages property, infrastructure, and agricultural and industrial production – will be significantly higher than elsewhere in the world, the strength of its trade networks should allow it to withstand the economic impact, the study said.

While the EU is similarly well equipped to rebound from the effects of extreme weather events, the US, with its increasingly protectionist stance on trade, is less so, the research said.

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Professor Anders Levermann, the lead author of the study, said the United States’ trade policy under US President Donald Trump made it more vulnerable to the knock-on effects of natural disasters.

Free trade allowed nations to exchange goods and services to overcome temporary shortages or disruptions to production activities in regions hit by severe flooding, he said.

Trump, however, instead of supporting liberalisation, was doing “the opposite”, he said.

The aggressive measures taken by Washington to redress its trade imbalance with China, for instance, has pushed the world’s two largest economies to the brink of a trade war.

“It is true that the US needs balanced trade relations, but that only helps if it results in more trade, not less,” Levermann told the South China Morning Post.

“Trade is necessary to compensate for the impact on local economies caused by extreme weather such as hurricanes, heatwaves or floods.”

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The conservative stance taken by the US on trade could cost it US$170 billion over the next 20 years, the research said.

The forecasts were made using a new mathematical model that calculates the risk of flooding for each country and the international impact of those disasters on trade.

Christian Otto, the study’s co-author, said that in some countries, including India, Malaysia and Russia, flooding could result in more benefits than losses because of its impact on trade.

“More intense global trade can help to mitigate losses from local extreme events by facilitating market adjustments,” he said.

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“When a supplier is impacted by a disaster hampering its production, international trade increases the chance that other suppliers can jump in and temporarily replace it. Interestingly, the global increase of climate-induced river floods could even cause net gains for some economies such as India, Southeast Asia or Australia.”

The researchers said also the projections were based on the assumption that nations did nothing to counter the effects of climate change. If countries, including China, opened more of their economies to the world, the net losses would likely decrease, they said.

Wang Zhonggen, a researcher at the Key Laboratory of Water Cycle and Related Land Surface Process under the Chinese Academy of Sciences in Beijing, said he was not surprised by the findings.

China’s rainfall is concentrated in the summer monsoon season, which means the risk of flooding is always higher than in countries where precipitation is more evenly spread throughout the year.

While China has developed one of the world’s largest water management systems, comprising giant dams and reservoirs, this was not enough to protect every city located near a major river, like the Yangtze, Yellow or Pearl, Wang said.

“China’s economy will continue to grow, so the losses caused by floods will increase even if the extreme weather remains the same as it is today,” he said.

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Li Binglong, an economics professor at China Agricultural University in Beijing, said high levels of imports also had a negative impact on local efforts to mitigate climate change.

“Too many imports hurt local production,” he said.

“If our farmers and factories can’t make money, how do you expect them to support the government’s efforts to combat climate change?”