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The Impact of Climate Change on Employment and Economic Growth

Sustainable development is the international community’s most urgent priority, and the core aim of the post-2015 development agenda. ECOSOC operates at the center of the UN system’s work on all three pillars of sustainable development—economic, social and environmental.[1]Thus, it is the United Nations’ central platform on reflection, debate and innovative thinking on the topic.

Keeping with the Council’s issue-based approach, the annual theme of discussion in 2018 will be how climate change affectseconomic indicators such as employment and economic growth.The international community is becoming aware that it is not only climate change itself, but also the many related problems and proposed solutions, that present the biggest threat to the simultaneous  achievement of SDGsnumber 13 – Climate Action andnumber 8 – Decent Work and Economic Growth[2].

Although revolutionary in its ambition, scale and enthusiasm of its signees, the Paris Climate Accord has been met with a great deal of skepticism. The reason can be found in its underlying implications. Namely, if the main goal of the agreement - keeping the global temperature rise below 2°Cabove pre-industrial levels[3], is to be met, the world would essentially have to stop emitting greenhouse gases into the atmosphere by 2060[4]. Such drastic changes will undoubtedly have great consequences on many economies, especially those in transition.

The sectors that will feel the greatest impact from these global economic shifts are also among the highest-contributing in both global GDP growth and employment. They include: energy production, transportation, food production and the financial sector. In order to avoid causing harmful distortions in the functioning of these industries, problems and solutions regarding each one are to be discussed respectively.

 ·    Despite growing support of finding and using alternative sources of energy, oil, coal and gas production still make up nearly 90% of total energy production in the world. Since 2014 estimates for global GDP range between $77 trillion and $107 trillion, while the oil and gas drilling sector makes up between 4.6% and 6.5% of the global econom[5]. However, fossil fuel consumption in the energy sector is also the largest man-made source of air pollution, causing 6.5 million premature pollution-related deaths annually. Moreover, environmental destruction caused by oil and gas production is also self-deprecating – it causes an increased risk in factory shutdown due to water shortages and extreme weather conditions. While the incentives for moving to cleaner energy sources are clear, the fossil fuel industry can in some cases employ up 100% more labor as compared to its renewable energy counterpart (depending on region and technology)[6]. This, along with strong lobbies by big gas and oil exporters, makes the transition towards clear energy more complex and multidimensional.

·     Transport is a crucial driver of economic and social development, bringing opportunities for the poor and enabling economies to be more competitive. Transport, however, also accounts for about 64% of global oil consumption, 27% of all energy use, and 23% of the world’s energy-related CO2 emissions. With motorization rates on the rise, the environmental impact of the sector is expected to grow dramatically[7]. The transport industry also directly employs around 10 million people and accounts for about 5% of GDP in the EU alone[8]. A combination of tighter regulations on manufacturers, along with changing consumer preferences towards green transport might prove to be detrimental to the labor market which largely depends on firms’ cost-cutting and profits.

·     The total value of the global food and agricultural industry measured in 2016 amounted to 8 trillion dollars[9]. Meanwhile, with 700 million people still living in famine, about one third of all the food produced annually is thrown to waste. Climate change further accelerates these negative trends. More crops and livestock are failing to survive due to harsh weather conditions. In addition, means of reducing these negative effects, such as preservatives and genetic modification, lessen the nutritional quality of food and are speculated to have negative side-effects. With the need for food expanding along with an ever-growing world population and developed countries prohibiting the import of modified food, developing, agriculture-dependent economies must find a multilateral solution to these issues.

·     The complexity of climate change is best exemplified when diagnosing its effects on the financial sector. Where increasing physical impacts of climate change pose immediate and long-term threats to insurance companies[10], aggressive new climate policies have already made severe shifts in the banking sector, primarily investments in carbon-intensive portfolios such as coal and oil[11]. Still, many investors are unlikely to exchange their shares in the fossil fuel industry in favor of the low-profit, emerging green-energy market. Amidst these problems, new emphasis has to be puton risk assessment and management in the insurance industry, combined with a transition to low-carbon stocks in the banking sector. Naturally, the underlying effects on the labor markets have to been taken into consideration.


Although the mixture of different problems might seem overwhelming and paradoxical, sustainable solutions can be found. The IMF predicts that he overall costs of mitigation could be minimized if policies are well designed and accepted by a broad group of countries.

In a time that requires fast-paced and effective decision-making, policy-makers will be faced with the discount rate between aggregate damages from climate change and the costs of abating them across generations[12].This is why, as pointed out by the UN Secretary-General, now more than ever, multilateral action is needed to find effective solutions to this mix of challenges.[13]

[1]Economic and Social Council (https://www.un.org/ecosoc/en/about-us).

[2] Sustainable Development Goals (http://www.un.org/sustainabledevelopment/sustainable-development-goals/)

[3]United Nations Framework Convention on Climate Change (http://unfccc.int/paris_agreement/items/9485.php)

[4] Based on a study by Nature Climate Change (http://unfccc.int/paris_agreement/items/9485.php)

[5] Investopedia (http://www.investopedia.com/ask/answers/030915/what-percentage-global-economy-comprised-oil-gas-drilling-sector.asp)

[6] International Energy Agency (https://www.iea.org/publications/wei2017/)

[7] World Bank Overview (http://www.worldbank.org/en/topic/transport/overview)

[8] EU Science Hub (https://ec.europa.eu/jrc/en/research-topic/transport-sector-economic-analysis)

[9] Plunkett Research: Global Food Industry Statistics and Market Size Overview, Business and Industry Statistics

12 BSR: Adapting to Climate Change: A Guide for the Financial Services Industry

[11] IFC, World Bank Group: Climate Change and the Financial Sector

[12] IMF: World Economic Outlook, April 2008. Chapter 4: Climate Change and the Global Economy

[13] Report of the Secretary-General on the Work of the Organization. United Nations. New York. 2017