World Bank: 3.4% drop in GDP by 2030 in the event of climate inaction

2023-11-30 10:06:26

Climate change is no longer an abstract phenomenon in Tunisia; it is a challenge that directly affects the country’s economy. The World Bank delves into the potential costs of climate inaction, also offering a glimmer of hope through exploring the economic and social benefits of mitigation and adaptation actions.

In its latest report on Climate and Development in Tunisia (CCDR), the World Bank returned to the macroeconomic impacts of climate inaction, given that the impact of climate change on the Tunisian economy is a subject of concern. increasing importance.

Indeed, the detailed analysis of the potential economic and fiscal impacts of inaction in the face of projected water shortages provides in-depth insight into the risks involved. According to projections, water shortages could lead to a contraction in Tunisia’s real GDP, estimated between 4.1% (RCP* 4.5 scenario) and 4.6% (RCP 8.5 scenario) by 2030, i.e. a value between 2.7 billion dinars and 3.8 billion dinars per year. These losses, concentrated mainly in the agricultural sector, could also impact the industrial sector and deteriorate the current account deficit. Rising sea levels and flooding, while potentially less damaging than water shortages, could generate significant economic losses. Simulations suggest small losses in the RCP 4.5 scenario, but more substantial figures in the RCP 8.5 scenario, reaching 1.7% of GDP by 2050.

What economic costs?

Projected water shortages could lead to significant economic impacts by reducing real GDP by 3.4% by 2030 (RCP 8.5 scenario), or approximately 5.6 billion dinars per year in net present value (1.8 billion dollars). These losses, mainly attributable to the agricultural sector, could also deteriorate the current account, exposing the economy to a prolonged and unprecedented crisis. Still according to the report, combined adaptation and mitigation measures to address climate change and decarbonize the electricity sector could increase GDP growth to 8.8% by 2030, reduce the poverty and reduce energy-related emissions. Faced with these challenges, the document highlights the urgency of adopting mitigation and adaptation measures. The high costs of climate change reinforce the need to return the economy to a sustainable trajectory, while providing a diverse set of policies and investments to address water shortages and flooding, providing short-term solutions and long-term benefits. In particular, decarbonization of the energy sector is emerging as a crucial strategy. The decarbonization scenarios presented show significant economic gains, reducing energy imports and boosting economic growth. The three decarbonization scenarios analyzed all indicate economic gains compared to inaction, with positive impacts on GDP, exports and public debt.

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By combining ambitious adaptation and mitigation measures, the document presents scenarios where GDP would be up to 9% higher than in the event of inaction by 2030. These combined measures would also significantly reduce poverty, thus highlighting the overall positive impact of climate actions. “Tunisia’s CCDR, aligned with the National Ecological Transition Strategy and the 2023-2025 Development Plan, highlights the constant support of the World Bank, Tunisia’s unwavering partner on the path to a more sustainable future, said Jesko Hentschel, World Bank operations director for the Maghreb. Adapting to climate change and promoting a green economy represents a unique opportunity for the country’s growth, resilience and sustainable development,” he added. In conclusion, the report highlights the critical importance of strengthening macroeconomic, financial and human capital to ensure resilience to climate challenges. Investments in decarbonization and adaptation actions can not only mitigate economic risks, but also generate substantial benefits, contributing to a more sustainable and resilient economy.

*RCP: Representative concentration trajectories: an RCP scenario makes it possible to model the future climate. Each RCP scenario gives a variant considered probable of the climate which will result from the emission level chosen as a working hypothesis.

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