A new report by the Bank of Korea, the Financial Supervisory Service, and the Korea Meteorological Administration warns that South Korea could see its annual economic growth rate decline by 0.3% each year if it fails to adequately address climate change. By 2100, the country's Gross Domestic Product (GDP) could be 20% smaller than expected under a business-as-usual scenario.
The report, titled "The Impact of Climate Change Risks on the Real Economy," outlines how climate change risks, such as rising carbon prices, increased production costs for carbon-intensive industries, and more frequent and severe natural disasters, will negatively affect the economy.
The study compared three scenarios: a "business-as-usual" scenario, a "1.5°C scenario" where global warming is limited to 1.5°C above pre-industrial levels by 2050, a "2°C scenario" where warming is limited to 2°C, and a "no policy" scenario where no climate action is taken.
Under the "1.5°C scenario," where strong climate policies are implemented, the annual growth rate is projected to decline by 0.14 percentage points compared to the business-as-usual scenario. As a result, GDP would be 1.8% lower in 2030, 13.1% lower in 2050, and 10.2% lower in 2100.
In the less stringent "2°C scenario," the annual growth rate is expected to decline by 0.21 percentage points, leading to a 2% reduction in GDP in 2030, 6.3% in 2050, and 15% in 2100.
If no climate action is taken, the "no policy" scenario, South Korea's GDP would increase by 0.4% in 2030 compared to the business-as-usual scenario but would decline by 1.8% in 2050 and a significant 21% by 2100. This indicates that while there might be short-term economic gains, long-term growth will be severely impacted.
The report also found that climate change will affect prices. Under a "no policy" scenario, producer prices are expected to rise by 1.8% by 2100. However, under the "1.5°C scenario," producer prices are projected to increase by 1.9% due to higher production costs from policies such as carbon pricing.
Industries such as oil, chemicals, cement, and steel are expected to experience a decline in value-added as carbon prices rise. On the other hand, agriculture and food manufacturing are projected to face greater losses as temperatures rise and rainfall patterns change.
Kim Jae-yun, a researcher at the Bank of Korea's Sustainability Growth Team, emphasized the importance of taking immediate and decisive action on climate change. "Since the risks of climate change are irreversible, it is crucial to implement policies such as achieving carbon neutrality by 2050 as soon as possible. The earlier we act, the less negative impact we will face. In the long term, limiting global warming to 1.5°C is the most favorable scenario."
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