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Home » DIVERSIFY ECONOMY TO TACKLE CLIMATE CHANGE

DIVERSIFY ECONOMY TO TACKLE CLIMATE CHANGE

GS 3: Disaster and disaster management.

GS Paper 3: Indian economy and issues related to planning

 

Theme of the article: Developing countries dependent on commodities need to diversify their economies to mitigate the increasing climate change risks and achieve the United Nations-mandated Sustainable Development Goals (SDGs) according to a new report by the UN Conference on Trade and Development (UNCTAD).

Most of the developing countries which include commodity-dependent developing countries (CDDCs), the least developed countries (LDCs) and small island developing states (SIDS), are commodity dependent.

It means that at least 60 per cent of their export earnings are from the commodity sector and the economic and commodity price cycle concur at the same time according to Commodities and Development Report 2019.

 

Coping with climate crisis

In the case of a boom in the price of the commodities, countries' economies grow faster and slow down when the prices slump. However, the CDDCs experience a slower growth rate than other countries during the slow down period, which in most cases are for longer periods, according to the report.

Thus, the diversification could be horizontal, which requires venturing into new goods and sectors to reduce dependence on a narrow range of commodities, or vertical, which involves moving the value chain of a commodity to increase its worth, stated the UNCTAD report.

Climate change is an additional burden to CDDCs that are already struggling to manage the problems arising from their dependence on commodities, it noted. They are more vulnerable to the risks due to their dependence on sectors that are highly exposed to extreme weather events.

 

Impact on natural resources

The disasters can also lead to ‘physical stranding’ of natural resources, rendering them impossible and unprofitable for use. These would adversely affect the CDDCs, especially those who are highly dependent on these resources for their economic well-being. 

 Further in the race to limit greenhouse gas emissions some natural resources in the energy sector also face the problem of ‘regulatory stranding’. The best example is the use of coal which is increasingly being reduced and eliminated as the primary energy source. With renewable energy, especially solar energy, becoming cheaper there would be a shift towards them. Thus, even without regulatory stranding, the thermal power stations would become economically unattractive.

China, the world’s largest importer of commodities, has resolved to increase the share of non-fossil fuels in the country’s primary energy consumption, as part of its commitment to climate change mitigation. This would impact the exporters of fossil fuels to China, resulting in revenue loss in export market. They would also face problems in finding alternative and profitable markets.

Angola, for example, the largest African exporter of oil to China, would be the hardest hit. In 2017, 47 per cent of its total merchandise export revenue was oil exports to China. The 10 most vulnerable countries to climate change in 2017 were all CDDCs, according to the University of Notre Dame’s Global Adaptation Initiative (ND-GAIN) Index. Of the 40 most vulnerable countries, only three were not dependent on commodity exports.

Opportunities to the CDDCs

The global push for renewable energy creates short- and medium-term opportunities in the mining sectors of CDDCs with large reserves of materials used in clean technologies, such as solar photovoltaic cells, wind turbines and electric vehicle batteries.

The Democratic Republic of the Congo was responsible for 58 per cent of global cobalt production in 2017, a major component for the development of electric vehicles and batteries. Chile and Argentina jointly accounted for 71 per cent of the global reserves of lithium in 2018, a key product in the production of battery.

The report also emphasised the need for CDDCs to involve ‘non-state and sub-national actors’ like the private sector, civil society organisations and local governments to achieve the objectives of the Paris Agreement. A combination of horizontal policies, such as strengthening human capital through investments in education and health, and targeted measures to promote individual sectors, are needed for a successful diversification.

 

Commodities and Development Report 2019 – Brief summary

The 2019 edition of the Commodities and Development Report is titled "Commodity Dependence, Climate Change and the Paris Agreement". It seeks to further the understanding of the interactions between climate change and the commodity sectors.

The report highlights the challenges that commodity dependent developing countries (CDDCs) face as they manage their natural resource sectors in the context of the Paris Agreement. It also explores some potential benefits that might arise from climate change mitigation and adaptation.

The report recommends that CDDCs should reduce their strong economic dependence on natural resources through economic and export diversification. Acknowledgement of the limited capabilities of CDDCs to cope with mitigation and adaptation challenges implies that CDDCs require a unique set of incentives as well as financial, technical and institutional assistance to cope with the challenges associated with the climate crisis.

The report underscores the need to raise the level of ambition and commitment in tackling climate change. Indeed, the extraction and consumption of highly polluting fossil fuels such as coal, oil and gas continue to increase unabated, exacerbating the climate crisis. Moreover, the staggering amounts that many countries are still spending on fossil fuel subsidies are an indication that more work needs to be done in terms of aligning domestic policies with the overarching objective of climate change mitigation and adaptation.

 

Previous Year Questions

  1. What do you understand by Run-off river hydroelectricity project? How is it different from any other hydroelectricity project? (2013)
  2. Enumerate the National Water Policy of India. Taking river Ganges as an example, discuss the strategies which may be adopted for river water pollution control and management. What are the legal provisions of management and handling of hazardous wastes in India?(2013)
  3. Drought has been recognized as a disaster in view of its spatial expanse, temporal duration, slow onset and lasting effects on vulnerable sections. With a focus on the September 2010 guidelines from the National Disaster Management Authority (NDMA), discuss the mechanisms for preparedness to deal with likely El Nino and La Nina fallouts in India. (2014)
  4. Environmental Impact Assessment studies are increasingly undertaken before a project is cleared by the Government. Discuss the environmental impacts of coal-fired thermal plants located at coal pitheads. (2014)
  5. Discuss the Namami Gange and National Mission for Clean Ganga (NMCG) programmes and causes of mixed results from the previous schemes. What quantum leaps can help preserve the river Ganga better than incremental inputs? (2015)
  6. The frequency of earthquakes appears to have increased in the Indian subcontinent. However, India’s preparedness for mitigating their impact has significant gaps. Discuss various aspects. (2015)
  7. Rehabilitation of human settlements is one of the important environmental impacts which always attracts controversy while planning major projects. Discuss the measures suggested for mitigation of this impact while proposing major developmental projects. (2016)
  8. With reference to National Disaster Management Authority (NDMA) guidelines, discuss the measures to be adopted to mitigate the impact of the recent incidents of cloudbursts in many places of Uttarakhand. (2016)
  9. On December 2004, tsunami brought havoc on fourteen countries including India. Discuss the factor responsible for occurrence of tsunami and its effects on life and economy. In the light of guidelines of NDMA (2010) describe the mechanisms for preparedness to reduce the risk during such events. (2017) 
  10. ‘Climate change’ is a global problem. How India will be affected by climate change? How Himalayan and coastal states of India will be affected by climate change? (2017)
  11. The nature of economic growth in India in recent times is often described as a jobless growth. Do you agree with this view? Give arguments in favour of your answer. (2015)
  12. How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is increased informalization detrimental to the development of the country? (2016)
  13. “Success of make in India program depends on the success of Skill India programme and radical labour reforms.” Discuss with logical arguments. (2015)
  14. It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement. (2019)