6 days ago
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With the local demand for electricity, gas, and petroleum expected to increase by nearly 20 percent over the next 45 years, the regional economy, including the Philippines, is seen to shrink by 3.3 percent due to energy demand shocks driven by climate change.
In a high-end emissions scenario or a setup where countries continue to emit large amounts of greenhouse gases, the Philippines is projected to lose 10 percent in electricity-related output by 2070, according to a working paper published by the Asian Development Bank (ADB) on March 19.
“Higher temperatures lead to increased energy demand for cooling and reduced demand for heating. Climate change shocks on energy demand are translated into relative changes of electricity, gas, and petroleum product demand,” the report said.
According to the report, energy demand shocks occur when private energy consumption, including gas, petroleum, and electricity, increases and energy companies change their energy efficiency practices.
While this increases the economic output of energy subsectors, it also leads to hikes in energy demand and prices.
This would result in “higher production costs and losses across sectors dependent on these energy sources,” Lorenza Campagnolo, Gabriele A. Mansi, Francesco Bosello, and David A. Raitzer said in their working paper titled “Quantifying the Economic Costs of Climate Change Inaction for Asia and the Pacific.”
Besides a relatively high economic loss in electricity, the country is expected to experience worse declines in market services and heavy and light industries.
Notably, the Philippines is set to lose 20 percent—the highest—in market services, which covers finance, insurance, real estate, retail, transportation, and tourism industries. Heavy and light industries come close with 19 percent loss each.
Heavy industry includes steel manufacturing, shipbuilding, and heavy machinery production, while light industry includes textile production, food processing, and consumer electronics manufacturing.
Also, changes in labor productivity are predicted to cause a five percent loss in gross domestic product (GDP) for the region.
The ADB report noted that “these shocks are pervasive across sectors. Outdoor activities like agriculture, fishing, and forestry face higher risks than indoor industrial activities.”
These losses are driven by several factors, “including the direct impact of climate change on productivity, the reallocation of workers in response to shocks, and capital outflows toward more profitable sectors” or other economies.
Overall, climate change is expected to cause the region to lose about 17 percent of its total GDP in 2070.
Sea-level rise is responsible for nearly half of the total GDP losses in several economies, including the Philippines.
“Trade allows economies to smooth climate change impacts, especially when the shock in an economy is smaller than in the other trading partners,” the report said.
