If climate change issues are not addressed, Pakistan’s annual GDP could fall by 18 to 20% by 2050 due to the combined risks of climate change intensification and environmental degradation in the country.
“The combined risks from the intensification of climate change and environmental degradation, if not addressed, will aggravate Pakistan’s economic fragility; and could ultimately reduce annual GDP by 18 to 20% per year by 2050, based on the optimistic and pessimistic scenarios,” according to a World Bank report recently published.
Climate change will likely cost between 6.5 and 9% of GDP (in the optimistic and pessimistic scenarios, respectively) as increased floods and heatwaves reduce agricultural and livestock yields, destroy infrastructure, sap labour productivity, and undermine health, according to the report.
Furthermore, water scarcity in agriculture could reduce GDP by more than 4.6%, and air pollution could reduce GDP by 6.5% per year.
Climate change is expected to significantly increase the use of water for non-agricultural purposes. Water demand is expected to increase by nearly 60% under a high-growth (4.9 percent per year) and high-warming (3 degrees Celsius by 2047) scenario, according to the report, with the domestic and industrial sectors experiencing the greatest increases.
It added that climate change will account for up to 15% of this increase in demand. “This increased demand will have unintended consequences, depriving downstream areas of water rights. The competition among sectors will necessitate inter-sectoral tradeoffs, which will most likely come at the expense of agricultural water “According to the report.
It is estimated that 10% of all irrigation water will need to be repurposed to meet non-agricultural demand over the next three decades. Freeing up 10% of irrigation water without jeopardizing food security will be a complex challenge that will necessitate significant policy changes to incentivize water conservation and increase water use efficiency in the agricultural sector, as well as a shift away from water-hungry crops and improved environmental management.
It stated that the economic consequences of climate-related extreme events will most likely have an impact on growth, fiscal space, employment, and poverty. “Global warming and extreme events have multiple effects on economic activity, including impacts on lives, infrastructure and assets, and livelihoods, which can result in lost economic growth, worsening poverty, and long-term threats to human capital and productivity. Existing macro models can assist in estimating the magnitude of such events.”
According to the report, while household poverty is expected to decrease over time, even a 9% decline in GDP by 2050 is enough to stall poverty reduction, with disproportionate effects on rural households.
According to the report, the urban poverty rate is expected to be half that of rural areas by 2030. “By 2050, urban poverty is expected to fall to 10%, while rural poverty remains in the 25-28 percent range.”