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Climate change

 Climate Change Issue


The potential effects of Climate Change on the forecasting models


 The forecasting methodology for both market and financial forecasts does take the potential effects of climate change into account. The United Nations, OECD and various other forecasting models will in future provided some 'Climate Change' indicators in their forecasts, however these forecasts tend to be politically influenced. The DataGroup forecasting methodology uses scientific forecasting models to attempt to evaluate these factors and then project their effects on supply and demand. 


CLIMATE CHANGE


In anticipation of the macro and micro economic effects of global climate change, the rising of sea levels, and the concomitant effects on the economic environment, DataGroup will (from 2018 onwards) include a series of economic scenarios on Climate Change, Sea Level Rises and Population Perceptions for each database and the results of this on the market and financial forecasting matrices.


The scenarios will cover various probabilities, as proposed and identified by the current scientific consensus, and will include probability ranges as well as the cascade effects of those scenarios on the macro-economic and the micro-economic environments.


For example, if global warming melts any major part of the Greenland Glaciers and/or Antarctic Ice Sheets by 2036, then sea levels will rise by 7 meters. In these circumstances the following national markets may disappear or be restricted because their existing coastal infrastructure will have been inundated:-


Anguilla

Bahamas

Bahrain

Bangladesh

Barbados

Bermuda

British Virgin Islands

Cayman Islands

Estonia

Faroe Islands

Fiji

French Polynesia

Grenada

Guadeloupe

Guam

Guernsey

Hong Kong

Jersey

Kiribati

Kuwait

Latvia

Macau

Maldives

Malta

Micronesia Federated States

Monaco

Nauru

Niue

Palau

Qatar

Saint Pierre and Miquelon

Seychelles

Singapore

Tokelau

Tonga

Trinidad and Tobago

Turks and Caicos Islands

Tuvalu

Virgin Islands

Clearly the situation for the less developed countries will be much graver than that for the richer countries; however some of the (per capita) richest countries in the world will be irrevocably damaged by global warming.  The critical factors for these countries include the existing ports and coastal infrastructure and the financial ability of the country to undertake coastal defence schemes. The cost / benefit calculations of attempting to defend a coast will vary according to each country and in many instances countries will have no option but to abandon the inundated coastal areas.

Many developed countries will experience substantial costs in protecting coastal areas and will have to finance these costs in the long-term. It is unclear if the global financial systems will be able to develop a global financial model to finance the substantial coastal infrastructure construction projects which will be necessary to allow the world economies to continue to function. There currently exists no initiative amongst governments or central bankers to develop a global financial system to underwrite the necessary coastal infrastructure construction schemes.

For example, a ‘7 meter Sea Rise Scenario’ will produce many consequential macro and micro economic forecasting factors and economic effects, including the following for the Netherlands:-


Physical effect




The 7 meter Sea Rise Scenario shows the physicals effects on the Netherlands if remedial measures are not implemented by the national government. The Dutch government are currently planning for only a 1 meter sea rise and intend to augment sea defences accordingly. This limited sea defence protection will however impose a current account burden on government finances and it is uncertain if the Dutch government will be able to finance sea defence schemes in the event of a higher than 1 meter sea level rise.



The area shaded in pink represents the potential area of inundation, flood, salination or groundwater pollution in the event of a 7 meter rise in sea level.




7 meter Sea Rise Scenario



Clearly no national government can allow the sea to inundate their country and thus the government will be forced into action, irrespective of the costs, to attempt to prevent or rectify the situation. The unknown factor is whether the government would be able to raise or attract the necessary international financing of the sea barrier and infrastructure construction projects.


National Response



Potential Political


Scenario Indicators



Economic Forecast


Scenario



Political response


National physical response



To construct coastal sea barriers.



Infrastructure costs


Construction of 1500 kms of sea barriers, inlet and river defences = $200 billion.


 Re-construction of ports and coastal facilities =  $100 billion.

Increased government infrastructure spending. Decreased government social spending.


Disruption to existing economic models and matrices. Creation of new forecasting parameters in the construction and supporting industries.


Economic response



Taxation consequences



Sharply increased taxation on consumers and industry.



Sharp decrease in domestic disposable incomes and corporate profitability.



Economic activity consequences



Channeling of government expenditure into coastal projects. Restrictions on capital movements. Inflation pressures.



Restrictions in public and private consumption of goods and services and recession.


Movements of corporate and private funds.



Civil consequences



Government direction / control of the population and employment factors.



Emigration of productive workers and investors. Possible civil unrest.



International co-operation and support



Financing from supra-national and international sources.  Co-operation with neighbouring countries for coastal defence schemes.



Long term debt and need for severe economic constraints on the domestic economy.


Severe Balance of Trade deficits.






Population response



Consumer Financial consequences



Government measures to restrict consumer demand.



Consumer finances depressed. Consumer investments values depressed.



Employment consequences


Government attempts to maintain employment levels conflicts with need to raise taxation revenues.


Unemployment levels rise and demand suppression multipliers take effect.



Migration consequences



Confused Government policies regarding immigration and workforce replenishment.



Emigration of professional and skilled workers.



Socio-Economic consequences



Government measures to stabilize the socio-economic effects of the situation.


Population uncertainty about financial security and continued investment in country. Population migration to neighbouring countries.



Psychological and psychometric response



Government measures to reduce public disquiet and uncertainty.



Population disquiet about personal risk and safety if sea defences fail.


Industry Response



Supply & Demand consequences



Government measures to stabilize industry and commerce.



Disruption of existing supply and demand norms and forecasting matrices.


Investment consequences



Government measures to secure investments in industry and commerce.



Reduction of investments and capital expenditure by industry and commerce.





Physical Factors



Data


Physical Consequence of this Scenario



Nominal

Best Scenario


Success of Sea Barriers

Worst Scenario


Failure of Sea Barriers


Area:



total: 41,526 sq km

land: 33,883 sq km

water: 7,643 sq km



total: 41,526 sq km

land: 31,526 sq km

water:10,000 sq km



total: 41,526 sq km

land: 13,883 sq km

water: 27,643 sq km



Coastline:



451 km



451 km



800 km



Elevation extremes:



lowest point: -7 m

highest point: 322 m



lowest point:  -7 m

highest point: 322 m



lowest point: -14 m

highest point: 315 m



Land use:



arable land: 21.96%

permanent crops: 0.77%

other: 77.27%



arable land: 18%

permanent crops: 1%

other: 81%



arable land: 10%

permanent crops:1%

other: 89%



Irrigated land:



5,650 sq km



7,000 sq km



3,000 sq km



 * simulated data for illustration


Economic forecasting factors



Data


Consequence of this Scenario



Norm


Best Scenario


Success of Sea Barriers

Worst Scenario


Failure of Sea Barriers


GDP (PPP):



$500 billion



$450 billion



$200 billion



GDP (official):



$600 billion



$530 billion



$230 billion



GDP growth:



1.5%



0.5%



-4%



GDP/per capita (PPP):



$30,000



$25,000



$15,000



GDP - sectors:



agriculture: 2.1%

industry: 24.4%

services: 73.6%



agriculture: 2%

industry: 20%

services: 78%



agriculture: 2%

industry: 15%

services: 83%



Labor force:



7.53 million



7 million



4 million



Labor force - by occupation:



agriculture: 2%

industry: 19%

services: 79%



agriculture: 3%

industry: 18%

services: 79%



agriculture: 2%

industry: 12%

services: 86%



Unemployment:



6.6%



9%



15%



Population poverty line:



10.5%



14%



18%


Household income distribution:



lowest 10%: 2.5%

highest 10%: 22.9%



lowest 10%: 2%

highest 10%: 25%



lowest 10%: 1.5%

highest 10%: 35%



Gini index:



30.9



35



45



Inflation rate:



1.7%



5.5%



9.5%



Investments:



19.5% of GDP



15% of GDP



9% of GDP



Budget:



revenues: $291.8 billion

expenditures: $303.7 billion



revenues: $200 billion

expenditures: $3000 billion



revenues: $150 billion

expenditures: $3000 billion



Public debt:



52.7% of GDP



200% of GDP



800% of GDP



Agriculture - products:



grains, potatoes, sugar beets, fruits, vegetables; livestock


grains, potatoes, sugar beets, fruits, vegetables


fruits, vegetables; livestock


Industries:


Agro-industries, metal and engineering products, electrical machinery and equipment, chemicals, petroleum, construction, microelectronics, fishing

Agro-industries, metal and engineering products, electrical machinery and equipment, construction


Metal and engineering products, electrical machinery and equipment, construction, fishing



Industry growth:


-1.4%


-5%


-15%


Current account:



$39.95 billion


-$300 billion


-$600 billion


Exports:



$365.1 billion f.o.b.



$330 billion f.o.b.



$100 billion f.o.b.



Exports - partners:


Germany 25%, Belgium 13%, France 9.5%, UK 9%, Italy 5.5%, US 4.%, Spain 4%

Germany 34%, Belgium 15%, France 9%, UK 9%, Italy 5%, US 2%, Spain 4%

Germany 54%, Belgium 16%, France 5%, UK 5%, Italy 5%, US 2%, Spain 2%

Imports:


$326.6 billion f.o.b.

$600 billion f.o.b.

$250 billion f.o.b.

Imports - commodities:


machinery and transport equipment, chemicals, fuels, foodstuffs, clothing


machinery and equipment, materials, fuels


machinery, fuels, foodstuffs, clothing


Imports - partners:


Germany 16.6%, Belgium 9%, China 9%, US 8%, UK 5.8%, France 5%, Russia 4%

Germany 20%, Belgium 12%, China 4%, US 4%, UK 8%, France 6%, Russia 6%

Germany 25%, Belgium 12%, China 4%, US 3%, UK 8%, France 7%, Russia 7%

Foreign exchange:

$20.54 billion

$2 billion


$0 billion



Debt - external:



$1,645 billion


$3,000 billion


$6,000 billion


* simulated data for illustration


Demographic forecasting factors


Data

Consequence of this Scenario



Norm



Best Scenario

Success of Sea Barriers


Worst Scenario

Failure of Sea Barriers


Population:



16,500,000



15,000,000



9,000,000



Age structure:



0-14 years: 18%

15-64 years: 67.8%

65 years and over: 14.2%



0-14 years: 16%

15-64 years: 66%

65 years and over: 18%



0-14 years: 20%

15-64 years: 60%

65 years and over: 20%



Median age:



39.4 years



38 years



42 years



Population growth rate:



0.49%



-5%



-15%



Birth rate:



10.9 births/1,000 population



9 births/1,000 population



6 births/1,000 population



Death rate:



8.68 deaths/1,000 population



9 deaths/1,000 population



12 deaths/1,000 population



Net migration rate:



2.72 migrant(s)/1,000 population



-3 migrant(s)/1,000 population



-9 migrant(s)/1,000 population


Infant mortality:


total: 4.96 deaths/1,000 live births

total: 6 deaths/1,000 live births


total: 9 deaths/1,000 live births



Life expectancy:


total population: 78.96 years



total population: 71 years



total population: 65 years



Total fertility rate:



1.66 children born/woman


1.5 children born/woman


1.1 children born/woman


* simulated data for illustration