Warming => decrease ??

[jean63]

According to this article, the decrease is likely to be achieved thanks to global warming:

AFP the 04 / 10 / 2007 16h45
Climate change will accelerate inflation, curb growth (study)

Climate change, "a consequence of human activity with the most devastating effects ever known on the economy", is expected to accelerate inflation and slow growth, warns Morgan Stanley bank in a study received Thursday.

Climate change is expected to dampen global growth through negative effects on the global workforce (illness, displacement, etc.), and is expected to result in damage to existing infrastructure, which will hurt overall productivity, the study finds. .

"Inflationary pressures should also be reinforced by an increase in food prices, water charges and carbon taxes", continues this analysis.

Hence "an environment conducive to + stagflation +" (inflation combined with stagnation of growth), especially if "no decisive action is taken to limit global warming" quickly, notes the bank.

The random nature of weather events should also increase uncertainties, leading to an increase in risk premiums which, in turn, will hurt investment spending.

"Countries will be affected by climate change in different ways" depending on the sectors that dominate their economy, the most vulnerable being "agriculture, tourism, recreation, land, and all sectors that use a lot of labor "Judge Morgan Stanley.

Other sectors will be indirectly affected by the need to limit their carbon dioxide emissions, notably energy, transport, construction, industry and real estate, especially in developed countries.

The role of public policies is crucial, underlines Morgan Stanley, because "inventing new techniques which reduce CO2 emissions and disseminate existing technologies, is at the heart of efforts to stop global warming".

Research funding or changes in regulatory standards can therefore lower the barriers to market entry for small innovative companies that develop alternative energies, and stimulate competition.

Large countries are less sensitive to the economic fallout from global warming because they have greater geological and ecological diversity than smaller countries.

"Regional free trade agreements could come under great pressure when climate change creates major asymmetric shocks," Morgan Stanley notes.

"This is particularly true for currency unions, and fixed or quasi-fixed exchange rate regimes, which in extreme cases could collapse as a result of major climatic shocks," predicts Morgan Stanley.

Countries that will suffer from weather-related damage may see their currency weaken, says the bank