Building a Resilient and Sustainable Economy Against Climate Change

    LightCastle Analytics Wing
    LightCastle Analytics Wing
    Climate Change

    Global climate change and its consequences are no longer a prerogative for the future; its effects are already here, endangering the planet, people, and nature. Bangladesh is set to face more natural calamities, heavy rain, cyclones, and higher temperatures than ever before. [1] Worsening weather conditions, rising sea levels, warming oceans, and other climate-induced changes are enormous threats for economies worldwide. These conditions are irreversible, and strategies should be developed to create resilience against these changes and sustainability for the future.

    From an economic perspective, climate change will create such adverse conditions for businesses that global GDP will lose 18% of its total value by 2050. Asia would be hit the hardest among all the economies, with China risks losing nearly 24% of its GDP. [2] With risks looming large in Asia, Bangladesh faces economic threats as well. The CRI index ranks Bangladesh 5th among countries that face the highest economic risks from climate change. [3] Neighboring countries India and Pakistan are ranked 7th and 5th in climate-induced risks. [3]

    Consequently, Bangladesh’s GDP is set to lose 1.3% in growth until the 2041 fiscal year. On the other hand, different natural disasters over the past 40 years have caused Bangladesh to lose an estimated USD12 Billion, compressing the GDP 0.5 to 1% annually. [4] 

    Figure: GDP growth rate objective until FY 25
    Figure: GDP growth rate objective until FY 25

    Bangladesh is targeting an 8.51% GDP growth rate by 2025. To achieve this, economic goals must be aligned with the impending risks that climate change has over the economy. This goal requires that Bangladesh adapt its growth and social development strategies by paying specific attention to nature and climate and improving the economic system that faces different risks in different sectors. 

    Climate Change Implication Across Different Sectors

    For a resilient and sustainable economy, the impending danger needs to be identified for each sector and how it affects the overall economy and related population. Currently, some of the sector-wise threats the economy faces are:

    SectorThreats Imposed By Climate ChangeRisks
    FisheriesSalinity increase: Sea level rise increases inland water salinity by reaching freshwater sources, creating unfavorable aquaculture conditions.

    Destruction of marine habitat: Warmer Sea temperature causing loss of marine habitat decreasing overall catch, changes in fish migration routes and storms renders fishermen and boats unable to go to the sea to stay for a more extended period.

    Shifting coastlines: Sea level rise causing geographic changes in coastal areas. This directly affects people living in coastal regions, dislocating people, businesses, and local economies.
     
    Submerging lands: Lands getting submerged underwater is a major issue for countries closer to sea levels dislocating millions of people living in coastal areas.
    — Bangladesh risks losing 11% of the total land in coastal areas.

    — Fifteen million people are facing the risk of relocation.

    — 12% of the population faces the possibility of losing their livelihood.
    AgricultureDegrading soil quality: Salinity, plastic pollution, and over usage of pesticides create lands that cannot be cultivated. Heavy rain, floods, extremely high temperatures are further damaging soil quality.

    — Increasing natural calamities: Cyclones, heavy rain, droughts, and hurricanes are growing, which damages farms and washes away various agricultural production.  

    Lack of water resources: Water sources are decreasing as well water quality. Droughts are already creating existing water sources to dry up.

    Decreasing production quantity: Adverse weather creating situations in which cultivation is not possible. Directly affecting a loss in production quantity.

    Decreasing production quality: Different agricultural products require different kinds of weather conditions. Without optimal weather conditions, crop quality declines drastically in return decreasing the price of produced crops.
    — Cost of agricultural goods rising.

    — Bangladesh already faces a regular price hike due to natural calamities.

    — 50% of total rural employment faces risk.

    — Rice production will decrease by 28% due to higher temperatures while delayed monsoon can cause an 8% decrease by 2050.
    ManufacturingLack of raw materials: Adverse conditions create low input for various manufacturers.

    — The rising cost of production: Lack of raw material with high demand causes the price to increase, and existing materials require a high level of processing.

    Supply chain disruptions: Bad weather conditions make it impossible to reach destinations on time, and an increase in price in every step of the value chain is observed.
    — Cotton, one of the major raw materials for RMG, increased by 40% in cost globally. 

    — Rising freight rates increasing commodity prices.

    — Longer delivery times due to adverse weather.

    Bangladesh, with its geographic position and elevation, sea-level rise imposes one of the greatest threats. It causes submerged lands, increased salinity, and floods, threatening the fisheries and agricultural sector directly. Floods in July 2021 alone displaced over 5,000 fish farms in the Bagerhat area. It is incurring a loss of at least USD 1.3 million. On the other hand, Rampal Upazila saw losses close to USD 0.47 million[5]. It is estimated that By 2050, the sea level may rise by 50 cm, which will result in coastal areas losing around 11% of total land, which will affect 15 million people, of whom a large amount is directly involved in the fisheries sector. [6] 

    Figure: Impending risks from climate change on coastal areas,  Source: Influence of hydro-climatic factors on future coastal land susceptibility to erosion in Bangladesh: a geospatial modeling approach
    Figure: Impending risks from climate change on coastal areas. / Source: Influence of hydro-climatic factors on future coastal land susceptibility to erosion in Bangladesh: a geospatial modeling approach

    Migratory changes of different species of fishes such as Eels, Herring, Prawn are causing location changes of fishing. Causing problems in the estimation of the overall catch, lowering the number of catches, and impacting overall export. [7]

    Additionally, the rising temperature will create adverse conditions which will affect rice production to decrease by 28% for agriculture added with delayed monsoon and natural calamities. At the same time, delayed monsoon and seasonal changes will cause an 8% loss of production by 2050. [8]  

    Furthermore, in manufacturing, RMG, the leading manufacturing sector of Bangladesh responsible for more than 80% of total export, faces issues in the supply of raw materials.  Yarn accounts for more than 50% of the total cost of production in knit-based textile. However, almost 99% of the demand is met through imports. In addition to that, about 8 million bales of cotton are imported, which costs around USD 3 billion a year. [9]

    Recently the price of yarn hiked 40% on average globally. Although the sudden hike is related to the increasing demand, climate factors play an essential role. Looking into the cotton-producing countries, for example, India, one of the largest cotton suppliers in the world and the largest seller to Bangladesh, is facing significant droughts in cotton-growing states resulting in a lower supply of cotton from India. [9]

    Persisting Bottlenecks

    Policies and budgets must be addressed to achieve a sustainable economy various existing issues must be solved. While the Bangladesh Government has plenty of institutions and policies that plan to mitigate the environmental problems, the problem lies in the proper synchronization of the institutions and the regulations in place. There is a lack of integrated action regarding sustainable development strategies. 

    Issues that persist are:


    Lack of Resource
    The primary ministry that works for the environment is Environment, Forest, and Climate Change (MoEFCC). The ministry itself is riddled with issues such as lack of capacity, knowledge, and inadequate staffing.
    Technical DataLack of up-to-date information collection and monitoring is scarce, especially on environmental damage and its current situation.
    Local Government InstitutionMoEFCC and other ministries did not put importance on the state of environment management. A prime example is the lack of Local Government Institutions in regards to environmental management.
    Fiscal and Pricing PolicyPolicies do not properly incentivize sustainability. Instead, pricing policy subsidizes carbon-emitting fossil fuels that create a further burden on healthcare expenditure. Assessment is required to improve and implement green growth.
    Budgetary SpendingThe budget for the MoEFCC and its activities has been trivial. In FY 2020, it was only 0.05% of the GDP. Ministries dealing with Water, Land, and environment-related services were 0.39% of the GDP. This scarcity in financial resources further limits the institutions to support various activities needed for an efficient and effective response to climate change programs.

    Building Resilience Against Climate Change

    Before building a sustainable economy, Bangladesh must create resilience towards the already existing and impending changes. Currently, the government is taking multitudes of approaches regarding climate change. Strategic, financial, and infrastructural plans have been taken to ensure the country is more resilient towards climate-induced changes.  

    A Locality Based Bottom-Up Approach

    In 2020  the Global Centre on Adaptation (GCA) Office was launched in Dhaka, which will focus on global knowledge and experience sharing. Specific importance will be given to nature-based solutions and infrastructural development for a more resilient future. The center will focus more on locally-led adoption programs. Creating a more decentralized approach and more significant impact. [10]

    National Adaptation Plan 

    The Ministry of Environment, Forests, changes and Climate Change is developing a national adaptation plan that will focus on water resources, agriculture and food security, damage limitation on coastal zones, and urbanization. [10]

    Investment Allocation

    Increasing monetary funds and utilization of investments is a significant concern for the next five years. USD 3 billion has already been allocated for this year’s budget. Since LDC graduation is expected very soon, international investments regarding climate change will decline; therefore, different funds such as green climate funds should be appropriately mobilized and invested strategically. 

    Capacity Building

    As per the perspective plan of Bangladesh 2021-2041, utilization and development are crucial. Some of the targets that the plan specifies regarding these are: 

    • Creation of knowledge-based economy
    • 100% literacy rate 
    • Free education for up to 12 years
    • Developing Job focused skill development training institutions

    Green Growth and The Way Forward 

    As per the 8th 5-year plan, the Bangladesh government wants to promote and implement a more sustainable economy with importance given to environmental impact. [11] This will ensure various sectors are more environment friendly and an economy that is more careful towards nature. 

    Some solutions that are being planned and implemented are :

    Improved Budgeting and Green Accounting

    The government is undertaking green Public Financial Management. Under the “Green PFM” agenda, all ministries of finance, planning, and other related departments will need to show environmental costs for all kinds of investment projects. In addition, the administration will introduce a green GDP and budget to accumulate data regarding depletion of resources, degradation of the environment, and vital environmental initiatives. 

    Expand Special Economic Zones and Introduce Environmental Regulations

    The government plans to increase the number of SEZs and implement more strict environmental regulations to ensure proper pollution monitoring and allow the government to enforce fines in case of violations.

    Introduce Extended Producer Responsibility (EPR) to Minimize Plastics 

    Producers will be responsible and take liability to ensure proper environmental management for their products. There will be an introduction of plans that will minimize single-use plastic and increase disposable alternatives.

    Policy implementation

    More advanced implementation from a policy perspective that will take change under the 8th 5-year plan is:

    Reducing Subsidies for Fuel and Adopt Green Tax on Fossil Fuel Consumption

    Encourage businesses and institutions to reduce the usage of fossil fuels and move towards greener alternatives.

    Pricing Policies for Water, Sanitation, and Solid Waste Management

    Tax policies will be implemented towards water usage, proper sanitation, and how waste management systems.

    Taxation of Emission from Industrial Units, Water Pollution, and Timber Extraction

    Thikesax has to be provided on emission, water usage, ETP plants, and timber extraction from various sources. This, in turn, will make companies more sufficient and cautious towards the environment. 

    Introduction of Household Illegal Waste Dumping Charges

    Only companies are not facing various policies and regulations; households also need to be more aware and be cautious regarding their waste management and dumping. 

    Further Implementation of National Biodiversity Strategy and Action Plan (NBSAP), 2016-2021

    The National Biodiversity Strategy and Action Plan will be further continued and updated beyond 2021. With changes to previous and making it more adaptable for the upcoming years. 

    It is essential that governing bodies properly monitor the implementation of policies, activities, and coordinated action by all parties involved. With the inevitable changes due to climate change, utmost importance should be given to the environment and creating a greener economy that is more adaptable and responsible. 

    The article was authored by Jaber Bin Noor, Trainee Consultant, and Dipa Sultana, Business Consultant, at LightCastle Partners. Advisory and editorial support was provided by Sanjir Ali, Project Manager and Senior Business Consultant at Lightcastle Partners. For further clarifications, contact here: [email protected]

    References

    • 1. AR6 Climate Change 2021 – The Physical Science Basis
    • 2. Stress Test Analysis Report – Swiss Re
    • 3. The Climate Risk Index Report 2021 – Germanwatch
    • 4. Bangladesh: Building Resilience to Climate Change –  World Bank
    • 5. Thousands marooned in coastal areas seek aid – Dhaka Tribune
    • 6. Climate Displacement in Bangladesh – Environmental Justice Foundation
    • 7. Climate Change and Fisheries & Livestock in Bangladesh Information Brief – International Union for Conservation of Nature (IUCN)
    • 8. Impact of Climate Change on Agriculture – The Financial Express
    • 9. Rising yarn prices threaten garment export recovery – The Daily Star
    • 10. GCF National Adaptation Plan Project in Bangladesh – UNDP
    • 11. The 8th 5 year Plan – Bangladesh Planning Commission

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    LightCastle Analytics Wing

    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.