Home > Americas, Environment > Climate change seen costing Central America billions of dollars

Climate change seen costing Central America billions of dollars

01 Dec 2010

Source: alertnet // Anastasia Moloney

NicaraguaGrandma648A woman and her grandson stand in the doorway of their house at the remote community of San Rafael del Norte in northern Nicaragua January 15, 2010.The northern communities of Nicaragua are being affected by climate change. REUTERS/Oswaldo Rivas

BOGOTA (AlertNet) – Climate change could cost Central America the equivalent of around half of today’s annual gross domestic product by the end of this century as more extreme weather, lower crop yields and water shortages are forecast in a region already prone to natural disasters, a recent United Nations report warns.

Increasing global average temperatures, rising sea levels, changes in rainfall and more frequent storms and droughts linked to climate change are already taking a heavy toll on government finances and poor rural communities across the seven countries that make up Central America.

Based on economic modelling, the study carried out by the U.N. Economic Commission for Latin America and the Caribbean (ECLAC) aims to put a price tag on the impact of global warming in the region, based on development and carbon emissions scenarios for agriculture, water resources, intensity of hurricanes and floods, and biodiversity.

“While uncertainties exist, initial estimates for only four sectors suggest that climate change might cost the region the equivalent of 54 percent of its GDP based on 2008 figures – $73 billion – accumulated over 90 years, from now until 2100,” Julie Lennox, climate change expert and ECLAC project coordinator, told AlertNet in an interview from Mexico City.

The study estimates the potential cost for Central American governments of doing nothing or little to address the effects of climate change – the “business as usual” approach – as well as costs if governments do implement strategies to tackle the problem.

The report concludes it would be more “cost effective” for states to address climate change by focusing on disaster prevention and adaptation sooner rather than later.


While Central American nations are low emitters of carbon – producing just 0.5 percent of global emissions – El Salvador, Honduras, Nicaragua and Guatemala are among the world’s countries most vulnerable to the impact of climate change.

The isthmus of Central America, wedged between the Pacific and Atlantic Oceans, lies on the edge of the hurricane belt, making the region particularly susceptible to natural disasters like tropical cyclones.

Roughly half of Central America’s population of 40 million live in poverty, and it is they who bear the brunt of natural hazards and local climate shifts, the report says.

Central America has experienced a “sustained increase” in the number of recorded extreme weather events since the 1970s, it adds, especially floods and landslides caused by storms in Costa Rica, Honduras and Panama.

More than 80 percent of land in Central America is exposed to landslides brought on by heavy rainfall, and almost all parts of the region have experienced drought in the last 30 years, according to the report.

In 1998, Hurricane Mitch battered Central America, causing some $5 billion in damage, and this year Guatemala has suffered over $1 billion in economic losses due to tropical storms.

The economic toll of such natural disasters is expected to rise, as experts predict extreme weather linked to climate change will become worse and more frequent.

“We are very concerned that we will have at least more intense storms and other extreme weather events such as droughts. We expect to see an increase of between five to 10 percent in intensity in hurricanes and tropical storms over this century, based on international literature,” said Lennox.


The report warns that agriculture – which is a key driver of the Central America’s economy, making up 18 percent of its GDP – will be one of the hardest-hit sectors.

“Climate change could significantly affect food security by reducing food production and curbing direct access to food among rural families, as well as leading to higher food prices,” the report says.

Predicted water shortages will also cause falling production of the region’s staple foods: maize, rice, beans and coffee, its key export. These crops are particularly sensitive to rising temperatures and declining rainfall levels, the report says.

The model used in the study points to an average reduction in rainfall levels for Central America of between 10 to 28 percent, depending on the level of emissions in the future, as well as increasing variability.

“Under the ‘business as usual’ scenario, it is estimated the overall agricultural production index in the region could fall by about nine percent by the end of the century,” Lennox said.

In Guatemala, for example, the report forecasts that a 3.5 degree Celsius rise in temperature together with a 30 percent reduction in rainfall could lead to a 34 percent decline in maize production and 66 percent for beans.

To address falling agricultural production, the report calls on regional governments to step up agricultural insurance schemes for poor farmers, expand credit and financial incentives for those investing in sustainable farming methods, and grant more collective land titles to indigenous groups.


The report forecasts serious water shortages for the region, where 75 percent of the population depend on groundwater. At the same time, without improvements in water use, economic and population growth in Central America could boost demand for water by about 300 percent by 2050.

“Central American societies need to become more audacious managers of their water resources,” the report says.

It urges governments to promote the use of electric power from renewable energy sources, such as solar and wind, and more efficient irrigation systems, particularly in rural communities.

“Everything to do with efficient water management – like dams, using and storing water more efficiently, recycling and returning water to the ecosystems – is going to be essential to Central America,” said Lennox.

However, the report warns that adopting measures to adapt to climate change “will be highly onerous for Central America because it demands a redoubling of efforts to reduce poverty, inequality”.

“This is a serious challenge, and it can’t just stay in the realm of environmentalists and climate experts,” said Lennox. “It is a central economic challenge with implications in many sectors.”

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