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Climate change Greenhouse gases Costs Energy consumption Economic analysis Economic trends Economic growth Sustainable development Latin America Caribbean region

The economics of climate change in Latin America and the Caribbean:
stylized facts
Luis Miguel Galindo and Joseluis Samaniego


his article aims to provide an overview of the main regular

patterns in theeconomic impacts of climate change in Latin America and the Caribbean, including the corresponding adaptation and mitigation processes. The key results show that the economic costs of those impacts in Latin America and the Caribbean are significant, heterogeneous, nonlinear and growing over time; and that there are specific thresholds beyond which irreversible losses occur. The available evidencealso reveals a positive relation between the trends of per capita emissions, energy consumption per capita and income per capita. Projections are for
Luis Miguel Galindo Expert, Sustainable Development and Human Settlements Division

per capita emissions to continue to grow regionwide, with the levels for individual countries converging in absolute terms; and at the same time emissionswill gradually become decoupled from economic activity.


Joseluis Samaniego Director, Sustainable Development and Human Settlements Division



Climate change is one of the key challenges of the twenty-first century. The available scientific evidence shows that greenhouse gas emissions —causedessentially by human activities— are generating large-scale climate changes, involving a rise in global temperature, changes in rainfall patterns, shrinking ice caps and retreating glaciers, rising sea levels and increases in the intensity, frequency, or both, of extreme weather events (IPCC, 2007). These climate changes can be expected to have significant repercussions for human activities and the planet’secosystems. In particular, economic activities will face the simultaneous challenge of adapting to new weather conditions and implementing major mitigation processes to avoid the most extreme climatic scenarios.1 The scale of the economic costs expected in this century suggests that climate change will be an additional constraint on economic growth for the countries of Latin America and theCaribbean. The economic analysis of climate change is therefore essential for designing and implementing a consistent adaptation and mitigation strategy, to reduce or avoid the most extreme economic costs arising from this phenomenon and optimize the use of available resources. Nonetheless, this is a complex task in which the long-term costs and benefits of each public-policy alternative need to beweighed, and appropriate risk management implemented in a context of high uncertainty (Pearce and others, 1996; Stern, 2007; Mendelsohn and Neumann, 1999; Tol, 2002). Not surprisingly, this involves an intense ethical and international political debate over the distribution of costs between countries, and between sectors and economic groups, with emphasis on adaptation and vulnerability, or onmitigation and compliance mechanisms and the respective sanctions (see, for example, Oxford Economic Review of Economic Policy, 2008). The key aim of this article is to present a longrange overview of the main regular patterns observed between economic activities and climate change in the region. It thus attempts to contribute to discussions aimed at defining the best adaptation and mitigationalternatives to tackle the problem of climate change from the Latin American and Caribbean standpoint, and to improve understanding of the consequences that the various types of international agreements could have for the region. The economic analysis of climate change is surrounded by major uncertainty, since it includes a wide variety of factors in which the transmission channels and scale of the...
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