Asia-Pacific Climate Change Impact Assessed in UN Economic Survey

Compared to nations in the rest of the Asia-Pacific region, the impact of climate change is moderate so far for the countries of the South Caucasus, according to an expansive study published by the United Nations measuring the impact of global warming on economic development.

The UN report, titled Economic and Social Survey of Asia and the Pacific 2025: Understanding the Macroeconomic Implications of Climate Change, sheds light on the “macroeconomic and climate change nexus” that will shape economic development in the coming decades.

“As the world experiences more climate disasters and steps up climate action, there will be significant implications on societies, economies and macroeconomic outcomes,” the report notes. “Understanding the complex and evolving macroeconomic and climate change nexus is thus necessary for macroeconomic policymakers to achieve their traditional goals and targets while effectively supporting national climate action.”

Armenia, Azerbaijan and Georgia are comparatively well positioned at present to confront future challenges, data contained in the report suggests. For instance, the estimated average annual loss, in terms of percentage of GDP, caused by “climate factors” is 4.8 percent for all 30 countries covered in the UN report. But the estimated losses for the South Caucasus states are all below average, with Azerbaijan having the lowest rate at about 3 percent.

The estimated losses to South Caucasus states’ agriculture output production value due to climate change are also well below the Asia-Pacific average, the study notes.

The study asserts that global warming and policy responses in such sectors as agriculture, energy and trade will exacerbate inflationary pressure across the Asia-Pacific region. It goes on to predict an average 1 basis point increase across the Asia-Pacific in the consumer price index due to expected climate change by mid-century. Armenia, Azerbaijan and Georgia are all projected to have warming-related increases below the average rate.

“These estimated inflation effects are based on countries’ price index vulnerabilities to temperature and precipitation extremes, and stem from disruptions to agriculture, energy production and supply chains, as well as damage to infrastructure and industrial facilities caused by climate change,” the report states.

The South Caucasus states are fortunate that their exposure to climate change-related development risks is relatively moderate. The UN study does not give the region high marks for institutional capacity to address climate challenges. A “coping capacity analysis” published in the study shows that Armenia, Azerbaijan and Georgia are all worse than average in the categories of “strength of banking sector” and “financial development index.” Armenia and Azerbaijan are likewise deemed below average in “climate finance mobilization” and “use of green financial policymaking.”

“While some countries have made strides in enhancing their fiscal and financial resilience, significant gaps remain, particularly in countries with limited resources and structural dependencies on climate-sensitive sectors,” says the report. “In moving forward, regional cooperation, targeted policy interventions and increased investment in climate adaptation will be essential to bridge these gaps.”

The UN recommends identifies a variety of ways to “enhance resilience,” including improving public finance management systems, augmenting social welfare safety nets, expanding the tax base and more efficient tax-collection systems, developing green fiscal stimulus measures and fostering a higher level of joint action to address challenges.

“There is a need for new thinking on policy tools and approaches. Since coping with and responding to climate change are not traditional macroeconomic goals, the effectiveness of traditional policies and approaches may be questioned,” the report cautions.

“Policymakers should be mindful of unintended adverse social impacts of climate-aligned macroeconomic policies. For example, carbon-pricing schemes that do not use part of additional government revenue to support people affected by higher energy prices can raise poverty and widen income inequality,” it adds.