Physical Climate Change and the Sovereign Risk of Emerging Economies

Physical Climate Change and The Sovereign Risk of Emerging Economies
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Physical Climate Change and The Sovereign Risk of Emerging Economies
Climate change is one of the most pressing issues facing the world today. It is an environmental crisis that has the potential to cause immense destruction and damage to economies, ecosystems, and communities around the globe. The effects of climate change are expected to be more pronounced in the developing world, where most people are vulnerable to the impacts of extreme weather events, rising sea levels, and temperature changes (Boehm, 2022). Climate change is now recognized as a major risk factor for the sovereign debt of emerging economies. This essay will focus on this issue and its implications for emerging economies. In particular, it will look at the physical climate change risks to these economies and the potential impacts on their sovereign debt risk.
Physical Climate Change Risks to Emerging Economies
Climate change is expected to have a wide range of physical impacts on economies worldwide. These impacts can be divided into four main categories: extreme weather events, shifting temperatures, sea level rise, and changes in natural resources (Boehm, 2022).
Extreme weather events are likely to become more recurrent and intense as global temperatures rise, which can lead to increased precipitation and flooding, storm intensity, and drought severity. These extreme events can cause damage to infrastructure and disrupt economic activity, leading to economic losses. Additionally, extreme weather events can cause health problems and fatalities, displacement of people and animals, destruction of ecosystems, and soil degradation. With climate change, the frequency and intensity of extreme weather events are expected to increase, causing more damage and disruption (Boehm, 2022). Thus, it is important to alleviate and adjust to climate change to reduce the likelihood and severity of extreme weather events.
Temperature changes are also expected to have an impact on economies. Warmer temperatures can increase energy demand, water demand, and health risks. Additionally, a rise in temperatures can lead to decreased crop yields and increased pest activity, leading to further economic losses. Warmer temperatures can lead to increased melting of snow and ice, leading to flooding in coastal areas and other areas with low-lying terrain (Anzolin & Lebdioui, 2021), which can cause extensive damage to infrastructure and buildings, leading to further economic losses.
Sea level rise is another major physical risk associated with climate change. Rising sea levels can cause an increase in coastal flooding, erosion, and saltwater intrusion into freshwater resources. This can damage infrastructure, agricultural land, and coastal ecosystems, harming economic activities. It can also result in more frequent and intense storms and changes in the distribution and abundance of marine species (Boehm, 2022). Sea levels are projected to rise...