OTHER VOICES: Climate change could stall growth in emerging markets

By Hans Greimel, Crain News Service

TOKYO (Sept. 26, 2014) — Auto executives have long salivated over the huge sales possible in emerging markets as their teeming, upwardly mobile masses migrate from motorbikes to cars.

So imagine the irony behind a new economic forecast that says surging greenhouse gases, spurred partly by auto emissions, will throw cold water on that once-anticipated development boom.

The problem: Climate change will disproportionately disrupt economic growth in poorer, tropical countries — especially the currently bustling economies of South and Southeast Asia.

The projections, from a July report by the Organization for Economic Cooperation and Development (OECD), temper what were long-held sanguine assumptions about rampant emerging market growth.

Greenhouse gas emissions are expected to double between 2010 and 2060, the OECD said. That could cut global GDP by 1.5 percent compared with base projections — and amount to a 5 percent GDP loss in the worst-hit regions, it projected.

“Especially in Asia, growth could be curbed further by the rising economic damages from environmental degradation due…to climate change, which are likely to affect these countries earlier than expected,” the OECD predicted in the report, entitled “Policy Challenges for the Next 50 Years.”

BRICs still key

To be sure, there are still lots of reasons to bet on emerging markets, including the so-called BRICs, shorthand for Brazil, Russia, India and China. For starters, the balance of the world economy will continue shifting their way, the OECD said.

And by 2060, non-OECD countries — the poor ones — will account for the lion's share of global exports. Exports from those countries accounted for 35 percent of global exports in 2012, but their share will climb to 56 percent by 2060, the OECD said.

But the impact of climate change was among the report's surprising findings. The OECD projection suggests that it could siphon between 0.7 percent and 2.5 percent from global GDP.

But in South and Southeast Asia, it may take a 5-percent bite.

Land loss risk

“On a global level, falling agricultural productivity, and capital and land losses related to sea level rise, are likely to be among the main contributors,” the report said.

That lower GDP growth translates into lower sales of everything, including cars and trucks.

On the flip side, more temperate regions may actually see an initial rise in agriculture productivity, better terms of trade and even stronger demand for tourist services, it said.

(Though the OECD cautions those gains will be ephemeral.)

The report covers a wide range of topics, including trade relations, changing demographics, income disparities and fiscal deficits. On the matter of climate change, it makes general suggestions on how to rein in emissions to mitigate the pain.

But the report is a sober warning that the future of selling cars in emerging markets looks less rosy, thanks, in part, to the emissions being churned out by cars already on road.

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Hans Greimel is Asia editor for Automotive News, a Detroit-based sister publication of Tire Business. This blog appeared on the paper's website,autonews.com.