Economic Power of Climate Change

“Santiago is a bubble.” That was one of the first sentences that my host father said to me to explain Santiago, Chile. I had thought he meant that it was small, and everyone knew each other, or that once you move to the city, it is hard to leave, but that was nowhere close to what he meant. My host father would later explain to me about three months later, that geographically, Santiago was a bubble. The city was surrounded by the Andes mountains that curved around the right side of the city and on the other side was the Pacific Ocean.

 

This specific geography caused a bubble-like effect on the city when it came to weather conditions and pollution. The pollution hung over the city and was visible throughout every season, although it was a bit lighter during the summer months. In the winter, the clouds paired with the bubble-like effect. This created a smog that covered the city, making it harder to breathe. In fact, during the winter, it was incredibly common for people to contract bronchitis because of the smog presence in the air, ultimately leading to infection. 

 

In addition to the health problems this causes, it has some further environmental impacts. Santiago is placed under one of two holes in the ozone layer, leading to stronger and higher UV exposure and radiation. I experienced this during my first weekend in Chile. My friends and I decided to take advantage of the nice weather and visit the beach for the weekend. I should have taken notice that grocery stores only sold SPF 50, but I had my SPF 35 and was ready for the beach after a Midwestern winter. By the end of the day, I had bright red and had blistering sunburns on my shoulders, back, shins, and the back of my knees. At just 80 degrees Fahrenheit, I never had burnt so badly in my life and was not expecting it when I went abroad.

 

So, not only does the increased amount of UV exposure lead to burns and a possibility of skin cancer but it also prevents the presence of water in the atmosphere. As a result, the air in Santiago is a dry desert-like heat with no rain in the summer months. In the winter however, it is cloudy so without the sun, it rains very frequently in Santiago, but due to the bubble-like effect that traps the pollution over the city and prevents it from rising, all rainwater that passes through this pollution is deemed as acid rain and cannot be used. So, in the winter, the city of Santiago relies on the snow that forms on the mountains that can melt and flow down to get naturally filtered before being filtered by the city’s purifying system. With the rising climate, Santiago citizens are not only affected by the decreasing access to resources but are also affected by the urban economics that are changing as a response to the increasing heat.

​

In Urban Economics, a class I took abroad while studying in Chile, we learned about the current large issues that the climate and pollution have on the health of citizens and the impact they make in urban planning, specifically in Latin America. It was an interesting class to evaluate the different factors that impact the Latin American market versus what we would see in the United States.  

​

One of the main topics we talked about in Urban Economics was the challenges of climate change and how they affect the water and sewage systems in a city. As mentioned before, Santiago struggles with access to clean water during the summer months and even throughout the winter, so Latin American countries are highly dependent on the snow coming off of the Andes Mountains. In Urban Economics, they measure the effects of climate change by measuring and observing a few natural disasters and the frequency at which they happen, such as the frequency and magnitude of extremely hot daily temperatures, the frequency and intensity of floods and landslides, and the change in sea level and the impact it has with the vulnerability of sea facades and port, as seen in my notes down below.

 

These were a lot of factors that were observed in Chile as it is a country well known for its earthquakes due to being on tectonic plates, but with a large portion of the country being on the coast of the Pacific Ocean, the times that it did rain in the winter months lead to historically bad landslides that wiped out whole hotels and apartment buildings. When I was living there, my host family had turned on the news to show a before and after of a residential area near the coast that was near the top of a cliff, and after just 5 years, the weather had worn away 150 yards off the side of the cliff and when an earthquake had it, it causes a lot of the houses to fall off the edge. It was devastating to watch on the television and as per my host family, it was only becoming more frequent as they saw growing hot temperatures and faced a 14-year drought.

 

As a result of the devastation and the growing risks towards the coast, Santiago had seen an influx of citizens moving into the city, which added more difficulty for the city planning to address the water crisis. A friend of mine told me it was very typical for Chileans to water their sidewalks or driveways in the summer to cool down the concrete as children or animals played on it. Today, that is a very rare thing to see because due to the increasing scarcity, it is becoming more and more expensive access to water. So, if someone wanted to water their grass, they had sprinklers that were typically programmed to run during the night so the water would not evaporate immediately. 

 

The costs that they face in Latin America due to the scarcity of resources are just the beginning. After the semester had ended, I was invited by my professor to watch a live stream from the Annual Conference of the Central Bank of Chile, which this year had a theme of “Implications of Climate Change and Ecosystem Services Degradation for Macroeconomic and Financial Stability.” This conference was awesome to watch and included many professors from North and South America who talked a lot about the themes mentioned in my Urban Economics class and some things that I observed while living in Santiago. At the Bank of Chile Annual Conference, a professor from Stanford University used historical data and economic models to try and find the cost breakdown to find out how much we are losing in the long term to climate change. The rising costs for water in Santiago may be an extreme case where rainwater is unusable, but in Chile, it is just the beginning. Dr. Marshall Burke observed that climate change not only had a significant impact on labor productivity in the long term, but we are at the rate of reaching 3 degrees Celsius of warming by 2100 as seen below in my notes from the conference.

​

Economically, he observed that it did not look like a big change when we factor climate change into GDP growth. The USA is projected to have GDP growth of 170% by 2100 but at that distance, climate change can only be discounted for 2%. To go further, just 1 degree Celsius can account for about 160 trillion dollars in the economy, and that is not considering the changes in inflation. This is all to say that we continue our efforts to try and be more sustainable, but if we carry “business as usual” then we are expected to experience losses of about 10% of GDP by the time we reach the 2 degrees Celsius of warming threshold.

 

Currently, we have surpassed the possibility of limiting the warming growth to 1.5 degrees, but if we follow Dr. Burke’s assumption that we can limit it to only 2 degrees instead of 3 degrees, the Chilean economy has the potential to grow at least 4.6%. The money that Chile could save in the long term by changing to more sustainable practices could be used to reinvest in infrastructure. As mentioned in my Urban Economics class, the water and sewage systems in Latin America cannot support the types of waste that we can in the United States, such as the inability to flush toilet paper into the sewage system. Investment in infrastructure like a sewage system would further the economic status of Chile as well as reduce the amount of waste created by not being able to dispose of it by flushing. 

 

This optimism for being able to make advancements in a country was what changed my mind from believing that climate change does not have a very big impact. Visibly seeing and experiencing the changes in the weather or experiencing the challenges of insufficient water and sewage systems made me realize that advancement to infrastructure or urban planning could be funded by money saved by sustainable methods in the long term. Before my experiences with my class or this conference, I didn't think it would be at all possible to grow economically by investing in sustainable practices. 

​

Through my learnings in my Urban Economics class, as well as my experience at the Bank of Chile Annual Conference, I strengthened my understanding of the different ways climate change affects the economy. As a result, I changed how I wanted to pursue my career in the long term. Starting as an International Business and Operations and Supply Chain major, I knew that I was passionate about the operations aspect in the field of supply chain. With each abroad experience, my interest was not only deepened but my perspective on how to protect the Earth and succeed economically was furthered.  After being able to travel throughout South America experience national parks and climb mountains, I realized how much our Earth means for us to survive and for us to advance in our futures. 

 

Today, most sustainable efforts take a lot of investment and innovation to create biodegradable packaging or plastic replacements. I hope in the long term that there are more innovative advances in these kinds of areas so that when I can enter into a position that I want, I can advise on the benefits of being sustainable and protecting the resources that we have and those that are fleeting. In the future, I would like to be an Environmental, Social, and Governance consultant to help companies transition their manufacturing processes into a green system and try to reduce carbon emissions to protect the resources we have and limit the strain climate change has on our economy.