ADB warns of rising food, energy prices if climate policy not well managed

CLIMATE change mitigation policies, if not properly managed, can result in food prices and household expenditure in Asia rising, said the Asian Development Bank (ADB) on Thursday (Apr 27).

Ambitious mitigation policies may divert land from food production, which could adversely affect agriculture and food affordability.

While deforestation is reduced, carbon emissions sequestered by afforestation, and bioenergy extracted from biomass, can “enhance” many important environmental services, but competition for land would increase as a result.

Reduced fossil fuel use and increased demand for land during climate change mitigation adversely affect agricultural production and push up food prices. This could potentially lead to 22 per cent of land planted with cereals being converted to forests and bioenergy, hence increasing food prices by up to 34 per cent.

Lower income households – which spend a higher share of expenditure on energy in most Asia regions – will also bear the brunt of higher energy prices as converting land use to formal bioenergy reduces the supply of traditional biomass for household energy, which is used for heating and cooking.

But higher food and energy prices can be offset by redistribution measures, such as recycling carbon revenue as universal basic income on an equal per capita basis, said ADB.

Despite potential price hikes in food and energy, ADB noted that mitigation measures could drive up employment in the energy sector – potentially creating 1.5 million additional jobs in Asia by 2050. The increase in employment would result in a “substantial shift” in the energy sector workforce across technologies, job types and regions.

Aggressive decarbonisation would result in the loss of 1.4 million jobs in the fossil fuel sector in Asia by 2050, while over 2.9 million jobs would be created, mostly in manufacturing, installing and operating solar photovoltaic systems and wind power generation.

“Energy sector employment generally requires much higher levels of skills than general employment in the workforce, so the expansion of energy jobs will lead to more formalised, professional employment in the region,” said ADB.

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ADB also noted that the transformation of the energy sector would require an increase in investments and a reallocation towards cleaner energy sources.

In order to achieve the goals set out in the Paris Agreement, ADB said average annual investments until 2050 would need to increase to US$707 billion. This would correspond to between 1.5 per cent and 2.7 per cent of gross domestic product for countries and sub-regions, including India, the Caucasus, Central Asia, Indonesia and the rest of South-east Asia.