Global Warming Affects International Business

During the 20th century, the earth's average surface temperature increased by 0. 6 °  ± (). 2 °C (Folland et al. 2001), and there’s strong evidence that human activities are the main cause of this trend (Mitchell et al. 2001). This increase in global surface temperature is thought to have at least some effect on the frequency of extreme weather events due to climate changes (Folland et al. 2001), and there is concern that these changes will have an enormous impact on various industries (Hitz and Smith 2004). Balancing environmental measures with economic development, that is, working toward sustainable development, is the fundamental goal of global environmental policies, including those for global warming (Hijioka, Masui, Takahashi, Matsuoka, and Harasawa 2006). Over the last decade, scientists have extensively studied the greenhouse effect, which holds that the accumulation of carbon dioxide (CO2) is expected to produce global warming and other significant climatic changes over the next century (Mendelsohn, Nordhaus and Shaw, 1994). In this essay, we will be discussing about the impact to an analysis of global warming change effects on agriculture and insurance industries, and some qualitative conclusions on the relative importance of the government decision. Numerous studies indicate major impacts on agriculture, especially if there is significant mid-continental drying and warming in the country (Mendelsohn et al. , 1994). Normally, sky-high food prices reflect scarcity caused by crop failure. Stocks are run down as everyone lives off last year's stores. This year harvests have been poor in some places, notably Australia, where the drought-hit wheat crop failed for the second year running. And world cereals stocks as a proportion of production are the lowest ever recorded. The run-down has been accentuated by the decision of large countries (America and China) to reduce stocks to save money (Peterson, 1979). With respect to research on global warming, United States and other international research programs are aiming towards improving future predictions. Such programs are arguably weakest in modelling feedbacks from human activities, including effects of trends towards greater urbanization and deforestation on local and regional climates. Economic incentives and culturally motivated practices are in large part driving changes in land use. Understanding incentives and responses by individuals, companies, and governments in developing countries will strengthen the human behavioural component of feedbacks to the climate system. U. S farm policy merits reform to increase farmers’ flexibility in responding to climatic changes without financial penalties that government programs may potentially give to such responses. Besides, government also introduce price support programs to inhibit climate change adaptation. Subsidies, tariffs and non-tariff barriers continue to distort world trade in agriculture and food. Subsidised prices reduce the ability of farmers in non-subsidising countries to earn a sustainable income and generate the capital required to increase production and improve productivity (Hill, Cronk and Wickramasekera, 2011). For example, today’s farmers are paid any positive difference between the support price for any program commodity and the international market price. International commodity markets smooth the price effects of production and consumption shocks, so changes in the patterns of food consumption induced by climate change thus are tempered by open trade or called free trade (Robert and Sally, 1995). Free trade occurs when there is an absence of barriers to the free flow of goods and services between countries Free trade might also increase the efficiency with which a country’s stock of resources of resources, as increased supplies of labour and capital from abroad become available for use within the country (Hill, Cronk and Wickramasekera, 2011). One manifestation insight is the joint implementation approach to greenhouse gas reductions initiated by several countries, including the U. S. Under joint implementation, the least costly projects to reduce greenhouse gas emissions or enhance carbon sinks can be pursued jointly across countries by, in essence, giving private agents and governments opportunities to meet emission reduction targets anywhere and in cooperation with ay others around the world. For example, forestry projects are one of the important outcomes of joint implementation in agriculture industry. Planting trees in reforestation or afforestation projects enhances the absorptive capacity of the biosphere and leads to carbon dioxide reductions in the atmosphere(Robert and Sally, 1995). Besides, Tesco, a European supermarket chain, is beginning a program to provide a global warming rating for everything it sells (Scot, 2007). The chain is creating an index to measure the â€Å"carbon footprint† required to produce, package, and transport ach product in its stores. Consumers can then include the carbon footprint along with price and product quality when making purchasing decisions. Weather and climate are ‘‘core business’’ for the insurance industry. Many extreme weather events such as cyclones, hailstorms, bushfires and floods are projected to increase in either intensity or frequency under climate change. A changing, less predictable climate has the potential to reduce the insurance industry’s capacity to calculate, price and spread this weather-related risk. In Australia, 19 out of the 20 most costly natural disasters, in terms of property insurance losses, have been weather related (Michael, 2007). While insurers face huge risks for society’s failure to act to curb greenhouse gas emissions, there are untapped opportunities for the insurance industry to use its financial muscle to push for changes in government policies as well as damaging business practices of the oil and fossil fuel power generating companies and the auto industry, to name the most obvious (Carrie, 2003). Analysis of the risks associated with climate change provides insurance companies with a working example of the benefits in considering long-term as well as short term issues. Understanding long-term risks and opportunities enables insurers to ensure our business is sustainable in the long term, while generating enduring shareholder value (Michael, 2007). Insurers and reinsurers using their considerable financial resources as â€Å"catalysts† for the development of renewable, emission reductions and energy efficient technologies could serve the industry by reducing risks and opening up new lines of business activity (Carrie, 2003). Government is committed to undertaking further research to increase the scientific understanding of the impacts of global warming, to identify ways to reduce the impact that global warming is expected to have on society and to identify insurance based, policies incentives for a reduction in future greenhouse gas emissions. However, success in dealing with this global problem requires action across the entire economy. While we are learning more about the economics and geophysics of global warming, policy makers should continue to seek ways to minimize social costs of climate change and change mitigation, a process which the economics profession has much to contribute. Prominent examples of efficiency-enhancing policy measures are he promotion of free trade, the liberalization of farm policy, and the joint implementation of greenhouse gas reduction objectives under the Framework Convention on Climate change (Robert and Sally, 1995). Climate change presents a strong case for the need for business, governments and community groups to work together to find sustainable solutions to this critical challenge of the 21st century (Michael, 2007).