(Copenhagen, December 17th, 2009) The seven countries of Central America produce less than 0.5% of the world emissions, but will suffer serious economic, social and environmental losses due to climate change, says a study coordinated by the Subregional Headquarters of the Economic Commission for Latin America and the Caribbean (ECLAC) in Mexico with the Ministries of Environment and Finance, the Central American Commission for Environment and Development (CCAD/SICA) and the Central America Economic Integration Secretariat (SIECA), with financing from the Department for International Development (DFID) of the British Government.  This investigation is part of the process underway to estimate the value of the impacts of climate change in Latin America and the Caribbean which is coordinated by ECLAC.

The study "The Economics of Climate Change in Central America" , which considers different development and emissions scenarios, as well as adaptation and mitigation options, presented an initial estimate of a cost of a 103 billion dollars at net present value, for the accumulated impact in 2100. Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama are already exposed to higher variations in precipitation and extreme events.  These incidents will increase in the next decades. This situation is made more difficult by existing socioeconomic and environmental vulnerabilities associated with poverty, limited access to food and drinking water and the insufficient coverage and quality of health, education and social security services.

The study's initial results indicate that the impact of climate change in Central America translates into higher climate variability and more intense extreme events. With a scenario of inaction and increasing emissions, the impact is significant and will increase with time. It was confirmed that the costs of such a scenario of inaction, of the sort of the IPCC A2 scenario, would be higher than the costs of a scenario with an international agreement to significantly reduce emissions. The initial estimates made by the study are the following:

Temperature and Precipitation: Under the scenario of inaction, and using the average of three climate models, the temperature could increase between 3.6° C and 4.7° C by 2100, depending on the country. The same exercise estimates an average reduction in precipitation of 28%, with a range between 18% and 35% depending on the country. The scenarios for rainfall exhibit a high range of variability, which constitutes an additional risk for the availability of water resources.

Extreme Events: Central America has registered 248 extreme events associated with the climate between 1930 and 2008. The most frequent events are hydrometeorological in nature (floods, storms, avalanches and mudslides), followed by droughts, with 85% and 9% respectively of the total. During the last three decades the number of disasters has increased annually by about 5% relative to the seventies. The intensity of hurricanes and storms could increase by between 5 and 10% due to climate change during this century and Belize and Honduras will be more affected, followed by Costa Rica and Panama.

Water Resources: With climate change, the demand for water by 2050 could increase by 12% above the tendency without climate change, and by 19% by 2100. In addition to the increased pressure due to economic growth and urbanization, the rise in temperature and the variation in rainfall will affect both demand and supply of this precious liquid. The pressure will be higher in Guatemala, Honduras and Nicaragua.

Agricultural Sector: Agriculture will be one of the most affected sectors in the Central American Isthmus. These activities, including those of an agroindustrial nature, currently account for about 18% of the region's GDP. According to initial estimates, the agricultural index could fall by 9% by 2100. The livestock sector will be especially affected with a decrease of its index of 13%. The potential impacts on the production of corn, beans and rice are of particular concern, due to their role in food security.

Biodiversity: Central America is home to 7% of global biodiversity. By 2080, climate change could reduce the region's potential biodiversity index by 38%, and between 27 and 48% depending on the country. The most affected countries will be Nicaragua, El Salvador and Honduras.

The first phase of the study produced an economic assessment of the accumulated impacts of climate change to 2100 which is equivalent to 103 thousand million current USD or 69 thousand million USD at 2002 prices. This economic assessment is equivalent to more than 70% of the region's GDP in 2008 at present net value and a discount rate of 0.5% and is the total of studies of the measurable costs in four areas of concern: agriculture (19%), water resources (15%), biodiversity (19%) and intensity of extreme events such as hurricanes and storms (18%). These initial costs increase especially after 2050 in most of the areas analyzed and are considerably higher by the end of the century, even considering that not all impacts can be assigned an economic value and other sectors still need to be evaluated. This threat confirms the importance of achieving a substantive reduction in global emissions in the short term to avoid greater costs and highlights the urgency of significant support by developed countries to finance adaptation and the transition to low carbon economies with the necessary technological transformations.

The project "The Economics of Climate Change in Central America" is exploring possible policy options and implications including the need to redouble efforts to reduce current levels of poverty, inequality and socioeconomic and environmental vulnerabilities. Initial options explore the need to strengthen food security, guarantee energy security, efficiency and sustainability and to become expert managers of water resources. The study gives special attention to the need to limit the pressure on natural ecosystems and support their adaptation, reduce the impact of extreme events, take preventative measures regarding fiscal policy, strengthen the systems involving science, innovation and technological development, and a timely integration into a global low carbon economy.

The initial results confirm that climate change cannot be treated as a problem solely of the environmental institutions, but rather must be recognized as a central and cross-sectoral economic problem. Climate change will affect public policy and finances due to the increase in emergencies caused by extreme events. This situation will make it essential to adopt a fiscal policy that includes a consideration of climate change as a multisectoral concern. Although the current economic crisis is a very serious threat, the response needs to involve a rethinking of the development strategy to incorporate measures to deal with climate change. Financial mechanisms are required that respond to the deceleration of economic growth with fiscal stimulus programs that take into consideration climate change impacts and create fiscal incentives for the transition towards more sustainable economies.

Note: This press note is based on the initial results of "The Economics of Climate Change in Central America" project for which a full publication will be available in 2010. For further information please contact Pedro Cote, pedro.cotecepal.org, telephone +52 55 5263 9714.