STU 01-99 : Special Topic - A sustainable development approach to climate change: why and how? [ Short Term Update 01-99 - 03/01/1999]

During the past few months, the signals concerning the development of the economy have been mixed. There are three indicators worth mentioning on the negative side. Growth in world trade, and in particular intra-European trade, has slowed. Partly in connection with this, it is estimated that Belgian exports have actually fallen in the second half of 1998, compared to the first half of the year. Thirdly, industrial confidence has continued to decline.

On the positive side there are four factors worth noting. Unemployment has continued to decline for the sixth consecutive quarter. Consumer confidence remains high and has even improved during the last few months. Thirdly, real interest rates have continued to fall and finally the government deficit fell sharply in 1998.

There are some fragile indications that the slowdown in the economy will only be temporary and that activity may soon resume its upward trend. Nevertheless, in terms of annual averages, 1999 should show a weakening in GDP growth, which is estimated to be 2%.

The upturn should be most visible in exports. Year-on-year growth rates for exports and private consumption should be relatively low at the beginning of the year and gradually improve thereafter.

Inflationary pressures should be absent. Underlying inflation will continue to hover around 1.4%, while oil prices should, on average, be lower than in 1998, leading to consumer price inflation of 1%, which is the same growth rate as in 1998. The health index should rise by 1.2%.

The labour market was particularly vigorous in 1998, with 54,000 more people in work (from June to June). In the second half of 1998 and into 1999, job creation is expected to be less dynamic. The June-to- June change for 1999 should be 33,000. The standardized unemployment rate should continue to fall, from 8.6% in 1998 to 8.2% this year.

In the area of public finances, the net borrowing requirement should be around 1.3% of GDP in 1998 and decline further in 1999. The primary surplus is expected to be above 6% in 1998 and 1999.

Global climate change may serve as a warning but also as a catalyser for change towards more sustainable ways of production and consumption, that could result into reduced greenhouse gas emissions. Reversing the emissions trend will require far reaching measures in the context of intensive international cooperation.

Facing the warning of global warming

Uncertainties remain in the science of climate change. However, a concerted body of evidence, assembled by some 2500 scientists of the International Panel on Climate Change (IPCC), suggests that the probable magnitude of global warming and its associated detrimental environmental and socio-economic impact is substantial: "With the growth in atmospheric concentrations of greenhouse gases, interference with the climate system will grow in magnitude and the likelihood of adverse impacts from climate change that could be judged dangerous will become greater" (IPCC 1995).

The rate of temperature change that is occurring today is indeed significantly higher than any observed over the last 10,000 years (IPCC 1995). According to IPCC estimates, at current emission trends, by the year 2100 global temperatures could increase between 0.5°C and 3.5°C. After this date, temperature increases are bound to continue to intensify. This could result in substantial adverse socio-economic, human health and environmental impacts which in turn would translate into real economic costs. Changes in temperature could cause sea levels to rise between 15cm and 95cm by the year 2100 (IPCC 1995). Other long-term detrimental effects could include: reductions in agricultural output and food security; risks to ecosystems and accelerated loss in bio-diversity; loss in available fresh water resources; spread of pests and diseases; changes in hydrological patterns and increases in the number of extreme climatic events (such as droughts, storms, hurricanes and floods); accelerated soil erosion and desertification and consequently increases in the number of environmental refugees.[More in the full text document (PDF 3.0 file)]

STU 1-99 was finalised on February 18th 1999.