How global warming is changing the world. Analysis: part 3

Global warming is gradually changing not only the climate, but also the economic map of the world. Due to heat waves, water scarcity, migration, and shifting natural resources, countries will compete in new ways for production, investment, labor, and trade routes. Some territories will receive new opportunities, while others will face falling yields, rising costs, and an outflow of population and capital. Izvestia examines this problem in a series of materials: in the first part, we write about which areas global warming has a critical impact, provoking serious consequences and risks that trigger the trigger mechanism and are reflected in other sectors. The second is about how the situation in the energy sector, healthcare and the labor market is changing, changing people's lives, and the third is about what this will lead to in the near or distant future.

New climate map of the world

• Climate change has the potential to reshape the international division of labor. Temperatures and precipitation patterns are changing, as well as the cost of the territory itself is being reviewed: how profitable it is to grow food, build factories, place data centers, trade or live on it.

• The comparative advantage of the state is determined by many factors: it is influenced by water, fertility, temperature, access to the sea, energy, transport and the sustainability of infrastructure. If one of these factors changes dramatically, the country's previous specialization may also become less profitable.

• The chain looks consistent: climate change changes the availability of resources, then the cost of production, trade flows and investor decisions. After that, businesses and the workforce begin to move, followed by a changing geography of the population. This is how the climate process is gradually turning into a geo-economic one.

• The Intergovernmental Panel on Climate Change (IPCC) records the varying effects of warming in different regions of the world: in low and middle latitudes (tropics, subtropics, temperate latitudes), agricultural productivity is already under pressure, while individual high-latitude territories (Canada, Alaska, Scandinavia, Russia, etc.) may receive a longer the season and new opportunities. But there is no automatic division into the victorious North and the loser South: the advantages can be destroyed by fires, pests, floods, melting permafrost and other risks.

• The new climate map will be more complex than the usual temperature map. It is not the absolute changes that are important, but the difference between countries: who will lose less, who will adapt faster, and where the new conditions will allow producing what was previously impossible or too expensive.

New migration of peoples

Migration will be one of the most visible long-term consequences of climate change. When an area becomes too hot, arid, or frequently flooded, people first change their place of residence within their own country. A typical trajectory begins with moving from rural areas to urban areas.

• The strongest combination consists of three factors: lack of water, falling incomes from agriculture and extreme heat. As problems accumulate, intra-State movements are replaced by cross-border ones. The population of vulnerable regions will look for more stable territories and States.

• The climate is rarely the only reason for moving. It reinforces the existing economic and social problems. Drought reduces harvests, incomes fall, prices rise, rural residents become poorer, after which migration becomes more likely.

• The most vulnerable countries are those where climate stress coincides with weak infrastructure and high dependence on natural resources. More resilient countries are putting additional strain on cities, housing, social systems, and the labor market. At the same time, aging economies receive an incentive to accept workers from younger regions.

• Climate migration will become not only a humanitarian issue. It will affect border security, the labor market, government spending, and domestic policy. The IPCC considers population mobility to be a significant climate risk, although it evaluates the direct link of warming with armed conflicts much more cautiously. In the long term, this may become a new form of redistribution of human capital. Some countries will lose their population and tax base, while others will gain workers, consumers and entrepreneurs, but at the same time incur the costs of their integration.

Heat wave and demographic decline

• The climate impact is superimposed on the demographic transition that is already underway. In many economies, the population is aging, and the proportion of people of working age is declining. Against this background, extreme heat increases health risks and can increase excess mortality, especially among the elderly (we wrote more about this in the second part of the analysis of the effects of climate change).

• The heat also affects economic activity. In conditions of high temperatures, labor productivity decreases, and costs for cooling and healthcare increase. For enterprises, this means higher costs, and for the state, an additional burden on social and medical systems. There is a double pressure: an aging society needs more protection from the heat, but at the same time has fewer workers who can finance rising costs. If the natural population decline accelerates, the need for migration increases even more.

• The climate is beginning to change the value of human capital, because the young population of the countries that source migration is becoming an economic resource for countries where there are not enough workers. For the latter, the issue of migration turns out to be both demographic and economic.

• It is especially important to distinguish between absolute and relative effects. For example, the state itself may become less productive due to the heat, but if the competing economy loses even more, its position relative to it improves. This logic will work for both demographics and the labor market.

• Climate change can accelerate existing demographic trends. They don't necessarily create them from scratch, but they can make aging, worker shortages, and migration pressures much more pronounced.

Fish changes boundaries

• What happens to the population also happens to marine biological resources in a different form. Ocean warming, acidification, and changes in oxygen levels in the water are forcing many species to move to more suitable waters. For fishing, this means a change in economic geography. A species that used to be concentrated in the exclusive economic zone of one country may turn out to be predominantly in the zone of another state in 20-30 years. The resource is physically moving, but the state borders remain in place.

• This leads to disputes over quotas, licenses, and access to fishing areas. The state, which receives a new concentration of fish, acquires jobs, export earnings, processing and tax revenues. A country that has lost a resource faces the opposite effect.

• Overall, a general decrease in potential marine catch and serious economic consequences of ocean acidification are expected, although certain high-latitude areas may benefit at certain stages. The movement of fish can change trade flows, the location of ports and processing plants, as well as the value of maritime agreements. At the same time, a new resource may appear in the country without the discovery of a deposit and without a technological breakthrough. It is enough for the ambient temperature to change.

New World Grain Map

• Agriculture will become one of the main places where comparative advantages will change. The competitiveness of the crop depends on temperature, precipitation, soil quality and the length of the season. If the climate changes at least a few parameters, the previous production structure begins to fail.

• There is already a negative impact of warming on agricultural productivity in low and middle latitudes and some positive effects in high latitudes. However, the northern advantage is not guaranteed: it may be limited by soil quality, lack of infrastructure, light conditions and excessive humidity.

• Water is becoming a key resource at the same time: without reliable water supply, it is more difficult to support not only agricultural production, but also metallurgy, chemistry, microchip production and extractive industries. Therefore, the new grain map will be determined by a combination of climate, water, technology, and infrastructure (we wrote more about the importance of water resources in the first part of the analysis).

• Traditional exporters will be forced to invest in irrigation, new varieties, logistics and crop protection. And states that manage to maintain production with increasing risk will receive not only export revenue, but also additional diplomatic weight. Therefore, the main question will be where warming can be turned into cost-effective production.

The rich adapt, but the poor lose

• The same climate impact does not have the same economic cost, because a rich country can finance reservoirs, cooling, new varieties, insurance, network upgrades, and coastal protection. Poor economies often do not have such opportunities. Therefore, there is an independent advantage — the ability to adapt. With the same drought, a country with capital, efficient management, desalination and insurance can lose about 5% of its crop, while a state without these tools can lose 25%.

• Climate risk then turns into financial risk, as the more dangerous area receives more expensive insurance, and the cost of credit and capital increases. The sequence is simple: risk increases, insurance becomes more expensive, financing becomes more expensive, and production costs increase. This mechanism can accelerate the outflow of investments from vulnerable regions. Then enterprises, jobs, and the population move to invest. Economies with a narrow specialization are particularly vulnerable. The loss of one industry is painful for a diversified state, but manageable. For a country dependent on tourism, coffee, fish, or a single type of agricultural export, a similar impact could become systemic.

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• As a result, climate can widen the already existing gap: the rich buy sustainability, while the poor have to pay for the consequences of a lack of adaptation. Moreover, this creates another feedback loop: the deterioration of climatic conditions provokes the migration of capital and people from vulnerable countries, which further weakens their ability to adapt.

New map of sea routes

• The climate is changing the competitiveness of not only goods, but also their delivery methods. If rivers become shallow more often, canals experience water shortages, and ports face floods and storms more often, traditional logistics becomes more expensive and less predictable.

• At the same time, the reduction of sea ice makes the northern routes more accessible. This does not mean that the Northern Sea Route will quickly replace the Suez Canal: restrictions remain on infrastructure, insurance, ice conditions, and transportation economics. But even changing the relative cost of routes is of strategic importance.

• The importance of the problem is particularly high because about 80% of the world's trade is transported by sea. Even a small shift in the cost or reliability of routes can change the choice of carriers and the location of new investments.

• If the climate increases the frequency of storms, flooding, or other disruptions, insurance and infrastructure costs increase. A competing node with lower risks gets a chance to transfer loads. The same applies to supply chains: a manufacturer that is 5% cheaper but regularly faces typhoons, floods, or droughts may be less profitable than a supplier that is 3% more expensive and more stable. This creates a new advantage — stability.

• Climate change can change the hierarchy of ports, logistics hubs, and trade corridors. What comes to the fore is not the minimum shipping price, but a combination of cost, speed, and the likelihood of trouble-free operation.

Winners and losers

• There will be no simple division of the world into winners and losers, because one country may lose yields but benefit from solar energy; another may have a longer agricultural season but face fires and infrastructure destruction. The most sustainable countries will be those with a combination of water, temperate climate, developed infrastructure, capital, cheap low-carbon energy and the ability to quickly adopt new technologies.

• Areas where heat is combined with water scarcity, high population density, dependence on natural industries and a weak adaptation system will be more vulnerable. Here, climate impacts turn more quickly into falling incomes, capital outflow, and migration. However, even an unfavorable climate does not necessarily mean a loss of competitiveness: much depends on the ability to change technology, infrastructure, exports and the protection system of the population.

• The main result of the climate change will be a change in the structure of the global economy. Agriculture, industry, energy, tourism, fishing and logistics will change, and with them, the export profiles of the countries. Some states will be able to switch from agriculture to energy, industry, or services, while others will become new suppliers of food, critical minerals, or low-carbon energy.

• Climate policy itself becomes a source of competitive advantage. Carbon standards, supply chain requirements and the development of the climate technology market are changing the competitive environment. To the traditional factors — labor, raw materials, geography, and cheap fuel — are added water, climate resilience, clean energy, critical minerals, technology, and infrastructure quality. These changes can shift trade flows, investments, business locations, and population movements.

• The main criterion of competitiveness is how cheaply and quickly a country is able to adapt to climate change. The sequence is simple: climate changes, followed by resources and productivity, followed by shifts in prices, trade, capital, jobs, and population. This is the great climatic redistribution of the 21st century: not only incomes are changing, but also the centers of economic and political power.