ABSTRACT
This paper examines the climate change effect on inclusive growth and the possible moderating role of adaptive capacity in climate change/inclusive growth in the long and short-run. The study employs temperature change anomalies (with 1951-1980 as the baseline climatological year) and CO2 emissions (metric ton per capita) as variables for climate change and a set of variables as indicators to measure inclusive growth. These set of indicators are adopted from the Asian Development Bank (2014) key indicators for inclusive growth which falls under five broad categories namely: Poverty and inequality; Growth and Expansion of Economic Opportunity; Social Inclusion to Ensure Equal Access to Economic Opportunity; Social Safety Nets; Good Governance and Institutions. Out of this, the study obtains a single variable using Principal Component Analysis (PCA) and fitting the dataset to an Autoregressive Distributed Lag (ARDL) model we determine the long and short-run effects of climate change and adaptive capacity on inclusive growth and the moderating role of adaptive capacity.
The studies establish that temperature change anomalies and increases in CO2 emissions lead to a fall in inclusive growth significantly. Thus, climate change has a negative impact on inclusive growth. The study also demonstrates that adaptive capacity contributes to inclusive growth significantly but only in the short-run. However, when the individual component of climate change is considered we observe a significant effect of climate change on mortality rate under 5 (per thousand live births) and contributing family workers (as a percentage of total employment) with adaptive capacity mitigating the negative impact of temperature change anomalies and carbon dioxide in relation to mortality rate. The study, therefore, indicates that climate change negatively affects climate sensitive indicators of inclusive growth and also these sensitive indicators responds appropriately to climate adaptation efforts and strategies.
CHAPTER ONE
BACKGROUND OF THE STUDY
INTRODUCTION
The debate as to whether economic growth is in and of itself sufficient for sustainable development still remain among policymakers and researchers (Ncube, 2015). This debate is driven by the fact that economic growth across the continent is not accompanied by improvement in the living conditions of its people despite records of economic growth. The call by civil societies for the inclusion of the poor in the growing process as well as benefits from its outcome is ever increasing. Economic growth is described as a disguise for the gap that exists between the poor and rich. Thus, positive economic outcomes are good on many fronts, nevertheless, such outcomes have rather served to create insecurities through widening disparities between the poor and rich. Such disparities have led to the distrust of government by citizens and civil societies who are calling for the need for growth that is broader and ensures societal progress (Stiglitz, Sen, & Fitoussi, 2009)
Largely, the economic growth of countries on the African continent is understood to be characterized by disparities and inequalities which are attributable to the lack of structural transformation and sectoral diversification. Faced with the task of ensuring inclusiveness in the growth process, governments and policymakers have responded by ensuring that growth is inclusive, spelling broader economic growth that benefits all. Inclusive growth refers to how fast growth is occurring as well as the form of such growth. It is a concept that embraces equity and equality. Inclusive growth highlight social welfare needs that cover non-income dimensions. It therefore, focuses on gender, ethnic and the geographical rather than economic outcomes alone (Ranieri & Almeida Ramos, 2013).
On another front, documentation indicates that climate change affects the economic growth of Africa (Abidoyea and Odusola, 2015; Odusola and Abidoye, 2015; Lanzafame, 2014; Dell et al., 2010; Fankhauser & Tol, 2005; Ouattara & Strob, 2008). This is because Africa’s economy is largely driven by primary manufacturing sectors which are linked to the climate.
As a result, economic loses created by climate change risk poses challenges to socio- economic development in developing and emerging economies, resulting from the high level of dependency of the poor on agriculture and forestry which are climate sensitive. It increases poverty and has the potential to repress inclusive growth, which is fundamental to sustainable development and growth across developing regions. The World Bank (2016) documents that 26 million people are forced into poverty each year resulting from climate change risk and this could reach 100 million people by 2030 with South Asian and Africa being hit the hardest. Africa emits less greenhouse gas emissions (GHG) (UNDP, 2006), yet it suffers more from the effects of climate change. Insufficient adaptation and a low adaptive capacity multiplies this effect. This could spell trouble for Africa’s efforts towards inclusive growth making it a daunting task since such efforts channeled towards inclusive development and growth could be reversed by such threat.
This makes the climate change situation in Africa serious and costly, affecting developmental efforts and strategies, particularly the wellbeing of its poor. Africa accounts for an insignificant amount of greenhouse gas (GHG) emissions and yet suffers extreme damaging effects than any other region (World Bank, 2015; Coumou et al., 2016; AfDB, 2011; Barr et al., 2010; IPCC, 2007), due to its high level vulnerability (Hallegatte, 2015; Gupta, 2014). The need to tackle this challenge for Africa becomes more pressing for the international community as climate change stands in the way of sustainable growth and its related issues like poverty and environmental sustainability (UN, 2015; Brown et al., 2010). This has garnered commitments and response from countries across the globe culminating in
adaptation and mitigation efforts to contain this fallout. For developing countries, particularly Africa, adaptation efforts have taken centre stage in policy strategies suggesting its importance compared to mitigation efforts because of its vulnerability (Barr, Fanhauser & Hamilton, 2010).
The negative effect of climate change on the continent is not far out in the future and is already taking place. As such, the continent’s response is not the immediate reduction of greenhouse gas emission (CIGI, 2009) but buidling resilience and adaptive capacity. Therefore, whereas the response in other regions would be to consider mitigation strategies, for Africa, the way forward would be to emphasize adaptation strategies and build adaptive capacity (Collier, Conway & Venables, 2008) that sustains growth. Adaptation strategies to confront these fallout is, without doubt, the way forward if it is to experience shared economic growth. How effective these strategies are depend on the level of adaptive capacity (Smit & Olga, 2009), therefore, if the ability to adapt is low or non-existent vulnerability levels will increase.
In Africa’s quest to pursue inclusive growth, it becomes paramount that any progress chalked is not eroded. Consequently, it becomes important to enhance adaptive capacity (Ensor, Hoddy & Ratner, 2015). Smit and Pilisofova (2003) remark that activities that augment adaptive capacity can be pursued together with sustainable development goals that promote the living condition of the poor. In fact, Robinson and Herbert (2001) by analysing climate change and sustainable development together, have argued that an analysis of both come with essential benefits.
Adaptive Capacity has been established to be closely associated with sustainable development making adaptive capacity fundamental to sustainable development and equity (IPCC, 2007). It has an influential role that is critical to the sustenance of developmental
goals (Engle, 2011; Folke, 2006). Adaptation strategies carried out deliberately tend to bring about equity in sustainable development (IPCC, 2007). Even though sustainable development goals have the potential of increasing adaptive capacity, certain types of development must be designed and pursued to contain climate change. Consequently, an adaptive capacity that is designed to tackle climate change will help reduce vulnerability and help promote sustainable development. Countries on low resources such as technology, infrastructure and information and the access to resources lack the capacity to adapt (Smit & Pilisofova, 2003).
Accordingly, development particularly inclusive growth that captures climate change, emission reduction efforts, adaptive capacity and resilience are needed to safeguard developmental efforts and assistance against climate change threats thus ensuring sustainability. This reduces vulnerability and increases resilience against climate stressors whiles also maintaining and advancing economic, environmental and social well-being that cuts across the poor. This suggests that the response of the continent to climate change challenges should not mainly be to manage and cope with the unavoidable but increase the continent’s adaptive capacity against future climate change impact.
The link between sustainable development, climate change and economic growth have garnered quite some studies but considering a holistic approach, the examination of the influence of climate change on inclusive growth is extinct and this paper examines exactly that relationship as well as the moderating role adaptive capacity plays in this relationship. In this vein, the study examines climate change impact on inclusive growth and the possible moderating role of adaptive capacity, thus providing empirical evidence to support adaptation efforts contribution towards Africa’s inclusive growth
RESEARCH PROBLEM
Climate change has been established to influence economic growth (Abidoyea & Odusolab, 2015; Alagidede & Adu, 2014; Fankhauser & Tol; 2004) and also established to be linked to sustainable development (Munasinghe & Swart, 2007; Beg et al., 2002; Robinson & Herbert; 2001). All these studies have demonstrated the negative effect of climate change on economic growth which ulimately impacts the poor. It has implication for those affected but there is no empirical research relating to how the negative impact of climate change on the poor could be moderated. Therefore, in the context of individual wellbeing and standard of living the study examines the negative influence of climate change and how it can be moderated.
Distinct from others, this study examines climate change impact on inclusive growth while at the same time looking at how adaptive capacity moderates the negative impact of adaptive capacity on inclusive growth. This provides empirical evidence to support adaptation strategies and build adaptive capacity to confronting the negative impact of climate change in a way that increases resilience and ensures that progress in inclusive growth is not inhibited.
Consequently, the study employs carbon dioxide emission (COE) and temperature change anomalies (ΔTEMP) as measures for climate change as well as key indicators for inclusive growth and adaptive capacity. The study employs data from 1995 to 2016 under the Autoregressive Distributed Lag (ARDL) estimator for panel data that allows the study to determine the short-run and the long-run effects of climate change and adaptive capacity on inclusive growth as well as the moderating effect adaptive capacity on the negative impact of climate change.
