Impact of Climate Change on Australia's Economy

Climate change has significant long-term effects on Australia's economy, particularly in the coal and beef industries. The demand for coal will decrease, leading to a decrease in GDP and an increase in unemployment. Similarly, the supply of beef will decrease, resulting in increased prices and inflation. These industries play a crucial role in Australia's economy, and climate change poses a continuous threat to the country's GDP.

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INTRODUCTION
Climate change, although gradual, has significant long term effects on individual economies
around the world as well as the global economy in general (Anthoff, et al., 2009). The impact on
economies can be evaluated from two points of view; supply of goods whose production is
weather dependent and demand of goods or services that contribute to climate change.
Australia’s economy, like other economies around the world, is not immune to the impacts of
climate change.
COAL DEMAND
The first industrial revolution was mainly fueled with coal, and has since then been an energy
source that continues to power industrialization around the world (Crafts, 2011). This is
especially true for third world and developing countries that need rapid industrialization to spur
economic growth and development. However, the carbon emission levels have also significantly
increased since the start of the first industrial revolution. Coal is a major contributor of carbon
emissions the lead to climate change (Jacobson, 2009).
Australia is the world’s leading exporter of coal, with markets mainly in developing countries in
Asia. There has been increased calls internationally for the shift from the use of coal as a source
of energy due to its contribution to environmental pollution and climate change (Oba, 2014). The
adoption of policies on green energy sources use will see a reduction in the use of coal, and
hence a decrease in the demand for coal. The prices of coal will decrease as a result and
consequently the amount of coal mined will also decrease. This can be seen in the plot in Figure
1: Demand-Supply Curves (Coal Industry) below, with both demand and supply decreasing.
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140 160 180 200 220 240 260 280 300 320
0
10
20
30
40
50
60
Demand-Supply Curves (Coal Industry)
Demand Supply
Quantity
Price
Figure 1: Demand-Supply Curves (Coal Industry)
Being the world’s leading exporter of coal, coal hence contributes significantly to the GDP of
Australia, a decrease in the demand for coal will cause a decrease in the country’s GDP. The
export component of the GDP will be mostly affected by this decrease in demand. The decrease
in the GDP will result in increase in both inflation and unemployment. There would be an
expected “walking” inflation in the country with structural unemployment (especially in the coal
industry) resulting from the decrease in coal mining.
BEEF SUPPLY
In Australia’s agricultural industry, beef farming is the leading agricultural practice, with beef
export being the second largest in the world. Climate change will progressively expose Australia
to more frequent and severe droughts. Beef farming is heavily dependent on the availability of
cattle feeds and in turn weather, frequent and severe droughts make animal feeds scarce (Oba,
2014). This scarcity will lead to reduced herd sizes and hence decreased supply of beef. The
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prices of beef products will increase. This is visible in Figure 2: Demand-Supply Curves (Beef
Industry) below, with decrease in supply and increase in demand.
25 30 35 40 45 50 55
0
5
10
15
20
25
Demand-Supply Curves (Beef Industry)
Demand Supply
Quantity
Price
Figure 2: Demand-Supply Curves (Beef Industry)
A decrease in the supply of beef will result in a decrease in the GDP of the country. With up to
60% of Australia’s beef products exported, the export component of the GDP will be affected.
The decreased supply will result in increased inflation and unemployment. There would be an
increased demand-pull inflation with structural unemployment in the beef industry as well as
other industries along the supply chain.
CONCLUSION
There will be increased pressure on both the coal and beef industries in Australia due to climate
change. The increased awareness of climate change and weather changes dues to climate change
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will be the main factors. These two industries significantly contribute to Australia’s economy
and thus climate change may lead to a continuous decrease in the country’s GDP.
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REFERENCES
Anthoff, D., Tol, R. S. J. & Yohe, G. W., 2009. Discounting for Climate Change. Economics, 3(2009-24), pp.
1-24.
Crafts, N., 2011. Explaining the First Industrial Revolution; Two Views. European Review of Economic
History, 15(1), pp. 153-168.
Jacobson, M. Z., 2009. Review of Solutions to Global Warming, Air Pollution, and Energy Security. Energy
and Environmental Science, 2(2), pp. 148-73.
Oba, P. G., 2014. Climate Change Adaptation in Africa. London: Taylor & Francis Group.
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