Public investment is key to solving climate issues

The problem is that climate policy has remained on the periphery of economic policy for a long time.

Hong Jong-ho

The author is a professor at the Graduate School of Environmental Studies at Seoul National University. The world is exposed to the devastating reality of climate change. Europe recently suffered heat waves exceeding 40 degrees Celsius (104 Fahrenheit) and extreme droughts. In Australia, areas more than twice the size of Korea were burned. The hurricane that hit Florida in the United States poured down torrential rains, the first of its kind in 1,000 years. Pakistan suffered a catastrophe in which one thirds of the country was submerged and over 1,700 people were killed. Extreme weather phenomena do not discriminate between advanced countries and developing ones.

Korea is no exception. From the longest monsoon season of 54 days in 2020, the flooding of Gangnam in Seoul in 2022, the casualties and the shutdown of Posco due to Typhoon Hinnamno that year to the tragic situation caused by river floods and landslides in the central and southern regions this year, we are experiencing extreme natural disasters today. Simply put, we live in a world where disasters have become a norm.

How should we understand the increasingly worsening disaster? Scientists say there is no explanation other than climate changes. There are two strategies to respond to climate changes. First is a mitigation policy to reduce carbon emissions from fossil fuel.

Second is an adaptation policy to minimize the risks and damages caused by climate changes and find new economic opportunities during the process. The fundamental measure to resolve climate changes is carbon emission reduction. But the adaptation policy has emerged after the importance of economic players for survival grew.

A recent study by the World Bank showed that the role of fiscal policy is essential for successful climate change adaptation. The report analyzed the economic effects of preventive measures and post-recovery measures through a macroeconomic model. The result showed that the former led to a higher GDP growth rate than the latter. That signifies the merits of proactive efforts by the government to reduce damages caused by climate change.

Firemen, police officers and soldiers conducting a joint rescue operation in the underpass at Osong, North Chungcheong, where 14 people died from the massive flood from downpours on July 15.

Efforts to build embankments in preparation for floods, create massive underground water storage tunnels and build infrastructure to reduce potential damage to industrial facilities require financial input. The report emphasized that if funding for adaptation policies is prepared and implemented by raising new tax resources or conducting expenditure restructuring, it can reduce the loss of lives and properties from natural disasters and increase the resilience of the economy.

A similar outcome came in a study conducted by my research team on damages from natural disasters. In Korea, 99 percent of natural disasters are related to water, such as floods and heavy snowfalls. In the study, a damage cost prediction model was built by using various variables such as long-term precipitation and economic growth forecasts. As expected, the amount of precipitation and the area of the impermeable layer were key variables in determining flood damage. In particular, the financial independence of local governments had a correlation with damage costs. The stronger their fiscal integrity, the more they could prepare for natural disasters or minimize damages.

There is a concept called “adaptation finance,” which refers to the finance a country or a local community needs to reduce the damages caused by climate risks. There are several sources, including domestic, foreign, public and private ones. To mitigate climate disasters in Korea, we must secure sufficient public budget because overseas financial resources will be mostly directed to developing countries — and because adaptation policy has public characteristics the private sector cannot afford.

Adaptation to climate changes goes beyond the realm of environmental policy, as massive budgets are required at the central and local government levels. That calls for securing sound tax resources and prioritizing expenditure allocations. It is no coincidence that the World Bank’s climate adaptation report singled out economic ministers of governments as key readers.

The problem is that climate policy has remained on the periphery of economic policy for a long time. We could hardly see any finance ministers who were serious about climate issues. The budget was mostly concentrated on areas where short-term outcomes could be expected — such as development projects — instead of prioritizing the allocation of financial resources to climate adaptation, a long-term policy whose benefits are hard to quantify.

In an era when human and material damages caused by natural disasters are growing exponentially and preventive measures determine the sustainability of the economy, it is time to fundamentally review our fiscal priorities.

Translation by the Korea JoongAng Daily staff.