Climate change overseas could affect domestic trade and food supplies, says PwC

The report (registration required), by professional services firm PricewaterhouseCooper (PwC), identified the potential for physical damage to overseas assets, more volatile food prices and increased demand for UK Government services from overseas territories and citizens abroad as some of the main threats from climate change. The analysis was based on the UN's "medium emissions scenario", resulting in a rise in global temperatures of two degrees celsius.

"Whilst progress has been made in many countries, including the UK, to understand the impact of climate change within national borders, little progress has been made to understand the international dimensions," said PwC. "And yet in an increasingly inter-connected world, it is more important than ever that governments, businesses and other organisations understand and are able to adapt to changes in other countries."

"Although the report was commissioned to improve understanding of climate impacts the findings reinforce the need to reduce greenhouse gas emissions, as the global costs of doing so are expected to be significantly less than the costs of inaction," it said.

The findings will inform  the Government's ongoing work towards the creation of a Climate Change National Adaptation Programme (NAP). The NAP will guide government, businesses, communities and civil society on how to  prepare for and adapt to climate change.

In its report PwC identified three "opportunities" that the UK could potentially exploit as a result of the effects of climate change overseas. These were increased potential to export UK goods and services, reduced shipping costs as a result of melting ice caps in the Arctic and the potential for greater international diplomatic cooperation. Notwithstanding this, the climate change threats to the UK  "significantly outweigh opportunities, both in terms of their magnitude and our confidence in them", the report concluded.

Although the UK's strongest trading and international links remained with "industrial countries considered less vulnerable to climate change", links with emerging economies which tended to be more vulnerable were becoming "increasingly strong", PwC said. In addition, recent "climatic events" such as Hurricane Katrina and Superstorm Sandy in the US suggested that events in developed countries could also have "global implications and significant costs to the UK", it said.

It warned that as global production of certain foodstuffs tended to be concentrated in a few countries, extreme weather events exacerbated by climate change were "highly likely" to increase price volatility and the potential for supply disruption in the short term. The increasing impact of climate change could lead to "more pervasive systemic changes" to trade in the longer term, by the 2050s and 2080s, it said.

The report also pointed out the potential exposure of UK investors and insurers to climate-related damage to physical and financial assets abroad, due to the "significant" amount of UK investment overseas. For example, the recent Thai floods cost Lloyd's of London £1.4 billion, according to the report. Climate change could also multiply the risks of natural disasters and conflict in "highly vulnerable countries", increasing the costs of UK intervention and aid, it said.