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Beyond Ratings Weekly Digest

Your briefing on augmented financial risk analysis

N°140 ▪ 05th April 2018


When the grass is truly greener on the other side

A recent report by the World Bank Group calls on the issue of climate migration. Focusing on three most affected regions – Sub-Saharan Africa, South Asia and Latin America, covering 55% of the developing world’s population – the World Bank suggests by 2050 the climate-induced displacement of more than 143 million people within their countries. This striking number represents up to 2.8% of the population of these three regions. And yet, it does not account for international migrations nor for other regions of the world, raising concerns on the possible extent of future global climate change-induced migrations.

Undeniably, human populations have always been exposed to environmental factors. Environmental migrants, as defined by the International Organization for Migration (IOM), are “persons or groups of persons who, predominantly for reasons of sudden or progressive change in the environment that adversely affects their lives or living conditions, are obliged to leave their habitual homes, or choose to do so, either temporarily or permanently, and who move either within their country or abroad”. Environmental drivers of human mobility are diverse, multifaceted and location-specific. Amongst them, natural events, land productivity and food/energy/water security may influence the habitability of an environment as well as the livelihoods of communities. It is thus difficult to estimate what percentage of environmental migration is induced by climate change and not due to mere natural variability. The incomplete understanding of climate change and the lack of quantitative data, often scarce and geographically disparate, are major difficulties in the assessment of the influence of climate on human mobility. What is sure, however, is that climate does affect the drivers of migration, and therefore the current and future patterns of population movements. Increases in temperature, for example, generate extreme droughts or heat waves with consequences on agricultural productivity. Changes in rainfall regimes and in weather events’ frequency or intensity threaten water availability and aggravate violent storms and floods. The rise in sea level is responsible for more damaging storm surges and for salt water intrusion in aquifers. Climate change also exacerbates gradual environmental degradation, such as land degradation, and coastal/marine ecosystem degradation.

It is worth noting that climate migration is a very good example of how the environment can impact other sectors. Existing vulnerabilities are amplified in all dynamics, be it political (through conflicts, insecurity, discrimination, persecution), demographic (disease prevalence, population size and density), economic (employment, income, well-being, prices, poverty) or social (inequalities, education, cultural mindset). With such widespread entanglements, the negative consequences of climate-induced migration are often exaggerated, with migrants generally perceived as a threat. Yet climate migration does have benefits that often go unnoticed. Population displacements can help reduce pressure on fragile resources, provide households with access to more secure livelihoods as well as better social status, and ultimately save human lives. In this respect, the most vulnerable populations would not be climate-induced migrants, but people who do not have the ability to relocate, usually due to lack of social, economic or political capital. These ‘trapped populations’ have the fewest opportunities to adapt and must endure increasingly unviable environments.

Furthermore, the evolution of climate-induced migration remains very uncertain. The World Bank’s striking estimation of 143 million climate-migrants by 2050 reflects a ‘pessimistic’ scenario, characterized by high greenhouse gas emissions combined with unequal development pathways. If appropriate and timely responses are put into place, this number could well stay a pessimistic overestimation. Government action certainly plays its part in bringing resilience and positive/negative outcome for the populations. Conceivable solutions include border management, migrant integration and reintegration of returning populations. For countries, prevention also relies on risk preparedness and embedding climate migration in development planning and investments. And as it cannot be stressed enough, significant cuts in GHG emissions are still needed to limit the progress of climate change and in turn ensure that fewer people will have to migrate or suffer its consequences.

Claire Hugo, Analyst



Sovereign Risk

France finally gets out of the excessive deficit procedure!

French General Government Deficit (% of GDP)

According to Insee, the French general government debt reached 97% of GDP at the end of 2017, compared with 96.6% at the end of 2016. In absolute terms, the debt is now EUR 2,218 billion, or EUR 66 billion more than in 2016 (EUR 2,152 billion). The general government deficit fell by 0.8 point last year to 2.6% of GDP (vs 2.9% expected), mostly thanks to a sharp increase in tax revenues, boosted by the growth come back. For comparison purposes, the average general government deficit is around 1% in the Eurozone.

Except for the growth come back and the decline in financing needs, the result turned out better than expected, for a particular accounting reason. Namely, Insee having chosen in its accounting treatment to only partially integrate the cost of the Areva recapitalisation (EUR 5 billion) into the general government deficit. Moreover, the announcement of such a performance should allow France to exit the process of excessive deficit on European treaties, pending the final figures.

At the end of the day, this is good news for the executive, who is currently going through a period of social unrest and exacerbation of the public service and railroad workers.

Sources: Beyond Ratings, Insee


Universal health protection for all countries!

Health protection coverage

As the following graph illustrates, a global health coverage protection is not the prerogative of the richest nations. For example, in 2010, only 85% of American people had health protection coverage. In the meantime, Thailand reached a full coverage despite the Asian crisis of the late 1990’s. It also appears that universal coverage took much longer for early deciders (several decades from 20% to 100%) than for new adopters. Whereas France needed 60 years to reach a global health coverage, Korea needed only 10. Notably, different type of political systems, from mature Western democracies to autocracies, have made efforts to increase social protection.

This health protection is crucial as it allows to break the vicious illness-poverty cycle. This remains an issue for the 100 million people that are still being pushed into extreme poverty because they have to pay for health care1 and for the 800 million that are spending more than 10% of their household budget to pay health care1. Universal health coverage also encourages a long-term healthy workforce that avoids chronic disease. Universal Health Coverage has become a Sustainable Development Goal to be achieved in 2030. If all countries could follow South Korea’s trajectory, this should be feasible.

1: World Health Organization (12/2017)

Sources: Beyond Ratings, UNDP

Carbon/Climate Change

Carbon accounting: The stakes of imported emissions

Difference between carbon emission and footprint, while building a car

The implementation of a global and relevant policy action on greenhouse gas (GHG) emissions was reflected in the Paris Agreement in December 2015. Therefore, a carbon accounting system is needed to estimate as finely as possible, the volume and the origin of the GHG emissions.

On the graph below, we can see that for €1 of car assembled in Germany and sold in France, 7kg of GHG are emitted. On the other hand, the wheels, seats, bearings and raw materials used emitted respectively 5, 3, 2 and 6 kg of GHG. For exemple, the amount of French national GHG emissions was 358Mt CO2 in 2017 while the footprint (including the imported GHG) was 531Mt CO2. This difference of 48% can be explained by the high amount of imports of the country.

The methodological difficulties remain in the identification of the emissions associated with each import, all along the chain of different intermediate activities. Those can be found in different geographical regions and in fact be attributed to different carbon accounting systems. It is therefore essential to know the entire value chain to account for these imported emissions, whether they come from the same territory or multilateral trade.

Sources: Beyond Ratings, OFCE


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Photo credit via Visualhunt/CC BY-SA or other: Front page ▪ Credit 1: CECAR – Climate and Ecosystems Change Adaptation R; Credit 2: Tony Webster; Credit 3: Kiefer.; Crédit 4: NASA Goddard Photo and Video / Research notes ▪ Credit 1: DnDavis (via; Credit 2: zhu difeng (via Fotolia); Credit 3: Mny-Jhee (via Fotolia); Credit 4: xmentoys (via Fotolia)


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