Effects of the current economic crisis and the state of global economy on the environment

What are the effects of the current economic crisis and the state of global economy on the environment?

            Klare explains that the phenomenal expansion of the world economy led by India, China and other nations produced a corresponding rise in the demand for the various forms of energy particularly fossil fuels, which emit green house gases such as carbon dioxide, that is the leading among the greenhouse gases responsible for climate change. The climate change would then lead to increased storm activity, persistent droughts and the rise of the sea level. The hard economic times cause people to fly less, drive less meaning they end up consuming less energy leading to lowered emissions of the green house-gases. Moreover, with the reduced consumption of petroleum, there is less investment in energy projects that are environmental hazardous. However, with the economic crisis, capitalists and governments invest less in energy projects that are innovative meaning that there is continued reliance on the traditional energy sources which are known not to be friendly to the environment.

            Fischler explains that with the global financial collapse, there arises food crisis and especially with the current world hunger levels at approximately a billion people. It is therefore difficult to meet the objectives against climate change as outlined in the Kyoto protocol in this state of food shortage. The environmental challenges are simply not easy to mitigate with unstable financial framework occasioned by financial crisis. In fighting the starvation Europe is expected to increase food production and with the rising food prices, deforestation will greatly be on the rise. European Commission (7) explains that climate change and sustainable energy are among the most prioritized investments but the utilization of funds is being curtailed by the insufficiency in technical expertise, public budgets that are restricted and the looming financial crisis.

            Between 2004 and 2008, the world’s renewable energy sector had been growing significantly to the point of surpassing the expected rates of growth. However, in late 2008, the financial crisis started to impact on the growth, especially with the change in debt flow to the developers of renewable energy from banks.  Investment in the sector therefore declined which implied that the world kept depending on the non-renewable sources of energy which are known to contribute to the emission of green-house gases that have a negative environmental impact. The investment in the renewable energy sector was just beginning to ease the bottlenecks in the supply-chain when the credit crunch came in and had a significant cut on the demand. The dynamics of the industry thereof changed dramatically and permanently. Despite the fact that the targets on renewable energy continued to drive utilities associated with the projects, fewer independent producers of power and other developers were involved hence slowing down the migration to renewable power sources (Fritz-Morgenthal et al, 1).

Kilmister explains that the recession resulting from financial crisis cannot lead to the slowing down of the rate of environmental degradation as it is experienced currently and especially the change in climate. This is particularly going to negatively impact on food production and as the hunger levels keep rising, the people will consequently pay little attention to environmental conservation measures as their interests focus on how to deal with the food crisis.

Kasa explores lessons learnt in Brazil in relation to environmental impacts as a result of the financial crisis of 1997 to 1999 especially about the deforestation in the Amazon region. The crisis is said to have reduced the funding to the environmental agencies both at state and federal levels. The cutbacks affected externally funded programs as well, an example of which is the PPG7 pilot programme, because the counterpart from the Brazilian government was absent. The program was initially involved with the curbing of deforestation as well as the propping of nongovernmental organizations’ capacity to that respect. The skyrocketing rates of interest and the weakening international and domestic markets halted the plans by the Cardoso government to expand infrastructure greatly in the Amazon region as well as the private investment expected in the agricultural sector. This had a good impact on the environment and was praised by environmental officials in the region with some saying that it gave the environment a breathing space’.

            Jesus explains that the financial meltdown leads to people having less money and therefore cannot buy as much. Fewer products therefore are manufactured meaning there is reduced use of natural resources. Deforestation rates, for example, will be reduced since there is less consumption of paper and wood and therefore fewer trees are cut down. On the negative, it is explained that financial crisis leads to less economic activity hence people focus more on the economy than on the environmental conservation efforts.


Works cited

European Commission. Commission staff working document of Regional Policy contributing to


           sustainable growth in Europe, 2020 COM (2011) 17. Brussels, January 2011.

Fischler, Franz. Fighting food scarcity and environmental degradation in times of economic

               crisis. Momagri editorial board. 20 April 2009. Web 24 September 2011.

Fritz-Morgenthal, Sebastian., Greenwood, Chris., Menzel, Carola., Mironjuk, Marija., and

           Sonntag-O’Brien, Virginia. The global financial crisis and its impact on renewable


          energy finance. Federal Ministry for the Environment, nature Conservancy and Nuclear

          Safety. April 2009.

Jesus, Amado. Financial crisis affects environment. Philippine Daily Inquirer. 24 October 2008.

          Web. 24 September 2011.

Kasa, Sjur. Lessons from history: Is the financial crisis good or bad for deforestation?


          Globalization and the environment. 15 October 2008. Web. 24 September 2011.

Kilmister, Andy. The economic crisis and its effects. World economy online magazine.

          December 2008. Web. 24 September 2011.

Klare, Michael, T. The economic crisis and the environment. Huff post green, the internet newspaper. 17 October 2008. Web. 24 September 2011.

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