Weather and climate play decisive roles in many artificial systems; climate variability and climate change would affect these activities, with beneficial and adverse impacts. These effects include direct impacts on the planning, implementation, and operation of industry; energy production; and transportation, as well as on the economics of corresponding systems. Climate affects markets for goods and services and the natural resources on which such economic activity depends (IPCC 1996, WG II, Section 11.5). Activities directly sensitive to climate include construction, fossil fuel production (including offshore drilling), water-dependent manufacturing, hydropower generation, space heating and air conditioning, tourism, and recreation. Industry located in coastal zones and flood-prone areas also would likely be affected by climatic variations. Other activities that depend on climate-sensitive resources include agro-industries (food/drink, forestry-related activities, and textiles), production of energy from biomass fuels (see Section 6.3.4), and activities associated with the production of other renewable energy.
Agro-industry is of relatively greater significance in Latin American countries where activities associated with agriculture constitute the bulk of the economy, than elsewhere. Agro-industries that depend on the production and transportation of products such as grain, sugar, and rubber are vulnerable to changes in precipitation patterns and the frequency and intensity of extreme weather events. Globalization undoubtedly will better define the future activities of some Latin American countries. The strategy of "dumping" industrialized products-which has been carried out by more developed countries and some of the Far East's emerging economies-suggests that Latin American countries might well reorient their development toward agro-industry to take advantage of their natural resources and secure a place in international markets. The inception of regional markets would facilitate a combination of agricultural and agro-industrial production capacities within the region, assuming that available natural resources are evaluated, through monitoring and research, in the light of projected climate change. This route could lead to the region's sustainable development and the improvement of its productive capacity to satisfy the demands of an increasing global population.
An important domain within these agro-industries is the development of energy sources through biomass exploitation (see Section 6.3.4). In Brazil, the Fuel-Alcohol Program-one of the largest commercial biomass-to-energy programs-has facilitated the substitution of ethanol for gasoline in passenger cars and light vehicles (Goldenberg et al., 1993). Technological advances, including more efficient production and processing of sugarcane, are responsible for the availability and low price of ethanol. The transition to ethanol fuel has reduced Brazil's dependence on foreign oil (thus lowering its import-export ratio), created significant employment opportunities, and greatly improved urban air quality. In addition, because sugarcane-derived ethanol is a renewable resource (cane is replanted at the same time that it is harvested), the combustion of ethanol adds virtually no net CO2 to the atmosphere-and thus helps reduce the threat of global warming. Hydropower production would be influenced by changes in precipitation; whether these changes would be beneficial depends heavily on the relationship between seasonal patterns of precipitation and electricity demand. In Costa Rica and the Cuyo region in Argentina, for example, energy production already is affected by climate variability. Whereas hydroelectricity contributed 14.5% of the world's generated electricity in 1986, hydroelectric sources satisfied 53% of Latin America's electrical energy demands in that year (of the rest, 34% was supplied through thermal generation and the remaining 13% was shared between nuclear and geothermal generation). Of the world's technically exploitable hydroelectric potential, Latin America (excluding Mexico) accounts for 3,500 TWh per year. The region has an installed capacity of 86.69 GW, which in 1988 generated 367 TWh (Moreira and Poole, 1992); thus, about 20% of the potentially exploitable hydroenergy was used. Under these circumstances, the region would be in a position to increase its hydropower production to satisfy increasing demands during the coming century, even if climate change results in some reductions in power generation. (This hypothesis assumes the operation of new dams and stations, starting in the early 1990s-particularly in South America-and the installation of interconnected transmission networks among countries in the region.)
As noted in Section 6.5, sensitivity studies and monitoring of water resources are needed to prevent serious adverse climate change impacts. However, other factors affecting hydropower generation may have more weight than those resulting from climate change-such as social and environmental impacts, which may be the principal constraints and sources of uncertainty affecting hydropower development. Large storage reservoirs exacerbate many problems, particularly in tropical regions. The impacts of hydropower development can be categorized as direct-such as those that arise while constructing the dam, filling the reservoir, and changing the river flow-or indirect, such as effects on the health and well-being of the community and local ecosystems. However, many of these problems can be reduced by improved planning, in coordination with national or regional communities and their participatory social movements [e.g., non-governmental organizations (NGOs)].
Although the energy, industry, and transportation sectors are of great economic importance and clearly are sensitive to climate change, the capacity for autonomous adaptation is relatively high, as long as climate change takes place gradually. The lifetimes of most assets are relatively short compared with projected time scales for climate change (Campos et al., 1996).
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