Understanding the Economics of Climate Change

By Dr Farzana Hossain

Every academic comes to their studies with a different life experience and area of interest. We spoke with recent PhD graduate, Dr Farzana Hossain to find out more about her passion for Environmental Economics.

Since my childhood, I have had a habit of reading newspapers, which broadens my outlook and enriches my knowledge of world happenings. I was interested in all sorts of news: sports, culture, international relations, and the global economy. My young mind was fascinated by reading articles on Bangladesh's success story on poverty reduction and female empowerment through microfinance. However, in the mid-2000s, the topic of ‘climate change’ grabbed my notice. I realised that Bangladesh is one of the countries most vulnerable to the effects of climate change, it being in the South Asia region, which is most susceptible to climatic events. Reading all the negative news related to the consequences of climate change made me quite anxious about our region's future.

During my undergrad, I decided to major in Economics as it is a subject that could develop my ways of thinking about the world, and provide me with a toolkit of skills that I can apply to solving a wide range of problems. I was fortunate to get my training in Economics at the University of Dhaka from some of Bangladesh’s most famous economists. Following my graduation, I applied for PhD programs abroad, hoping to broaden my knowledge and familiarise myself with frontier economic research.

Farzana Hossain
Dr Farzana Hossain.

I did not think twice about moving to Australia when I was admitted into the Economics PhD program at the University of Melbourne, the best program in the Australasian region. This PhD program is exceptional in that it had two years of coursework, followed by three years of research. The coursework component of the program has given me a solid background in the theoretical aspects of economics. In the research component, I had to develop my independent research projects. My upbringing in a developing country and passion for climate-related issues motivated me to work on research topics at the intersection of both development and environmental economics.

In the three chapters of my PhD thesis, I quantify the causal effects of changing climatic conditions in developing countries, and identify the channels through which the economy is affected. In particular, I have investigated the consequences of floods on output, employment, and the aggregate productivity of the manufacturing sector; the impact of high temperatures on the informal economy; and the spillover effect of extreme rainfall on the welfare of rural agricultural households. These are important research agenda as a careful understanding of the vulnerability and resilience of economic agents to extreme events is essential for the effective design and implementation of adaptation and mitigation policies. My findings provide supporting evidence that global climate change is not only negatively affecting developing countries, but also disproportionately affecting the income-generating activities of the poorer segments within these countries. This research provides new insights into how extreme weather events and natural disasters affect human well-being and productivity in today's developing world and provide explicit mechanisms through which future climatic events can increase the ongoing costs in these countries.

I have completed my PhD at an interesting time when the world is going through an unprecedented crisis. I believe the role of economists is more important than ever as their prudent policies are essential for economic recovery. As an environmental economist, I hope we will take this as an opportunity to design and recommend recovery policies that are green and sustainable. This pandemic is an important lesson as it shows us the fragility of our current system. So, future policies should focus on building resilience in the economy so that we can build back in a better world.