Comprehension : Comprehension

Q 203 / 466

UPSC CSE Prelims 2019

A changing climate, and the eventual efforts of governments (however reluctant) to deal with it, could have a big impact on investors' returns. Companies that produce or use large amounts of fossil fuels will face higher taxes and regulatory burdens. Some energy producers may find it impossible to exploit their known reserves, and be left with "stranded assets" — deposits of oil and coal that have to be left in the ground. Other industries could be affected by the economic damage caused by more extreme weather — storms, floods, heat waves and droughts.

On the basis of the above passage, the following assumptions have been made:

  1. Governments and companies need to be adequately prepared to face the climate change.
  2. Extreme weather events will reduce the economic growth of governments and companies in future.
  3. Ignoring climate change is a huge risk for investors.

Which of the above assumptions is/are valid?

EXPLANATION

Correct Option (C)

Statement 1: The passage indicates that both governments and companies will face significant economic impacts due to climate change and the efforts to address it. This includes higher taxes, regulatory burdens, and the risk of "stranded assets." These implications necessitate adequate preparation by both entities to mitigate adverse economic consequences.

Statement 3: The passage explicitly states that a changing climate "could have a big impact on investors' returns." It details specific financial risks such as "stranded assets" for energy producers and "economic damage" to other industries from extreme weather events. This directly supports the inference that disregarding climate change poses a substantial risk for investors.

Incorrect Options:

Statement 2: The passage mentions that "Other industries could be affected by the economic damage caused by more extreme weather." However, it does not explicitly state or imply that these events will lead to a reduction in "overall economic growth" for governments and companies in the future. The passage describes potential damage to specific industries, not a universal or definitive reduction in economic growth.