The U.S. economy could face significant and regionally diverse economic risks from climate change if it continues on its current path (“business-as-usual”) without proper risk management – i.e. risk mitigation strategies – such as timely “investments in adaptation or policy efforts to mitigate climate change through lowering carbon emissions,” according to a new report titled “Risky Business: The Economic Risks of Climate Change in the United States” and released on June 24. This report has been commissioned by The Risky Business Project, a joint, non-partisan initiative of former Treasury Secretary Henry M. Paulson, Jr., Mayor of New York City from 2002-2013 Michael R. Bloomberg, and Thomas P. Steyer, former Senior Managing Member of Farallon Capital Management.
Source: Risky Business; Data Source: Rhodium Group
The report takes a risk-assessment approach and what makes this project unique is the fact that it tries to “combine the best available projections for changes in local climate conditions across the United States [through the year 2100] with empirically-derived estimates of the fiscal impact of changes [in temperature, precipitation, sea levels, and storm activity] on key sectors of the U.S. economy.”
The Risky Business report finds that climate risks – especially extreme heat and a rising sea level – will “disproportionately affect certain regions of the US”. In the words of former New York City Mayor Michael Bloomberg: “With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents – and impossible to ignore.”
In this respect noteworthy is that “impacts that are likely to occur between now and 2030 are largely the result of past [historical] emissions, and thus less avoidable.” That means – to use a metaphor – that even though we have evidently missed the train, we still can see it slowly leaving the station and, therefore, may have a chance of jumping on if we react immediately and initiate countermeasures.
The report considers the following climate risks economically most significant and threatening:
- Damage to coastal property and infrastructure from rising sea levels and increased storm surge: Within the next 15 years, potential average annual cost of coastal storms along the Eastern Seaboard and the Gulf of Mexico in addition to potential changes in hurricane activity could bring the total annual price tag up to $35 billion. Staying on the current emissions path, by 2050 between $66 billion and $106 billion worth of existing coastal property will likely be below sea level nationwide, with $238 billion to $507 billion worth of property below sea level by 2100.
- Climate-driven changes in agricultural production: Without adaptation via crop switching, some Midwestern and Southern counties could experience a decline in yields of more than 10 per cent over the next 5 to 25 years. Meanwhile, these shifting agricultural patterns and crop yields may translate into gains for Northern farmers illustrating that climate change may play out as zero-sum game both nationally and globally. With extreme heat spreading across the middle of the US by 2100, some states in the Southeast, lower Great Plains, and Midwest risk losing up to 50 per cent to 70 per cent of average annual crop yields.
- Impact of higher temperatures along with extreme heat – especially in the Southwest, Southeast, and Upper Midwest – on labor productivity, public health and existing energy systems: By 2050, Americans will likely see 27 to 50 days over 95°F each year – two to more than three times the average annual number of 95°F days over the past 30 years. By 2100, this number will likely reach 45 to 96 days over 95°F each year on average. The following graphic – ‘Humid Heat Stroke Index’ – shows the temperatures at which the human body can no longer maintain a normal core temperature (around 98.6°F) without air conditioning. A core body temperature close to 104°F is the body’s absolute limit.
Humid Heat Stroke Index
Source: Watching The Skies
4. Climate-driven changes in energy demand: GHG-driven changes in temperature may necessitate the construction of up to 95 GW of new power generation capacity over the next 5 to 25 years. According to the climate risk report, this is equivalent to about 200 average coal or natural gas-fired power plants and could end up costing electricity ratepayers up to $12 billion per year over the next 5 to 25 years and $8.5 billion to $30 billion by 2050. Electricity powered cooling demand (air conditioning systems) – in addition to heat-related impacts such as reductions in power generation and in transmission efficiency as well as reliability – is projected to increase electricity consumption in the Great Plains region substantially, resulting in a 3.1 per cent to 8.4 per cent increase for the Great Plains region as a whole by 2050.
Source: Risky Business; Data Source: Rhodium Group
According to the report, those impacts of climate change do manifest themselves already in the economy and are likely to “grow materially over the next 5 to 25 years and affect the future performance of today’s business and investment decisions.” Therefore, the report recommends three general areas of ‘adaptation’ for US businesses and the public sector to help minimize current climate change risks:
- Change everyday business practices to become more resilient;
- Incorporate risk assessment as “material” risks from climate change into capital expenditures and balance sheets;
- Institute policies to mitigate and adapt to climate change.