Global warming to disrupt US economy by mid-century, report finds
Costs of economic disruption from global warming are likely to total hundreds of billions of dollars by 2050, a new risk assessment finds. The bipartisan report tallies losses to four sectors of the US economy.
If global warming continues unchecked, it is likely to cost the US economy hundreds of billions of dollars in lost productivity, inundated housing and infrastructure along coasts, and plunging crop yields in key farming regions by mid-century.
Those are among the conclusions of a report, notable for its bipartisan representation, released Tuesday on the economic risks the US faces from climate change. Participants include business leaders, current and former investment executives, and former US Cabinet secretaries.
The report purports to be the first to assign dollar figures to the risk that global warming poses to four key sectors of America's economy. It comes on the heels of a federal assessment of the climatological effects of global warming on the US through 2100, released in May.
The report "identifies a large number of risks. Many of these already are baked into the economy," said former US Treasury Secretary Henry Paulson Jr., who served under President George W. Bush. He co-chaired the group overseeing the report, along with former New York Mayor Michael Bloomberg and Thomas Steyer, retired founder of Farallon Capital Management LLC.
It breaks down the risks by region, and in some cases even by county. And it looks not only at the average risk, but also at the extremes, because today's 1-in-100-year drought or flood could become tomorrow's 1-in-10-year event – the new normal.
"The good news is that if we take action immediately, we can avoid the very worst outcomes," Mr. Paulson said during a press briefing Tuesday.
He characterized a cautious, wait-until-we-know-more approach as "radical risk-taking." It so delays action that it leaves no opportunity to reduce risks. Instead, it leaves adaptation as the only option.
Overall, the report estimates that by 2050 the value of property that lies below sea level will range from $66 billion to $106 billion – figures that rise to between $238 billion and $507 billion by 2100. The effect of sea-level rise on surges from winter storms or hurricanes along the US East and Gulf coasts could lead to $108 billion in losses by century's end.
Meanwhile, on average Americans are likely to see an increase in the number of days each year when temperatures top 95 degrees Fahrenheit. By mid-century, the number of 95-degree days is likely to range between 27 and 50, more than three times the average annual number during the past three decades. By 2100, those days could number 45 to 96, with some regions seeing as many as three months' worth of 95-degree-plus high temperatures.
The rising temperatures combined with higher humidity could cut productivity in key sectors, such as construction, landscaping, farming, and similar occupations by as much as 3 percent nationwide, the report finds. This is twice the loss the US experienced during a slowdown in productivity in the 1970s.
Rising temperatures will probably require the services of about 200 new power plants, each with a capacity comparable to today's typical coal- or gas-fired plants. These plants would need to be built within the next five to 25 years to meet the increased energy demand that comes with rising temperatures – temperatures that also reduce the efficiency of steam-generating plants and could undercut the supply of cooling water for them. As a point of comparison, during the 15 years ending in 2012 the US added about 21 new gas- or coal-fired plants, according to the US Energy Information Administration.
As for farm productivity, the report notes that warmth and plants' ability to take up some of the carbon dioxide humans are pumping into the atmosphere could boost yields in the upper Great Plains and in other northern states. But without adequate adaptation measures, yields of corn, soy beans, cotton, and wheat in some states in the lower Great Plains, Midwest, and Southeast could plummet by 50 to 70 percent by century's end.
The risk assessment, which assumes a business-as-usual greenhouse-gas emissions trajectory, was conducted by The Rhodium Group, a firm specializing in studying disruptive economic trends, and Risk Management Solutions, a firm that models catastrophes for insurance and investment companies.
The project's 10-member steering committee – which includes former Cabinet heads from Republican and Democratic administrations, the executive chairman of Cargill Inc., and a dean emeritus of the Bloomberg School of Public Health at The Johns Hopkins University in Baltimore – doesn't set out specific policy ideas for meeting the climate challenge.
But individual members have not been shy about setting out some ideas.
For his part, Paulson said he would like to see a tax on carbon emissions. This would prompt companies to shift to carbon-free or carbon-neutral energy sources, he argues.
Any formal proposal for such a tax, however, would be sent bouncing down the steps of Capitol Hill. One indication of the reception such a proposal would receive in the House came in late May, when lawmakers approved and sent to the US Senate a defense authorization bill for fiscal 2015. The bill includes an amendment that in essence prohibits the Pentagon from spending money "to implement" several recent UN and US scientific assessments on the projected effects on global warming. The Senate has yet to take up the measure.
Robert Rubin, co-chairman of the Council on Foreign Relations in Washington and former Treasury secretary under President Bill Clinton, suggests that pressure on companies to undertake more efforts to mitigate climate change and to urge Washington to move more swiftly may best come from the bottom up.
He noted during Tuesday's briefing that "investors should insist that companies disclose their exposure to climate risks." Those risks could include future costs of reducing emissions, or future losses from plants or infrastructure that either the company or the climate takes out of service before the company gets the full return on its investment.
The US Securities and Exchange Commission in 2010 introduced a voluntary approach that companies could adopt for reporting climate-related risks. As of last year, some 60 percent of the companies listed in the Standard & Poors 500 had adopted the guidelines. But that means many companies continue to withhold information about their climate risks.
Given the effect climate change is likely to have on the frequency of extreme-weather events, climate change needs to be factored into the federal budget process, Mr. Rubin suggested, because damage from severe weather typically requires federal aid to help communities recover.
Referring to the need to mitigate climate change, not just adapt to it, Paulson said, "We need to take out an insurance policy. It's just that simple."