While the impact of climate change typically draws environmentalists and political types to the issue, it’s now the focus of a group of high-powered executives who say Americans should view it as a business risk.
In a report called “Risky Business,” business leaders including billionaire Michael Bloomberg and former U.S. Secretary of the Treasury and Goldman Sachs (GS) CEO Henry Paulson compare climate change to an interest-only loan, a risky form of borrowing that helped trigger the housing crisis.
Future generations “will be stuck paying off the cumulative interest on the greenhouse gas emissions we’re putting into the atmosphere now, with no possibility of actually paying down that ‘emissions principal,’” the report says.
Those costs will be significant, according to the study’s calculations. By 2050, as much as $106 billion worth of coastal property will be below sea level, while extreme heat could reduce average crop yields by as much as 70 percent in some states.
“Damages from storms, flooding and heat waves are already costing local economies billions of dollars — we saw that firsthand in New York City with Hurricane Sandy,” Bloomberg, the former mayor of New York City, said in a statement. The study “details the costs of inaction in ways that are easy to understand in dollars and cents — and impossible to ignore.”
Other business leaders who are lending their names to the report include former hedge fund manager Thomas Steyer, Cargill executive chairman Gregory Page and former U.S. Treasury Secretary Robert Rubin.
While the report provides a grim view of the impact on climate change through the year 2100, it also stresses that the damage will be felt near-term. Within the next five to 25 years, the annual average cost of coastal storms and hurricanes could rise to as much as $35 billion per year. Agricultural yields in some Midwestern and Southern counties could slip more than 10 percent within that time frame, while rising temperatures will cause demand for energy to surge, costing residential and commercial ratepayers as much as $12 billion each year.
The business community should step up and “lead the way in helping reduce climate risks,” said the report. It recommends that business adapt new practices, such as new agricultural technologies or building sea walls, while investors should incorporate risk assessments from climate change into their plans.
The public sector should also be involved, although the report didn’t provide direct recommendations, and generally side-stepped political issues.
The report was prepared by economic research firm Rhodium Group, with the research led byRobert Kopp, a climate scientist at Rutgers University, and economist Solomon Hsiang of the University of California, Berkeley.
The federal government’s efforts to reduce greenhouse-gas emissions has been at the center of a fight between the U.S. Chamber of Commerce and the Environmental Protection Agency. In a Monday decision, the Supreme Court mostly supported the EPA’s plan to lower emissions, although it said it had overstepped its power in the case of forcing companies to evaluate how to reduce emissions.
“Our economy is vulnerable to an overwhelming number of risks from climate change,” Paulson said in a statement. “These risks include the potential for significant federal budget liabilities, since many businesses and property owners turn to the federal government as the insurer of last resort.”
Not every U.S. region will feel the same impact, or level of financial pain, from climate change, the report found.
In the Northeast, the biggest impact will come from the rise in sea level, which will affect industries ranging from financial services (with Wall Street located in a low-lying area of New York City) to fisheries in New England. Eighty-eight percent of the Northeast’s population lives in coastal regions, the report notes.
By the end of the century, sea levels in New York City and Boston could rise as much as four feet. The cost of higher sea levels and stronger storms in the Northeast could cost as much as $9 billion by 2100, according to the report. Average temperatures in cities in the region could rise as much as 5.4°F during the day and 22°F in the evening, compared with rural areas.
The Southeast is also likely to be hit hard by the coastal effects of climate change, with about one-third of residents living near the sea. Florida, much of which sits on porous limestone, could see as much as $23 billion worth of property literally under water by 2050, the report says. Heat will also become major issue, with the region experiencing an additional 17 to 52 days a year of temperatures reaching at least 95°F.
In the Midwest, agriculture will be heavily impacted, with states including Missouri and Illinois facing an average yield loss of up to 15 percent in the next five to 25 years. That could reach a 73 percent yield loss by 2100.
“Armed with the right information, Midwest farmers can, and will, mitigate some of these impacts through double- and triple-cropping, seed modification, crop switching and other adaptive practices,” the report notes.
The number of days reaching 95°F or higher in the Midwest could rise by an additional seven to 26 days by 2050. But the bigger impact will come from rising humidity, which could reach dangerous levels in the Midwest by the late part of the century, according to the report.
As for the Great Plains region, which the report defines as reaching from Texas to Montana, demand for air conditioning will rise significantly because of hotter days, raising costs. Agriculture will also feel the heat, with lower yields in the region’s southern states.
In the Northwest, coastal regions are likely to see higher sea levels. Pests and wildfire risks will likely increase as the climate changes, putting its forestry industry at risk, the report predicts. For the already hot and dry Southwest, residents may see one to two additional months of days hitting 95°F or higher by 2100. That would boost the risk of wildfires and potentially create a threat to water supplies.
“Extreme heat may also lead to higher evaporation of existing reservoirs” in the Southwest, the report notes. “This translates into less available groundwater for critical industries such as agriculture, as well as for simple drinking and bathing.”
Alaska, meanwhile, is “ground zero” for climate change, thanks to its heavily coastal population and the importance of fisheries and tourism to its economy. Sea levels here could actually fall, the report notes. Meanwhile, the island state of Hawaii will likely see a greater sea level rise than the global average, as well as average temperatures that could rise by as much as 10°F by the end of the century.