US wakes up to economic costs of global warming

Heat and humidity will grow so intense that spending time outside will become dangerous.

More than a million homes and businesses along the nation’s coasts could flood repeatedly before ultimately being destroyed. Entire states in the Southeast and the Corn Belt may lose much of their agriculture as farming shifts northward in a warming world. Heat and humidity will probably grow so intense that spending time outside will become physically dangerous, throwing industries like construction and tourism into turmoil.

That is a picture of what may happen to the United States economy in a world of unchecked global warming, according to a major new report released on Tuesday by a coalition of senior political and economic figures from the left, right and centre, including three Treasury secretaries stretching back to the Nixon administration. At a time when the issue of climate change has divided the American political landscape, pitting Republicans against Democrats and even fellow party members against one another, the unusual bipartisan alliance of political veterans said that the country — and business leaders in particular — must wake up to the enormous scale of the economic risk.

“The big ice shees are melting; something’s happening,” George P Shultz, who was Treasury secretary under President Richard M Nixon and secretary of state under President Ronald Reagan, said in an interview. He noted that he had grown concerned enough about global warming to put solar panels on his own California roof and to buy an electric car. “I say we should take out an insurance policy.”

The former Treasury secretaries — including Henry M Paulson Jr, a Republican who served under President George W Bush, and Robert E Rubin, a Democrat in the Clinton administration — promised to help sound the alarm. All endorse putting a price on greenhouse gases, most likely by taxing emissions. “I actually do believe that we’re at a tipping point with the planet,” Paulson said in an interview at his home in Chicago. “A lot of things are going to happen that none of us are going to like to see.” 

Speaking at a news conference in New York, Rubin urged the Securities and Exchange Commission to take a tougher stance in requiring that publicly held companies disclose the climate-related risks they may face. While many companies have started issuing such warnings to investors, the disclosures are often vague and inadequate, he said. “I have come to believe that climate change is the existential issue of our age,” Rubin said. “I believe that investors should insist that companies disclose their risks, including the value of assets that could be stranded.”

He was referring to warnings that assets worth trillions of dollars are at risk of being stranded, or rendered obsolete, including vast coal and oil deposits that will most likely have to be left in the ground if dangerous levels of global warming are to be prevented.

The campaign behind the new report, called Risky Business, is funded largely by three wealthy financiers who are strong advocates of action on global warming: Paulson, who with his wife, Wendy, has helped finance conservation efforts for decades; Thomas F Steyer, a billionaire former hedge fund executive and Democrat who is pushing to make global warming a central issue in political races around the country; and Michael R Bloomberg, the former mayor of New York, who now urges cities to confront the threat of climate change. They commissioned an economic modeling firm that often does work for the oil and gas industry, the Rhodium Group, to assemble a team of experts who carried out the risk analysis. Trevor Houser, a Rhodium partner who led the study, sought to insulate the findings from the political opinions of the sponsors, in part by setting up a committee of leading climate scientists and environmental economists who reviewed the work.

Detailed modeling

Houser called the analysis “the most detailed modeling ever done on the impact of climate change on specific sectors of the US economy.” Still, it is unclear whether the new report, or the voices of the former Treasury secretaries, will have an effect on companies or investors, given that many decisions on Wall Street are driven by short-term considerations of profit and loss.

“The largest companies are starting to realise climate change is a financial issue,” said Mindy S Lubber, who runs a Boston advocacy group called Ceres that seeks to focus investor attention on the economic risks. “Are they radically changing yet? No. But we’re making some progress, slowly.” 

The report said the economic effects would vary substantially by region. Some colder states may actually benefit from higher temperatures in significant ways, including longer growing seasons. Under the likeliest projections, Houser said, the American economy will keep growing throughout this century despite the increasing economic drag from climate change. So people in the future will probably be wealthier.

But the warming will nonetheless impose huge costs, the report said. Coastal counties, home to 40 per cent of the nation’s population, will take especially large hits from the rise of the sea, which could swallow more than $370 billion worth of property in Florida and Louisiana alone by the end of the century.

If greenhouse gas emissions continue at a rapid pace, the report said, the global sea level could increase roughly a foot by 2050, and double or triple that by century’s end. A rise of as much as six or eight feet cannot be entirely ruled out, but that is more likely in the next century.

Given that land is sinking in Louisiana even faster than the sea is rising, 4.1 per cent to 5.5 per cent of all insurable property in that state will be below mean sea level by 2050, the report predicted. By 2100, that figure could reach 15 per cent to 20 percent. In Florida, 1 percent to 5 percent of all properties could fall below sea level by 2100, the report said.

But long before homes and businesses along the coast are entirely inundated, the researchers said, owners will face escalating damages from flooding. That poses substantial risks to taxpayers, who subsidize the National Flood Insurance Program, which has already been put more than $20 billion in the red by storms of recent years. Coastal property owners have fought attempts by Congress to charge premiums reflecting the true hazard.

The study projected complex effects on American agriculture. It is possible that farm output will continue rising, the report found, as it has done for many decades — but that increase may require huge shifts in where crops are grown.

With current agricultural practices, the losses could be substantial in the Southeast and the Corn Belt, as high temperatures and water stress take a toll on crops. That would have to be made up by an agricultural shift to the northern rim of the country, with states like North Dakota and Minnesota potentially being net winners.

But in parts of the country, farmers and other outdoor labourers will face routinely dangerous working conditions as summers grow longer and hotter, the report found. If emissions continue apace, the combination of heat and humidity projected for some regions, particularly the Southeast, at century’s end means that anyone working outside at certain times will face a high risk of life-threatening heat stroke. And in the 22nd century, much of the eastern half of the country could face these conditions for weeks on end, the researchers predicted.

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