This past May was the hottest on record ever, according to the National Oceanic and Atmospheric Administration. The average surface temperature around the world was almost 1°C above its average last century, and Alaska almost 2°C over its average. There’s no denying that climate change is already happening, so the question we need to start asking ourselves now is how is this going to impact our lives, and how can we prepare? Astute business analysts are asking the obvious question: how is this going to impact our economy? A new study highlighted by The Economist magazine looks at precisely this question and tries to calculate the economic cost of climate change. Examining everything from the threat of rising sea levels to coastal real-estate (from Miami to New York City), the economic impact on farming (from increased temperatures and decreased precipitation), to the economic impact of increasingly erratic weather patterns on businesses, homeowners and farming, The Economist takes an in-depth look at what climate change is going to mean for business in the coming decades. Read on to find out more.
A sheep farmer surveys his sheep, from Shutterstock
Originally published in The Economist, June 28th, 2014, here >
The heat has brought American business out in a rash. Two weeks after President Barack Obama proposed new rules ordering power stations to cut carbon emissions, the bosses of several big firms (including Coca-Cola and General Mills) demanded that other governments get on with it and negotiate a treaty on greenhouse gases. Now Michael Bloomberg, a former New York mayor, and several other gazillionaires—including three former Treasury secretaries—have come up with new forecasts of the economic damage that climate change might do. Their study is notable for its wealth of detail and for concentrating on things you can see.
It looks at three areas where the weather makes the biggest difference: coastal property, farming and the effect of heat on work. It points out that, if the oceans go on rising at current rates, the sea level at New York city will rise by 27-49cm by 2050 and by 64-128cm in 2100. In Norfolk, Virginia—home to America’s largest naval base—the rise could be 134cm. Increases like that would put property now worth $66 billion-106 billion below sea level by 2050.
Flooded street in NYC, from Shutterstock
Of course, being physically underwater is not the same as being underwater in the metaphorical sense. A house could still be protected. But that costs money and anyway it would still be more vulnerable than a property on higher ground. The study reckons that property damage from storm surges and other bad weather in coastal regions could reach $238 billion-507 billion in 2100. Between a fifth and two-fifths of that would come in the south-east. Coastal cities such as Miami are especially at risk from rising sea levels.
Inland, the big problem is the effect of heat and drought on farming. Drought in North Dakota in 2006, for example, wiped out 10% of the value of the state’s wheat crop. Such damage is likely to get worse. A recent report from the Intergovernmental Panel on Climate Change (a controversial group of scientists who advise governments) argued that cereals are more sensitive to heat than used to be thought and that damage in hot agricultural areas would outweigh gains in cooler ones that warm up (such as the Pacific north-west).
Drought stricken crop field, from Shutterstock
On current trends, by 2050 America’s most productive cereal-growing region, the Midwest, will have between nine and 28 days a year in which average daytime temperatures will be 35°C (95°F) or above; for the past 40 years, it has had, on average, just two such days each year. In even-more-sweltering Texas, Oklahoma and Kansas, the number of hot, hot days could rise from 39 to 67-99 a year by 2050. The heat could cut yields in the Midwest by a fifth, the study reckons—though that assumes farmers do not adapt by planting heat-tolerant crops, which of course they would. The problem is that, at the moment, new crop varieties cannot withstand such high heat without big yield reductions.
Steamy temperatures make people wilt, as well as crops. Previous studies have shown that, when the thermometer hits 37.8°C, the supply of labour in farming, construction and other outdoor jobs falls by an hour a day, compared with mild days at 24-27°C. The new study is more cautious: it reckons labour productivity among outdoor workers could fall 3% if there were 27-50 extra days of daytime temperatures over 35°C. That is still a lot (for comparison, total Greek labour productivity fell only 0.7% in 2013). Moreover, high temperatures do not affect only outdoor workers. Another study found that a week’s worth of outside temperatures over 32°C cuts production in car plants by 8%.
This week, the Supreme Court limited Mr Obama’s authority to use executive rules to rein in carbon emissions from some large polluters, though not from the ones which account for most of the pollution. It was a quibble at a time when, in America as a whole, business concerns about the climate are growing sharper, even if public opinion is not.
This article was originally published in The Economist, June 28th, 2014.
For more articles like this, about how the environment affects the economy, check out The Economist current subscription specials.