Significant Economic Risks from Climate Change
Non-partisan Study Breaks New Ground in Climate Risk Assessment
New York, June 24 – The American economy could face significant and widespread disruptions from climate change unless U.S. businesses and policymakers take immediate action to reduce climate risk, according to a new report released today. The report, “Risky Business: The Economic Risks of Climate Change in the United States,” summarizes findings of an independent assessment of the impact of climate change at the county, state, and regional level, and shows that communities, industries, and properties across the U.S. face profound risks from climate change. The findings also show that the most severe risks can still be avoided through early investments in resilience, and through immediate action to reduce the pollution that causes global warming.
The Risky Business report shows that two of the primary impacts of climate change—extreme heat and sea level rise—will disproportionately affect certain regions of the U.S., and pose highly variable risks across the nation. In the U.S. Gulf Coast, Northeast, and Southeast, for example, sea level rise and increased damage from storm surge are likely to lead to an additional $2 to $3.5 billion in property losses each year by 2030, with escalating costs in future decades. In interior states in the Midwest and Southwest, extreme heat will threaten human health, reduce labor productivity and strain electricity grids.
Conversely, in northern latitudes such as North Dakota and Montana, winter temperatures will likely rise, reducing frost events and cold-related deaths, and lengthening the growing season for some crops.
The report is a product of 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. They were joined by members of a high-level “Risk Committee” who helped scope the research and reviewed the research findings.
Risk Committee members include:
● Henry Cisneros - Founder & Chairman, CityView Capital; former U.S. Secretary of Housing and Urban Development (HUD); former Mayor of San Antonio, TX
● Gregory Page - Executive Chairman, Cargill, Inc. and former Cargill Chief Executive Officer
● Robert Rubin - Co-chairman, Council on Foreign Relations; former U.S. Secretary of the Treasury
● Donna Shalala - President, University of Miami; former US Secretary of Health and Human Services; former Chancellor of the University of Wisconsin-Madison
● George Shultz - Thomas W. and Susan B. Ford Distinguished Fellow at the Hoover Institution; former US Secretary of State; former U.S. Secretary of the Treasury; former U.S. Secretary of Labor; former Director, Office of Management & Budget; former President, Bechtel Group
● Olympia Snowe - Former U.S. Senator representing Maine
● Dr. Al Sommer - Dean Emeritus, Bloomberg School of Public Health, Johns Hopkins University
[Click HERE to read statements from the full Risky Business Project Risk Committee]
The Risky Business Project represents a first-of-its-kind effort to combine the best available projections for changes in local climate conditions across the United States with empirically-derived estimates of the fiscal impact of those changes on key sectors of the U.S. economy. The Risky Business Project presents a new approach to understanding the possible costs of unmitigated climate change, providing businesses, investors, households and policymakers with critical information about the nature of the climate risks they face. The project’s independent research team analyzed low-probability, high-impact climate events, as well as those most likely to occur. Consideration of such “tail risks” is critical for investors and businesses accustomed to buying insurance against potentially catastrophic losses.
“The Risky Business report shows us that our economy is vulnerable to an overwhelming number of risks from climate change,” said Hank Paulson. “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. But if we act immediately, we can still avoid most of the worst impacts of climate change and significantly reduce the odds of catastrophic outcomes—but the investments we’re making today will determine our economic future.”
“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,” said Michael R. 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.”
“Climate change is nature’s way of charging us compound interest for doing the wrong thing,” said Tom Steyer. “The Risky Business report confirms what many of us have long suspected: The longer we wait to address the growing risks of climate change, the more it will cost us all. From a business perspective, given the many benefits of early action, it would be silly to allow these risks to accumulate to the point where we can no longer manage them.”
In analyzing different regions of the country, the Risky Business report found that the most likely impacts of climate change are distributed unevenly across the country, reflecting broad geographic diversity. The report also analyzed four different scenarios for levels of greenhouse gas emissions, and found that lower emissions scenarios carry considerably less risk; detailed impact results focused on the current pathway, commonly referred to as “business as usual.”
[Click HERE to explore the full report, including interactive maps that show likely impacts by U.S. region.]
Examples of likely impacts include:
- Large-scale losses of coastal property and infrastructure (click here to review full results online).
- If we continue on our current path, by 2050 between $66 and $106 billion worth of existing coastal property will likely be below sea level nationwide, growing to $238 to $507 billion by 2100.
- There is a 1-in-20 chance that by the end of this century more than $701 billion worth of existing coastal property will be below sea level, and that average annual losses from hurricanes and other coastal storms along the Eastern Seaboard and Gulf of Mexico will grow by more than $42 billion due just to sea-level rise alone. Potential changes in hurricane activity could raise this amount to $108 billion.
- Property losses from sea-level rise will disproportionately affect the Southeast and Atlantic coasts, where rise is expected to be higher and the losses far greater than other coastal areas.
- Extreme heat across the nation—especially in the Southwest, Southeast, and Upper Midwest—that threatens labor productivity, human health, and energy systems (click here to review full results online).
- By the middle of this century, the average American will likely experience 27 to 50 days each year with temperatures reaching more than 95°F—up to more than three times the average number of 95°F days we’ve seen over the past 30 years. By the end of this century, this number will likely reach 45 to 100 additional days reaching 95°F each year on average.
- As with sea-level rise, these national averages mask regional extremes, especially in the Southwest, Southeast, and upper Midwest, which will likely see several months of successive 95°F days each year.
- Labor productivity of outdoor workers, such as those working in construction, utility maintenance, landscaping, and agriculture, could be reduced by as much as 3 percent, particularly in the Southeast.
- Over the longer-term, during portions of the year, extreme heat could surpass the threshold at which the human body can no longer maintain a normal core temperature without air conditioning. During these periods, anyone whose job requires them to work outdoors, as well as anyone lacking access to air conditioning, will face severe health risks and potential death.
- Demand for electricity for air conditioning will surge in those parts of the country facing the most extreme temperature increases, straining regional generation and transmission capacity and driving up costs for consumers.
- Shifting agricultural patterns and crop yields, with likely gains for Northern farmers offset by losses in the Midwest and South (click here to review full results online).
- Absent agricultural adaptation, if we continue on our current path, national commodity crop production (corn, soy, wheat and cotton) could decline by 14 percent by mid-century and up to 42 percent by late century as extreme heat spreads across the middle of the country.
- At the same time, warmer temperatures and carbon fertilization may improve agricultural productivity and crop yields in the upper Great Plains and other northern states.
- Food systems are resilient at a national and global level, and agricultural producers have proven themselves extremely able to adapt to changing climate conditions. These shifts, however, still carry risks for the individual farming communities most vulnerable to projected climatic changes.
The Risky Business Project found that early action to reduce greenhouse gas pollution can substantially reduce future risks. Impacts that are likely to occur between now and 2030 are largely the result of past emissions, and thus less avoidable.
“The United States faces an array of risks from climate change that are as diverse as we are as a country,” said Kate Gordon, Executive Director of the Risky Business Project. “By looking at how climate affects specific regions and sectors, rather than at national averages that mask local conditions, our research found that the degree to which any single business may be harmed by a changing climate will depend largely on where that business is located. But we still live in a single integrated national economy—so just because it’s not hot where you are, doesn’t mean you won’t feel the heat of climate change.”
“This is just a first step,” Gordon continued. “We urgently need to expand our understanding of the risks our nation faces so we can begin to take the steps necessary to reduce them.”
About the Risky Business Project
Launched in October, 2013, the Risky Business Project (www.riskybusiness.org) focuses on quantifying and publicizing the economic risks from the impacts of a changing climate.
Risky Business Project co-chairs Michael R. Bloomberg, Henry Paulson, and Tom Steyer tasked the Rhodium Group, an economic research firm that specializes in analyzing disruptive global trends, with an independent assessment of the economic risks posed by a changing climate in the U.S. Rhodium convened a research team co-led by climate scientist Dr. Robert Kopp of Rutgers University and economist Dr. Solomon Hsiang of the University of California, Berkeley. Rhodium also partnered with Risk Management Solutions (RMS), the world’s largest catastrophe-modeling company for insurance, reinsurance, and investment-management companies around the world. The team’s complete assessment, along with technical appendices, is available at Rhodium’s website, climaterisk.rhg.com.
The Risky Business Project is a joint partnership ofBloomberg Philanthropies, thePaulson Institute, and TomKat Charitable Trust. All three organizations provided substantive staff input to the Risky Business Project over the past 18 months, and supported the underlying independent research being released today. Additional support for this research was provided by the Skoll Global Threats Fund and the Rockefeller Family Fund. Staff support for the Risky Business Project is provided by Next Generation, an independent 501c3 organization.