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Risky Business Report Analyzes Climate Change Economic Risks

Risky Business Report Analyzes Climate Change Economic Risks

27 June 2014

US – 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.

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 US 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 US, 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. 

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.

“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.”

  • Extreme heat across the nation—especially in the Southwest, Southeast, and Upper Midwest—that threatens labor productivity, human health, and energy systems.
  • 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.
  • 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.

Further Reading

You can view the full report by clicking here.

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