Risky Business’ report from Steyer, allies puts climate costs at many billions of dollars annually
“Risky Business: The Economic Risks of Climate Change to the United States” — an analysis more than a year in the making — projects losses across sectors and by region of the country. It aims to provide what it calls the first-ever “comprehensive assessment of the economic risks our nation faces from the changing climate.”
There will be lost productivity, the report says, because of extreme heat. More power plants will need to be built to provide electricity for air conditioners. Sea-level rise, meanwhile, threatens infrastructure, particularly along the Eastern Seaboard and Gulf Coast.
“If we stay on our current climate path, some homes and commercial properties with 30-year mortgages in places in Virginia, North Carolina, New Jersey, Alabama, Florida, and Louisiana and elsewhere could quite literally be underwater before the note is paid off,” the report says.
There is a 1-in-20 chance, it says, “that by the end of this century, more than $701 billion worth of existing coastal property will be below mean sea levels, with more than $730 billion of additional property at risk during high tide.”
Steyer, Paulson and Bloomberg are scheduled to attend the New York event, in addition to several members of the Risky Business advisory committee: Clinton administration Secretary of Housing and Urban Development Henry Cisneros, Treasury Secretary Robert Rubin and Secretary of Health and Human Services Donna Shalala, as well as Alfred Sommer of the Johns Hopkins Bloomberg School of Public Health and Gregory Page, former CEO and current chairman of the board of Cargill Inc.
Short- and long-term impacts
The American economy is already beginning to feel the effects of climate change, the report says, and “these impacts will likely grow materially over the next 5 to 25 years and affect the future performance of today’s business and investment decisions.”
Rising seas, increased damage from storm surge and more frequent bouts of extreme heat will have “specific, measurable impacts on our nation’s current assets and ongoing economic activity,” it says.
The analysis focuses on three major areas where there are risks as a result of “human-induced climate change”: coastal property and infrastructure, agriculture, and energy.
There are likely to be more extreme storms, it says, such as 2012’s Superstorm Sandy.
“Within the next 15 years, higher sea levels combined with storm surge will likely increase the average annual cost of coastal storms along the Eastern Seaboard and the Gulf of Mexico by $2 billion to $3.5 billion,” the report says. Combined with potential changes in hurricane activity, “the likely increase in average annual losses grows to up to $7.3 billion, bringing the total annual price tag for hurricanes and other coastal storms to $35 billion.”
Temperature increases over the next five to 25 years are likely to bring about a demand for more power, an amount equal to the generation of roughly 200 average coal or natural gas-fired power plants, the report says. That will cost residential and commercial ratepayers up to $12 billion per year.
Over the longer term, there will be many more days with uncomfortable and dangerous temperatures, it said. That extreme heat — especially in the Southwest, Southeast and Upper Midwest — threatens “labor productivity, human health, and energy systems,” it says.
“By the middle of this century, the average American will likely see 27 to 50 days over 95°F each year — two to more than three times the average annual number of 95°F days we’ve seen over the past 30 years,” the report says. “By the end of this century, this number will likely reach 45 to 96 days over 95°F each year on average.”
Higher temperatures will bring serious challenges to the farming industry, it says, particularly in certain regions.
Without adaptation, some Midwestern and Southern counties could see yield declines of more than 10 percent over the next five to 25 years if they continue to sow corn, wheat, soy and cotton, the report says. There is a 1-in-20 chance of yield losses of those crops of more than 20 percent, it says. The analysis does not put a dollar value on those potential losses, because it would be impossible to project future prices, said Matt Lewis, director of communications for Risky Business.
Risky Business based its findings on data from the National Climate Assessment and Intergovernmental Panel on Climate Change (IPCC) reports, as well as peer-reviewed literature on extreme weather impacts on crops, labor productivity and energy system performance. It also uses proprietary models on coastal storm surge impact from Risk Management Solutions (RMS), which models catastrophes for the insurance industry and financial institutions.
‘Explicitly avoiding’ policy prescriptions
The Risky Businesses analysis has been eagerly anticipated by some environmental groups, businesses and Democratic activists because of the high-powered team behind the document. In addition, Steyer has been active politically, using his personal wealth to back candidates he believes support his goals on climate and to target others with opposing views.
The “Risky Business” document, however, does not advocate any actions to address climate change. Lewis emphasized that Steyer is just one of 10 people involved, after counting the seven-member Risk Committee.
“We’re not building a list of businesses who are on board for policy. That’s not the objective of ‘Risky Business,'” Lewis said. “We’re explicitly avoiding a discussion of policy in the entire project.”
Members of the group’s Risk Committee don’t agree on the best policy to address warming, he said.
“What they completely agree upon is that climate change poses many risks across many sectors of the American economy, and that we should not in good conscience leave those risks unaddressed,” Lewis said.
The primary goal of the analysis is to help businesses understand those risks, he added. That could help companies make informed decisions.
“You could change the way capital flows work to real estate, if they start to realize there’s properties they’re investing in now that could be uninsurable in 20 years,” Lewis said. There could be different investments in the agricultural field “to deal with the changing growth patterns that we expect,” he said.
Businesses could be involved in shaping government action, Lewis said, but they will have to decide on their own if that’s in their best interest.
“The American business community has a critical role to play both in preparing itself for climate change and in informing the policy response,” Lewis said.
Some foresee pushes for regulations
Critics of the Risky Business project, however, said they were concerned it would be used to advocate for expensive fixes.
The report is likely to “raise alarm bells,” said Chris Neefus, spokesman for Americans for Prosperity, a conservative advocacy group linked to energy barons Charles and David Koch.
“Generally, we find that on the heels of something like this, that folks are looking to raise taxes,” either directly through a carbon tax or by rule changes that raise power prices, Neefus said.
Tom Pyle, president of American Energy Alliance, a nonprofit focused on free-market advocacy and partly funded by energy companies, said that restrictions on carbon emissions would be costly and not extremely effective.
Cutting greenhouse gas pollution to zero by 2100 would result in a temperature drop of 0.17 degree Celsius, he said, adding that he was citing information from reports prepared for the IPCC analysis.
“Squandering the huge amount of resources to do any more than the marketplace is already doing doesn’t make a lot of sense to me,” Pyle said.
Lewis said that one of the key findings of the “Risky Business” report is that increases in temperatures will vary by regions. The average global temperature drop or avoided temperature increase that Pyle is citing is not very useful, Lewis said.
“While it’s easy to sort of point to averages,” Lewis said, “for places like Alaska or like the Southeast that are going to see extreme changes, it doesn’t help.”
Averages mask variability and don’t give the true impact, he said. There is the same problem with averages on sea-level rise and flooding, he said.
“On average, the United States is not going underwater,” Lewis said, “but don’t tell that to the people of Miami.”
One Democratic strategist said he hopes facts in the report will be used for political advocacy with TV ads and other outreach to voters before the election.
“It potentially can be a piece to the puzzle of turning around the basic framework on this issue,” said Mark Longabaugh, a partner at Democratic media consulting firm Devine Mulvey Longabaugh. “It helps the public accept the idea that climate change is going to drastically affect our economy.”
Oil and coal interests have promoted the idea that cutting carbon emissions is costly, he said, while the long-term damage from warming “is far greater.”
“Once that turns, I think people opposing serious climate change legislation are going to be in a really tough spot,” Longabaugh said.
Lewis, asked about whether Steyer plans any activism on climate using the report, referred questions to Steyer’s political advocacy arm, NextGen Climate. A spokeswoman there did not immediately respond to an inquiry.