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Today, we’re making the same mistakes when it comes to climate change that we made in the lead-up to the financial crisis. We’re building up excesses (debt in 2008; heat-trapping greenhouse-gas emissions now). Our government policies are flawed (providing incentives for borrowing too much to finance homes then; providing incentives for the use of fossil fuels now).
The greenhouse-gas crisis, however, won’t suddenly manifest itself with a burst, like that of a financial bubble. Climate change is more subtle and cruel. It’s cumulative. And our current actions don’t just exacerbate the situation—they compound it. Indeed, our failure to make decisions today to avert climate disaster tomorrow is even more serious than our failure to avert the credit crisis in 2008. The carbon dioxide and other greenhouse gases that we emit into the atmosphere today will remain there for centuries, and government will not be able to avert catastrophe at the last minute.
We’re already feeling the impact. For example, the higher sea levels off the coast of New York City—sea levels that led to a storm surge that devastated parts of the city during Hurricane Sandy—are the result of public- and private-sector decisions made decades ago.
So what does this mean for businesses and investors trying to plan for the future? It means that even as we’re spending money to adapt to the current state of our climate, we’re also making decisions today that risk locking us into long-term consequences that we’ll certainly have to adapt to, at far greater cost, far into the future.
In an effort to better understand these risks and to measure their cost to specific sectors of the US economy, I recently joined with former New York City mayor Michael Bloomberg and the investor and philanthropist Tom Steyer to cochair the Risky Business Project. Our goal was to take a standard risk-management approach to climate change. We asked independent researchers to model the specific consequences of continuing along our current emissions pathway for three major industries—agriculture, energy, and real estate.1
The results were sobering. The US economy faces multiple and varied risks from unmitigated climate change. These are disproportionately significant in certain regions, and they are not all decades in the future: for example, projected changes in sea level, combined with changes in hurricane activity, will likely increase the cost of coastal storms along the East Coast and Gulf of Mexico by 11 to 27 percent in 15 years, representing an additional $3 billion to $7 billion in average annual damage. This has serious implications for developers, insurers, bond raters and issuers, and local governments in these areas—not to mention current property owners and businesses located along the coastlines.
In the Midwest region, some states, including my home state of Illinois, will likely experience significant losses in crop yields for our major commodity crops of corn, soy, wheat, and cotton. Absent major adaptation efforts on the part of farmers and agribusiness, some states in the Southeast, lower Great Plains, and Midwest risk up to a 50 to 70 percent loss in average annual yields for the same crops by the end of this century.
And for states across the South, hotter conditions will make outdoor work nearly impossible for large portions of the summer. Texas, for instance, experienced an average of 43 days a year with temperatures above 95 degrees Fahrenheit over the past 30 years. This number will likely reach up to 80 days over the next 5 to 25 years, nearly doubling, and rise to more than 100 days a year by mid-century.
We took a conservative approach in the Risky Business Project report, looking only at the most clearly foreseeable effects of climate change. But the data we didn’t consider are even more disturbing. Most scientists believe that the single biggest tipping point on climate change will come with the melting ice sheets in the Arctic and Antarctic.
Fewer than ten years ago, scientists projected that melting Arctic sea ice would result in virtually ice-free Arctic summers by the end of this century. Now, the ice is melting so rapidly that such a result could be a reality in the next decade or two.
More troubling, two new studies reveal that one of the biggest thresholds has already been crossed. The West Antarctic ice sheet has begun to melt, a process that scientists say may take centuries but that could eventually raise sea levels by as much as 14 feet. Now that the melting has begun, we can’t undo the underlying dynamics, which scientists say are “baked in.”
It’s time for the United States to get its house in order through policies to curb and price carbon emissions. We must lead, first, because the stakes are high for our environment and for our economy. Moreover, when our own house is in order, we are in a better position to press China and other developing countries to take difficult but necessary steps to curb this crisis.
Given the stakes for our environment and for our economy, it’s also time for the business community to urge government to enact smart and sustainable policy solutions. After all, politicians listen to the business leaders in their states and districts—in addition to the general public that elects them.
We can’t afford to ignore this crisis. It’s as if we’re watching as we fly slow motion toward a giant mountain. We can see the crash coming, but we’re sitting on our hands instead of altering course.
It’s time to turn the wheel.
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