The Jet Star roller coaster of Seaside Heights, New Jersey, after Superstorm Sandy in 2012. (Photo: Mark Wilson/Getty Images)
America's next big financial crisis is already in the works, a new report warns, and once again it threatens Americans where they live. This time, though, houses can wind up literally underwater.
The report, titled "Risky Business," aims to quantify how climate change affects the U.S. economy on a regional scale. From rising seas along the East Coast to withering crops in the Great Plains, it doesn't just put the science of climate change in layman's terms — it puts it in businessman's terms.
That's because the report was led by three giants of the U.S. financial world: former New York Mayor Michael Bloomberg, former hedge-fund manager Tom Steyer and former U.S. Treasury Secretary Henry Paulson. The trio, collectively worth $35 billion, knows something about managing risk.
"Our research focuses on climate impacts from today out to the year 2100, which may seem far off to many investors and policymakers," the report's introduction explains. "But climate impacts are unusual in that future risks are directly tied to present decisions. Carbon dioxide and other greenhouse gases can stay in the atmosphere for hundreds or even thousands of years."
The U.S. is too big and diverse to examine as a single unit, so the report divides its findings by region. It's getting hotter almost everywhere, but the effects will vary widely — as will the local capacity to handle them. "Talking about climate change in terms of U.S. averages is like saying, 'My head is in the refrigerator and my feet are in the oven, so overall I'm average," Steyer says.
Here are the report's "clearest and most economically significant" risks posed by climate change:
1. Encroaching oceans
Sea-level rise endangers coasts worldwide, but especially in low-lying, crowded places prone to hurricanes. Much of the U.S. Atlantic and Gulf coastline fits that profile, and the Northeast is also a "hotspot" for quickly rising seas. And if climate change favors Category 4 and 5 hurricanes as expected, storm surges can then push those taller oceans farther and more violently ashore.
Superstorm Sandy pushed seawater over this coastal New Jersey neighborhood in 2012. (Photo: U.S. Coast Guard)
"[B]etween $66 billion and $106 billion worth of existing coastal property will likely be below sea level nationwide" by 2050 if the current pace of climate change continues, the report warns. By 2100, ocean water will likely have enveloped up to $507 billion worth of existing U.S. coastal property, although there's a 1-in-20 chance it could cover more than $701 billion worth of property by then — with another $730 billion at risk during high tide. The average annual losses caused by Atlantic hurricanes could reach $108 billion by the end of this century, the report estimates.
2. Dying crops
Extra carbon dioxide is initially good for plants, and that plus warmer weather could actually boost harvests in some northern parts of the country. Such gains would likely be temporary, though, and still vulnerable to other effects of climate change, like droughts or severe weather. And they would also be matched by painful economic disruption in the country's traditional farming heartland.
Droughts are one of several ways climate change can devastate farmers. (Photo: Ian Waldie/Getty Images)
Recent droughts in Texas and California hint at what a warmer future holds for agriculture in much of the country. By 2100, some states in the Southeast, lower Great Plains and Midwest face up to a 70 percent loss in average annual crop yields, the report warns, absent a major adaptation plan. The Midwest alone contains more than 520,000 farms valued at $135.6 billion per year, and accounts for nearly two-thirds of the country's corn and soybean production. The region's more southerly states, namely Missouri and Illinois, likely face a 15 percent average yield loss in the next 5 to 25 years, according to the report, and up to a 73 percent average yield loss over the next 85 years.
3. Air conditioning
A/C units will need to work harder as the U.S. gets hotter, and that will increase electricity demand. And as long as most U.S. electricity comes from fuels whose emissions promote climate change, that will perpetuate a cruelly ironic cycle. This will happen all over the country, with nationwide electricity consumption expected to rise by 0.8 to 2.2 percent just in the next 5 to 25 years. But the largest spikes in electricity demand will occur in the Great Plains, the report warns.
As more heat drives up electricity demand, more electricity production drives up the heat. (Photo: Justin Sullivan/Getty Images)
"By mid-century, climate-driven changes in air conditioning will likely result in a 3.4% to 9.2% increase in electricity demand in Texas, and a 3.1% to 8.4% increase for the Great Plains region as a whole," it says. And since most of this increase will occur at times of day when electricity use is already high, meeting higher peak demand likely means building more power plants. Regardless of how those plants are fueled, that new infrastructure will raise residential and commercial energy prices. By 2050, the report predicts a yearly increase of $8.5 billion to $30 billion in U.S. energy prices.
4. Lost productivity
And who can blame our children and grandchildren for cranking up the A/C? The U.S. is going to be a much hotter place, even in just a few decades. The average American will likely see 27 to 50 days per year over 95 degrees Fahrenheit by 2050, according to the report, which is two to three times the average number of such days the country has seen annually for the past 30 years. And as with sea-level rise, the national averages mask regional extremes, the report adds. People in the Southwest, Southeast and upper Midwest should prepare for several months of 95°F weather per year.
A dog cools off on a New York City sidewalk during a heatwave in July 2013. (Photo: Stan Honda/AFP/Getty Images)
And aside from all its indirect effects, like rising seas and wilder storms, this heat will also simply wear Americans out. Labor productivity could drop by 3 percent among outdoor workers, the report warns, such as those working in construction, utility maintenance, landscaping and agriculture. That may not sound like much, but for comparison, U.S. labor productivity declined by roughly 1.5 percent during the notorious "productivity slowdown" of the 1970s.
The heat won't just slow down the labor force, though. It will keep all kinds of people indoors, thanks to a supercharged mix of heat and humidity, measured by the Humid Heat Stroke Index (HHSI). Human sweat can no longer evaporate if the HHSI hits 95°F, allowing our core body temperatures to rise until we collapse from heat stroke. The U.S. has never seen an HHSI that high before, but it will eventually be a fact of life for many Americans. The average Midwesterner can expect two days per year above 95°F HHSI by 2100, the report predicts, and 20 such days by the middle of next century — "during which it will be functionally impossible to be outdoors." And in the Southeast, an extra 130 days of extreme heat per year will likely kill 11,000 to 36,000 more people per year, according to the report.
"The risks are much more perverse and cruel than we saw with the financial crisis, because they accumulate over time," Paulson said Tuesday at a presentation of the report in New York. When it comes to climate change, he added, "a business-as-usual approach is actually radical risk-taking."
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