On June 24th, a panel composed largely of Masters of the Universe told the American business community that it was time to get serious about global warming.
Arraigned along the dais were former Goldman Sachs and U.S. Treasury potentates Robert Rubin and Hank Paulson, billionaire climate activist Tom Steyer, former New York Mayor Mike Bloomberg, former U.S. Housing Secretary and real estate investment magnate Henry Cisneros, Cargill CEO Gregory Page and former U.S. HHS Secretary Donna Shalala, among others.
The occasion: a press conference to announce the release of the first in-depth report on the economic impact of climate change ever to be produced in the United States.
Based on an exhaustive analysis by climate scientists, economists and econometricians convened by the Rhodium Group, the report aptly titled, Risky Business, laid out a series of terrifying scenarios if the economy continues on the path of business-as-usual and urged the business community to get its head out of the sand and lead.
Bob Rubin Lambasts Inaction on Climate
I’ll get to some of those dire predictions in a moment; but first, it was, if anything, more shocking to hear Bob Rubin—the guy who (along with Paulson) helped usher in the casino economy on Wall Street that resulted in the Crash of 2008—say the report is too mild in its conclusions and that government and business are AWOL on dealing with the threat. Perhaps the Crash taught Rubin something about paying attention to risk. He said:
"I have come to believe that climate change is the existential issue of our age. I don’t believe we have a focus or action in relation to it that is remotely commensurate with the risk that we face. I believe that if we don’t address climate change, the effects will not only be severe but...catastrophic. The report vastly understates the effects [my emphasis]."
When Bob Rubin talks like this, you know the paradigm is shifting.
Global Warming Will Cost U.S. Economy Trillions of Dollars by Century's End
Now to some of those “understated effects” Rubin referred to in the report. The greatest economic impacts will come in the form of vast losses to coastal property, a steep decline in worker productivity, devastation to agriculture and productive forests and soaring energy costs.
The public purse will be tapped to the max as well—and taxes will have to rise. Paulson made the point in a New York Times Op Ed that Republican opponents of Big Government have it upside down when they criticize government attempts to put a price on carbon:
"Some members of my political party worry that pricing carbon is a ‘big government’ intervention. In fact, it will reduce the role of government, which, on our present course, increasingly will be called on to help communities and regions affected by climate-related disasters like floods, drought-related crop failures and extreme weather like tornadoes, hurricanes and other violent storms. We’ll all be paying those costs. Not once, but many times over."
Property Values Will Sink Under Rising Waters
Rubin owns an elite golf club (the join fee is $750,000) not far from the rising waters of Peconic Bay on Long Island’s East End. So the report’s prediction that damage to coastal property will be staggering is surely not lost on him.
Risky Business reports damage to coastal property and infrastructure from rising sea levels and increased storm surge will come with an annual price tag of $35 billion on the Eastern seaboard within the next 15 years. By century’s end, there is a “1-in-20 chance—about the same chance as an American developing colon cancer—that…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.”
That’s more than $1.4 trillion, in case you didn’t do the math.
Add in the skyrocketing cost of insurance – assuming it is still available – and even properties that escape actual inundation could find their values sinking fast. It brings a new meaning to “underwater” mortgages.
Higher Temperatures Cause Labor Productivity to Plummet
Freddy Krueger, watch out: the projected temperature maps in the study are the real Nightmare on Elm Street:
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. By the end of this century, this number will likely reach 45 to 96 days over 95°F each year on average.
And, like they say – it ain’t the heat, it’s the humidity.
The Risky Business report combined heat and humidity to show the devastating impacts the rise in temperatures will have when paired with the humidity of the entire eastern half of the country.
The heat/humidity index will make the eastern half, from the northern tip of Maine to the bayous of Louisiana, too dangerous to be outside in for the increasing number of days when the mercury tops 92° F. Working outside—construction crews, police patrols, agricultural workers, road repair crews, etc.—will become life-threatening:
>92°F is extraordinarily dangerous. Heat stroke is likely for fit individuals undertaking less than one hour of moderate activity in the shade…Such humidity/heat indexes have never been experienced historically.
Climate-Driven Changes in Agricultural Production
The heat will also hammer our food system. The study reports that in the main staple crop producing region of the country, the Midwest, the next five to 25 years will see a decline in yields of more than 10 percent, with a 1-in-20 chance of losses of more than 20 percent. Yields could plummet 50 to 70 percent by century’s end.
That’s because, as agriculture in the Midwest – Iowa and Illinois – dries up under the scorching heat, farming will have to shift northwest to the Northern Great Plains—right in the middle of the pipeline’s path. If the KXL leaks into the Oglala aquifer, it will destroy the only irrigation source for agriculture in the region. Our other major farming region, California, will be experiencing prolonged and major droughts. Where is our food going to come from if our addiction to fossil fuels has destroyed the water supply of the only region left capable of growing crops on a mass scale?
Energy Prices Will Soar Along with Demand
Contrary to the baying of climate deniers in Congress that new EPA rules and Obama’s emissions reduction targets will push up electric bills, the report underscores it is business-as-usual that will drive energy prices higher as temperatures soar and vast swaths of the country find they can no longer live without cranking up the AC all day, every day during the summer months.
The report predicts annual residential and commercial energy costs will rise up to $12 billion over the next five to 25 years and up to $30 billion by 2050 due to rising energy demand. Of course, exploding our use of AC is only going to make carbon pollution worse.
Global Warming: Central to Every Business & Investment Plan
In Risky Business, Paulson, Bloomberg and the others sound the clarion call to business to take action itself and press government to step up to the plate:
With this report, we call on the American business community to rise to the challenge and lead the way in helping reduce climate risks. We believe that American businesses should play an active role in helping the public sector determine how best to react to the risks and costs posed by climate change, and how to set the rules that move the country forward in a new, more sustainable direction.
The report itself unfortunately goes into virtually no specifics on how to do that, but at the press conference members of the panel outlined some of their own ideas:
Rubin: Investors should insist that companies disclose climate change. That includes costs they may have to someday absorb. It includes the value of assets that could be stranded and the actual impacts climate change could have.
Bloomberg called GDP “a misguided measure” because “it doesn’t accurately reflect the externalities.” He called for quantifying the risks by using such metrics as the SASB. He also said he was moving his data center to upstate New York from Wall Street because he “wants to sleep at night.”
Paulson decried the short termism of the corporate world and argued that the SEC should require more robust and detailed disclosure of climate risk. He’s also called for a carbon tax.
Donna Shalala, as president of a private college, urged institutional investors to “pay very close attention” to climate risk in investment planning.
Finally, Rubin underscored the need for business to engage consumers and the wider public in pressing for climate action:
"The business community can work to change the public conversation and I think that’s critical if we’re going to get political action and engage with the political sector to move forward on public policy."
Time will tell, but in a society where the oligarchs rule, it comes as a welcome sign that they have finally decided to make global warming their number one priority. Let’s hope the rest of the business community will get the message.