Deep down, a lot of climate change denial has always been about money. That’s why Upton Sinclair’s observation—“It's difficult to get a man to understand something if his salary depends upon his not understanding it”—has by some accounts become the signature quote of the climate debate. Somehow, science and morality seem beside the point for the doubters and do-nothings.
Yet the Obama administration is now making the case that climate inaction is "fiscally foolish," as Shaun Donovan, the president’s budget director, put it on Friday. Treasury Secretary Jack Lew added yesterday that, “as an economic matter, the cost of inaction or delay is far greater than the cost of action.” President Obama himself only touched on the economics of climate change in his speech earlier today at the United Nations, but it's clear that the economic argument is now central to his administration's efforts to reduce carbon pollution.
So let’s talk about money. The Intergovernmental Panel on Climate Change estimates that a global average temperature increase of four degrees Celsius would shave 1 to 5 percent off of gross world product by the end of the century. That might seem pretty small, but the global economic output in 2100 will likely be around $280 trillion. Cutting 5 percent of that would be the equivalent of telling Brazil to take the year off.
If those numbers are too abstract and global for you, let’s get more granular: your salary and taxes. If we don’t combat climate change, food will become more expensive, and wildfires will incinerate an ever-growing proportion of state and federal dollars. Extreme weather and drought will demand more emergency relief funds. Last year an insurance-industry association warned that climate change is already influencing risk calculations, while Standard and Poor’s says it will soon affect the creditworthiness of many countries, increasing the cost of borrowing and driving up taxes. And that would be just a taste of what’s to come.
It’s nearly impossible to put precise dollar figures on the future costs of global warming. Even if we have a pretty good idea of what unabated climate change will bring, we know very little about what our economy will look like in 100 years. Still, there are a few areas in which analysts have a pretty good idea. On that note, I’ve compiled a small sampling of line items from the climate change budget for the year 2100:
Cheap food enabled the American century. Between 1945 and 2000, farm-gate prices (the price at which farmers sell their products) dropped 80 percent. That was unfortunate for small farmers but good for the U.S. economy. Lower grocery bills freed up money for people to buy other things, such as houses, cars, medicine, and computers. Inexpensive food also made household budgets more resilient. If only a small portion of your income goes to buying groceries, a doubling or tripling of that expense still remains tolerable.
No matter what happens to carbon emissions, the steady downward trend in food expenses will continue in the near term. For a few decades, an increase in the agricultural productivity in colder regions might partially offset crop losses in warmer climes. A small bump in carbon dioxide would act as a fertilizer, and heat-resistant crops and other adaptations could help, as well.
The long-term picture, however, is far gloomier. Every major economic model conducted by independent scholars suggests massive food price increases by the end of the century in a business-as-usual carbon pollution scenario. Farmers will charge as much as 35 percent more for their crops. If consumer prices follow changes in farm-gate prices, national food expenditures will increase by $490 billion. On a household basis, that would mean an additional $2,260 annually spent on food. Tough to swallow.
Most studies suggest that warming ocean waters will fuel larger hurricanes, and many scientists also anticipate more frequent tropical storms. Every year, we build more homes on the coastline. Put those factors together, and you get a steady rise in the economic costs of hurricanes. Over the past century, the damages have risen 2 percent faster than gross domestic product.
A 2008 study estimated the average annual costs of hurricane damage to be $5 billion. If costs continue to rise at 2 percent a year—which is basically a best-case scenario—the United States will lose more than $27 billion to storm damage in 2100, without considering inflation.
A more realistic scenario is that hurricane costs grow faster. Without acting on climate change, we will reach tipping points—events such as the melting of large ice sheets that will accelerate the warming process. If we assume an annual increase of 2.5 percent in hurricane damages rather than the current rate, the hurricane budget in 2100 would approach $42 billion, more than eight times the current sum.
Artist Nickolay Lamm altered photographs of major U.S. cities last spring in order to depict how these urban areas would appear after a 12-foot rise in sea level: the steps of the Jefferson Memorial just peeking out of the water, Liberty Island completely submerged beneath its famous statue, and the infield of San Francisco’s AT&T Park underwater. The images are arresting, but the financials are pretty scary, too.
According to a paper by the Union of Concerned Scientists, sea-level rise under a business-as-usual scenario would threaten property valued at $4.7 trillion. Boston would be hit with $13 billion in flood damages by 2100. Florida would face $60 billion in losses. California would have to spend between $6 billion and $30 billion annually on constructing seawalls and raising homes.
By the way, picking up a house runs about $50 per square foot, which means lifting the average house would cost a cool $100K. Not what you’d call fiscally conservative.
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Even if we allow the skeptics to continue indulging their niggling doubts about climate science, fiscal conservatism requires action. As Yale economist William Nordhaus wrote in his book Climate Casino, “[W]e need insurance against bad outcomes, not to cover good outcomes.” It’s about time someone seized the financial high ground from climate change deniers, while there's still some left.
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