Climate Change Economic Impact

What Has Climate Change Cost Us? What's Being Done?

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Climate change has taken a toll on the economy in the last 11 years. In 2015, the drought cost California $2.7 billion. The polar vortex walloped the United States in 2014, shrinking the economy by 2.1 percent. The most destructive tornado in U.S. history hit Oklahoma City in 2013, costing $2 billion in damages. Hurricane Sandy cost $50 billion in 2012.

Are these really just coincidences? Maybe. But it's looking more and more like these powerful storms are the result of climate change.

For those who doubt, global warming is already melting the ice caps in Antarctica at 1.6 meters per year, compared to 3.8 centimeters annually before 1992. The United Nations said that to reverse the impact, the world's average temperature must be limited to 2 degrees Celsius above preindustrial levels. As of February 2016, average temperature has already surpassed 1.5 degrees above preindustrial levels. (Source: “Earth Flirts with a 1.5-Degree Celsius Global Warming Threshold,” Scientific American, April 20, 2016.)

Many people assume that climate change and global warming just means temperatures will gradually get warmer. Maybe one day melting ice caps will raise sea level enough to flood New York City. 

But climate change also means unpredictable and violent storms, droughts and floods around the world. That's according to John P. Holdren, Director of Woods Hole Research Center, and other experts.

 

Timeline of Natural Disasters — Just a Coincidence?

2016 - Scientists reported record-high temperatures for the fifth year in a row. Some areas also experienced record levels of typhoons, flooding and heat waves. Two-thirds of the Great Barrier Reef bleached out due to high water temperatures.

2015 - California's six-year drought emptied groundwater reservoirs, forcing water restrictions on farmers and families.

It cost $2.7 billion and 21,000 jobs in 2015.

2014 - The polar vortex hit the Midwest, slowing retail sales and economic growth.

2013 - The Oklahoma City tornado was the most destructive in U.S. history, totaling $2 billion in damages.

2012 - Hurricane Sandy left behind $50 billion in economic destruction. Droughts across the Midwest resulted in high food prices.

2011 - The Mississippi River flood was a 500-year event. It left at least $2 billion in damages. Hurricane Irene left $20 billion in damage and $45 billion in total impact on the economy. The worst tornado season in U.S. history occurred, with 305 twisters hitting in one week, wreaking $3 billion in damages. Japan's earthquake and tsunami cost between $300 billion. Iceland's volcano cost $1.2 billion in lost air traffic. 

2010 - Haiti earthquake caused at least $8.5 billion in damages.

2009 - Plenty of natural disasters but no mega-disasters.

2008 - The world was buffeted by floods, hurricanes and cyclones:

  • Guangdong province in southern China experienced the highest rainfall in history. Resultant flooding killed 57 people, displaced 1.5 million and ruined crops on 860,000 hectares of cropland.
  • Heavy rainfall in the Midwest caused flooding, resulting in the destruction of 12 percent of crops. This contributed to higher prices for corn and soybean. 
  • Hurricane Gustav cost $25 billion in damage to Louisiana, Mississippi and lost oil production.
  • Hurricane Ike cost $25 billion in damage alone and boosted gas prices to $5 a gallon.
  • A typhoon in the Philippines capsized a ship carrying 845 passengers and displaced 360,000 inland.
  • Cyclone Nargis in Burma displaced 2.4 million people. Over 134,000 were dead or missing. Large parts of the delta were completely destroyed. (Sources: "Floods Kill at Least 57 in China," VOA, June 16, 2008. "Six Weeks After Cyclone, Burma Devastation Remains Uncertain," VOA, June 11, 2008. "Along the Mississippi, Wary Eyes on Rising Water," IHT, June 18, 2008. "More than 800 Missing after Philippine Ferry Capsized amid Deadly Typhoon," New York Times, June 22, 2008.)

2007 - More droughts and floods pummeled the world.

  • Georgia, Florida and Alabama had their worst dry spell in recorded history. At one point, Atlanta was down to a three-month supply of water.
  • Massive floods hit Mexico and affected one million people, creating "...one of the worst natural disasters in the history of the country, " according to then-President Felipe Calderon.
  • An aggressive monsoon season hit India, Nepal, Bhutan and Bangladesh. They created the worst floods in living memory, according to UNICEF.  Damage was $120 million. Thirty million people were displaced and 2,000 killed. (Source: "Top 10 Natural Disasters 2007," Time Magazine.)

2006 - A relatively normal disaster season.

2005 - Hurricane Katrina left behind $125 billion in damages. GDP fell to 1.3 percent in Q4 2005. 

What's Being Done?

In December 2015, 195 countries signed the Paris Climate Accord. They pledged to cut greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. They also committed $3 billion in aid for poorer countries by 2020. These are most likely to suffer damage from rising sea levels and other consequences of climate change.

The accord's goal is to keep global warming from worsening another 2 degrees Celsius above preindustrial levels. Many experts consider that the tipping point. Beyond that, and the consequences of climate change become unstoppable.

The United States is responsible for 20 percent of the world's carbon emissions. It would be difficult for the other signatories to reach the accord's goal without U.S. participation. (Source: "What You Need to Know About the Paris Climate Accord," The New York Times, June 1, 2017.)

On June 1, 2017, President Trump announced the United States would withdraw from the accord. Trump said he wanted to negotiate a better deal, but leaders from Germany, France and Italy said the accord is non-negotiable. China and India joined the other leaders in stating they remain committed to the accord. Some have argued that America's withdrawal from a leadership position creates a vacuum that China will readily fill.

Business leaders from Tesla, General Electric and Goldman Sachs said this will give foreign competitors an edge in clean energy industries. That's because U.S. companies will lose government support and subsidies in these industries.

The United States cannot legally exit until November 1, 2020. That means it will become an issue in the next presidential election. (Source: "Trump Will Withdraw U.S. From Paris Climate Agreement," New York Times, June 1, 2017.)

In 2009, the UN Climate Summit produced the Copenhagen Accord. President Obama pushed China's President Hu Jintao to pledge to limit global temperature increases to 2 degrees Celsius over the pre-industrial level. The European Union, other developed nations and many developing nations also agreed to the limit. 

In addition, the developed countries agreed to pay $100 billion a year by 2020 to assist poor countries affected the most by climate change. That includes relocating communities hit by floods and droughts and protecting water supplies. The countries agree to provide $30 billion over the next three years.

Obama had hoped developed countries would agree to reduce their emissions to 80 percent lower than 1990 levels by 2050. All other countries, including China, would reduce emissions by 50 percent. China blocked that agreement. 

Some countries refused to sign the agreement because the United States refused to cut more than 4 percent of its emissions by 2020. That foot-dragging signaled to many that Obama was not any more committed than the Bush Administration. (Source: "The Ugly Truth About Obama's Copenhagen Accord," Vanity Fair, December 21, 2009.)

In 2008, the International Energy Administration called for expenditures of over $45 trillion in the next 50 years to prevent global warming from slowing economic growth. To put this into perspective, the economic output of the entire world is only $65 billion a year. 

The measures included building 32 nuclear power plants each year and reducing greenhouse gases by 50 percent by 2050. This would cost the world $100 billion to $200 billion a year for the next 10 years after 2008, and rise to $1 trillion to $2 trillion after that. (Source: "Nations Urged to Spend $45 Trillion to Battle Emissions," The New York Times, June 6, 2008.)

In 2007, China announced it would reduce energy consumption by 20 percent by 2010, thereby reducing CO2 emissions. In 1997, the United Nations adopted the Kyoto Agreement. The United States never ratified it. 

United States and China Contribute 44 Percent of the Problem

In reality, a global agreement doesn't have to occur. Only 10 countries account for almost 70 percent of the world's carbon emissions. China and the United States are the worst, at 27 percent and 17 percent, respectively. Russia and India contribute a little more than 5 percent each, then comes Japan (3.6 percent), Germany (2.3 percent), Iran (1.9 percent), South Korea (1.9 percent), Canada (1.7 percent) and Saudi Arabia (1.7 percent).  

If these 10 countries could agree to limit pollution and expand renewable technology, the other countries wouldn't really need be involved. (Source: "A Plan B for Climate Agreements," MIT Technology Review, June 12, 2014.)

But many of these countries are bitterly opposed to each other and often at war over boundaries, religion, and (of all things) oil. So it's easy to understand why little progress has been made since 1988, when the United Nations first tried to broker a solution.

But until there is stronger government leadership, we must create our own progress. Many everyday citizens and entrepreneurs are hard at work on innovative ways to address climate change.  Republican Newt Gingrich, former Speaker of the House, argued for the importance of supporting entrepreneurial environmental solutions in his 2007 book A Contract with the Earth. Pressure on the market forces that got the atmosphere into trouble is the best solution to clean it up.