Climate change and the economy

Now more than ever, the drastic consequences of climate change are becoming increasingly apparent in the United States – wildfires in the west, an excessively damaging hurricane season, and record high temperatures. While the dissipating effects of such events may not be evident immediately, the country’s economic patterns will slowly but surely represent such effects in the long run. To put this into perspective, a recent study suggests that if temperatures were to rise by 4.5º Celsius by 2100 as compared to pre-industrial levels, it could cost the US $520 billion each year. This represents the significantly large amount of time and resources that will have to be expended on recovery and prevention efforts to tackle the consequences of climate change. Let’s take a look at how such impacts are expected to manifest themselves in specific industries and sectors in response to arguably one of the major challenges of the 21st century.

Food
Unsurprisingly, extreme changes in weather patterns that lead to increasing incidents of either droughts or floods will impede agricultural productivity and threaten the survival of livestock. The locational advantages to growing specific crops in certain areas of the country may be disrupted forever affecting numerous rural agricultural communities. While this directly impacts the livelihood of farmers and food producers, such changes will also impact food security and price stability across the country and beyond.

Insurance
Farmers, business owners, and landowners often rely on insurance money to recoup their losses from extreme weather events. However, with such incidents on the rise, insurance companies will have to demand higher premiums to cover their costs and remain in business. Not everyone can afford such high premiums though which will have a detrimental impact on the long-term financial sustainability of a lot of people in need. By impeding productivity and employability, this scenario will prove very costly for the economy.

Infrastructure
Our country’s infrastructure – roads, water systems, electric power lines, etc. – was not built to withstand the rapid changes in the climate and requires a lot of government spending and stimulus to survive the impending consequences. With sea levels and global temperatures on the rise, many cities could become uninhabitable for humans in the long run. Preparing for such a drastic change in living patterns could prove to be an excessive drain on the economy.

Tourism
Rising temperatures are lowering business and increasing costs of tourism in winter destinations; increasing sea levels can prove to be a threat for the viability of beach towns and resorts; and wildfires and its imminent effects on biodiversity may make a lot of tourist destinations less attractive. As discussed in my previous blog post, tourism makes up a large share of the US economy and the livelihoods of millions depend on it directly or indirectly. A blow to the tourism industry could prove to be damaging to the country’s GDP in the long run.

Health
A country’s population is pivotal to its economic productivity and sustainability. Poor quality of the air we breathe, the water we drink, and the food we eat will ultimately negatively impact human health and survival. Extreme weather events put a significant portion of the population under constant risk and an increasing trend in the transmission of infectious diseases has also been partially attributed to climate change. Climate change not only causes physical barriers to earn a livelihood but also may impact the mental health of those directly affected by it.

It is pivotal that governments, businesses, and individuals prioritize preventing or delaying the serious impacts of climate change. Through a traditional regulatory approach or a market-oriented approach such as emission taxes, the government should put mitigating climate change at the forefront of its policies. By adopting sustainable approaches that ultimately also benefit their bottom line, businesses should take more responsibility and play their part in saving the environment. Finally, individuals should educate themselves, make everyday changes in their households and communities, and hold local authorities accountable while taking small but essential steps to protect the ecosystem. The onus is on all of us to come together and tackle this rapidly escalating global challenge and ensure the survival of the planet for future generations.