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Climate Change Is Killing the Economy: Here’s What Can Be Done to Stop It

Daily Ticker

Congress this week is considering a $60 billion bill to pay for damages inflicted by Superstorm Sandy across three Northeastern states in late October. Though some Republican congressional members are balking at the sum, which the White House is requesting, New York, New Jersey and Connecticut say the damage is closer to $82 billion.

In either case, these sums are nothing compared to the long-term price the U.S. will pay as a result of extreme weather caused by climate change says Michael Hanemann, an economics professor specializing in climate change at Arizona State University.

"What we're going to experience is unprecedented in human history in terms of the type of climate we're creating for ourselves," Hanemann tells The Daily Ticker. "The rate of warming has increased maybe five times what it was in the early part of the 20th century. The earth is getting warmer faster."

The first 11 months of this year were the warmest on record for the United States and this summer's drought was the most severe since 1956. The U.S. Climate Extremes Index, which tracks the highest and lowest 10% of extremes in temperature, precipitation, drought and cyclones, reached a record high this year.

Hanemann says the increasing frequency of these unusual weather patterns prove that climate change is real and continuing. At the root of the earth's warming, says Hanemann, is the release of carbon dioxide into the atmosphere. Those emissions are declining somewhat in the U.S. but globally they reached a record high in 2011.

Hanemann says the earth has warmed almost 1 degree Celsius since just before the Industrial Revolution. GDP could permanently drop 2.5% if temperatures increase another 2 degrees Celsius (3.6 degrees Fahrenheit), says Michael Livermore, Executive Director at NYU's Institute for Policy Integrity and research scholar at NYU Law School's Environmental Law Center.
Using today's GDP of roughly $16 trillion that amounts to a permanent $400 billion decline in GDP. Further warming would erase even more growth.

Climate change affects GDP in multiple ways:

  • Heat waves increase energy costs and contribute to droughts, which destroy crops and raise food prices.
  • Floods destroy or damage infrastructure, homes and businesses. Repairs can boost growth but lost earnings of businesses and individuals cannot be recovered. If those businesses never reopen, growth will decline even further.
  • Heat waves, floods and other effects of extreme weather also create health problems. Paying those increased health care costs often slow personal consumption and business investment.

New York, New Jersey and Connecticut have asked the federal government for $82 billion for losses due to Superstorm Sandy. Losses from Hurricane Katrina topped $150 billion and Fitch Ratings recently reported that New Orleans hasn't completely recovered seven years later.

Livermore says there are steps government and individuals can can take now to slow the rate of increased warming and the damage that would follow.

For the government he suggests cap and trade legislation, development of cleaner renewable fuels and infrastructure projects including sea walls in New York City to protect against flooding and other consequences of more extreme weather.

He recommends that individuals insulate homes, drive more fuel-efficient autos and use other fuel-efficient products like compact fluorescent light bulbs and Energy Star refrigerators as well as support politicians who are focused on reducing greenhouse gas emissions.

The costs for all of these moves "is nowhere near the costs we face if we don't act," says Livermore.

Hanemann recommends expanding the electric grid to accommodate increased use of air conditioning and expanded water storage. In the meantime, he says, "We need to prepare for more wildfires, floods and droughts."

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