By Meagan Clark - A new U.S. report highlights the impact of climate change on virtually every sector of the economy, about a month before a draft regulation from the Environmental Protection Agency is expected to propose requiring lower greenhouse gas emissions from power plants.
Already, the oil and gas industries, manufacturing, and farming have begun to assess the risks that climate change poses for them. Some sectors of the economy--in particular, energy and insurance--will also see opportunities for growth.
The 800-page National Climate Assessment--compiled by more than 300 scientists and experts and a 60-member federal committee--looked at the current and future impact of climate change in the U.S, broken down by geographical region and across sectors from human health to ocean ecosystems to indigenous peoples.
The authors concluded that an average warming of less than 2 degrees Fahrenheit across the country over the past century is soaking up water sources in dry regions, increasing heavy rains and storms in wet and coastal regions, worsening wildfires and heat waves and attracting heat-loving insects that kill trees.
“The report brings it home to Americans that we are not immune to threats posed by climate change to our infrastructure, water supplies, agriculture, ecosystems and health,” Eileen Claussen, president of the non-profit Center for Climate and Energy Solutions (C2ES), said.
C2ES conducted its own report last year, talking to 100 S&P companies about their plans to adapt to climate change. Of those companies, 90 said their businesses faced risks due to extreme weather patterns.
“Companies are having real costs from climate change,” Claussen said. “They know it. They’re starting to do things to deal with this, but it’s slow and most are still not doing all that needs to be done.”
Agriculture is the most climate-sensitive sector of the economy. Since it’s a shrinking share of the U.S. economy, the economic damage will not be as significant in the U.S. as in the developing world, said Robert Stavins, director of Harvard’s environmental economics program and professor of business and government.
But American farmers will still need to adjust. “If they can adapt by changing crops, they will certainly do that,” Stavins said. “But there are adaptations that are more difficult--like where rain falls short. In the western U.S, if the snow were to decrease and the annual flow of the Colorado River were to decrease, that would have significant impacts on thriving cities like Phoenix.”
In the near-term, farmers may benefit from a longer growing season for crops. But rising heat and water stress in coming decades is likely to hurt food production and push up prices, the government report found.
The manufacturing and energy industries, particularly fossil fuel companies, will feel the brunt of economic damage from climate change through higher energy prices and a potential shift in demand from coal to natural gas, wind, solar and other power sources. Extreme weather events and water shortages are already interrupting energy supply. Those challenges are likely to increase, according to the report.
“Companies like Exxon want to be able to adapt to the political climate that results from climate change,” Wallach said Phillip Wallach, fellow at the Brookings Institution. ”They’ve been doing a lot of planning, in the event that the political system puts a price on carbon, so that they’ll be able to adapt.”
Fossil fuel companies are diversifying, Stavins said, while manufacturing companies like General Electric are trying to improve energy efficiency to keep their bills as low as possible.
With the risks to existing business, climate change is introducing potential for growth as well.
Drought- and salinity-resistant crops, technologies that enhance water-use efficiency, weather-related insurance products, enhanced land management techniques, storm-resistant building materials and renewable energy sources are likely to boom.
Over the past five years, wind power generation has increased more than 30 percent in the U.S, according to the American Wind Energy Association, and solar power accounted for nearly 30 percent of electricity generation capacity added last year, the largest year on record, according to the Solar Energy Industries Association.
Renewable energy like wind and solar are currently propped up with federal subsidies. Green technology will ultimately have to stand on its own and be competitive with fossil fuels--and it will, says Tim Young, CEO of California-based hydrogen power producer Hypersolar.
“It’s just a fact that the sun and water are pretty abundant, and if we can combine the two to create energy, we’ve solved all our energy issues,” he said. Four years into research and development, Hypersolar’s technology doesn’t use any fossil fuels to produce power. “The benefits are pretty obvious.”