A focus on short-term costs is blinding the business community to the severity of climate change risks, according to a new report released by The Risky Business Project.
The effort, spearheaded by former New York City mayor Michael Bloomberg, former treasury secretary Hank Paulson, and former investor Thomas Steyer, strongly argues that a “secure, more certain economic future” is critically dependent on a much more aggressive effort to mitigate and adapt to climate change.
The Risky Business Project, led by Bloomberg, Paulson, and Steyer, along with a “risk committee” of eminent persons (including another two former treasury secretaries, George P. Shultz and Robert Rubin) conceived of the project as a way to bring risk management practices to bear on producing a coldly calculated butcher’s bill of the massive economic costs of a business-as-usual process to battling climate change.
The report identifies the “clearest and most economically significant risks”:
- rising sea levels and storm surge damaging coastal property and infrastructure (hundreds of billions of dollar in coastal real estate will literally be underwater);
- changes in agricultural production (some Midwestern and Southern growing areas may see 10 percent declines in yield);
- changes in energy demand (we will need a massive investment in new energy generation as people rely on technology to adapt to new weather patterns, and current energy infrastructure struggles to respond to increased demand); and
- human health effects of higher temperatures (including as a drag on labor productivity—outdoor workers may see a productivity decline of 3 percent as the number of extreme heat days rise; lethal heat stroke may become endemic to many parts of the country over time).
The report does not break too much new ground on describing specific effects, but the extant information is presenting compellingly. The report makes an impressive stab at granularity, looking at regional and local impacts.
Climate change will not affect the United States uniformly. Those living in southern California, Arizona, Texas, and Florida will see the biggest rise in high-heat days. Rising sea levels are obviously a direct threat to the Eastern Seaboard and Gulf Coast. Agriculture productivity in the Midwest faces challenges that will require resilience and adaptability by farming communities.
Taking into account these risks, what does it want businesses to do? The report’s “Next Steps” section broadly calls for business to follow their risk management approaches, especially with regard to forecasting future financial outlays to deal with climate change’s effects. It also recommends corporations be more transparent about its risks in financial disclosures.
Investors should know, for example, if the corporation whose shares their purchasing will be adversely affected by future legislation or regulation aimed at reducing fossil fuel consumption, or whether demands for goods and services will be affected by extreme weather variability.
That is a good start, but the report falls short in an important respect. It is agnostic with regard to macro-level policy prescriptions. It wants the public sector to get serious about the problem, without defining what that seriousness looks like. Ending fossil fuel subsidies? National cap-and-trade? A carbon tax? (Which co-chair Henry Paulson did call for in a New York Times op-ed.) A defense of the new EPA regulations?
The principals in the Risky Business Project do not want to “dictate the solutions,” but rather clearly lay out the risks and hope that political and business leadership will identify the proper pathways to avoiding the worst-case scenarios. One must wonder what they see in the recent debate over climate change that would support the idea a serious “nonpartisan” discussion is possible.
Many supposedly pro-business conservatives see climate denial as a shibboleth. It certainly enjoys a wider hearing in the legislature than it deserves. While one should not suggest that it is Michael Bloomberg’s personal responsibility to shoehorn America’s CEOs into a consensus about legislation, it is equally true that, if, as they say, time is short, there is consequently no better opportunity to go on the record about specific solutions than this.
During the press conference roll-out for the report, Robert Rubin called climate change the “existential issue of our age” and bemoaned the lack of seriousness of purpose that is the hallmark of the current consensus around our response. Hopefully, future Risky Business reports will be more forthright about how to address failures within our national politics.