A recent study lays out a bleak picture for climate change. Learn how the consequences could have a major impact on coastal businesses.
Though some politicians still question the impact – and sometimes the existence – of climate change, many scientists, business leaders, and insurance carriers agree on its destructive potential. That is one of the tenants of a study released on June 17, 2014, conducted by a bipartisan group of prominent former business leaders, politicians, and other public figures.
The study, Risky Business: The Economic Risks of Climate Change in the United States, lays out a bleak future for unchecked growth. No matter the cause, the consequences of climate change could be dire.
One of the parties most worried about it is the business sector. The nonprofit Carbon Disclosure Project has outlined how climate change can affect every aspect of a company, including increased operational costs, disruption in production, inability to do business, reduced demand for goods and services, and increased capital cost.
Here are two major overarching impacts that climate change could have on business in the next 10 years and beyond:
It could put coastal property literally underwater.
About 36% of the U.S. population lives along the East Coast, according to the U.S. Census Bureau. Those residents could see major changes in the next 50 years, according to the Risky Business study.
For the short term (the next 15 years), the study outlines the effects higher sea levels and increased storm surge could have on damage levels of seasonal storms. The study projects the average cost of damage from annual storms in the East Coast and along the Gulf of Mexico could increase by as much as $3.5 billion.
Potential changes in hurricane activity could boost that increase to as high as $7.3 billion – meaning the average cost of hurricanes and other coastal storms would rise to $35 billion annually.
It gets worse: By the middle of the century, 2050, the Risky Business study predicts $32 billion in Florida property will be underwater; and that's just part of the $66 billion to $106 billion in total property succumbing to higher sea levels and storm surge.
What does this mean for business?
For starters, it signifies trouble for the insurance industry. During the past 20 years, 40.4% of total catastrophe losses have come from hurricanes and tropical storms, according to the Insurance Information Institute (III).
An already struggling National Flood Insurance Program can't take on more literal or figurative water. East Coast residents and businesses continue to overdevelop coastlines, which only increases the danger of damage to homes and businesses.
Knocking down natural down natural barriers such as dunes or trees to further development also puts existing homeowners, neighborhoods, and businesses at additional risk. It could make our neighborhoods uninhabitable If you're complaining about heat and humidity this summer, you haven't felt anything yet.
By 2050, Risky Business predicts the average American will experience 27 to 50 days of temperatures exceeding 95 degrees – two-to three times as many days as the average American experiences today. Such increases could cause a huge hit to business and unique new problems for the economic sector.
For one, farmers can't operate in the same way. The study predicts yields in the Midwest and South, without adaptation, could fall 10% during the next 5 to 25 years. In addition, extreme heat and humidity on certain days could prevent workers from safely working outside, dropping labor productivity by about 3%.
To keep up with rising temperatures and demands for air conditioning during the next 25 years, the energy industry will need 95 more gigawatts of new power generation – the equivalent of 200 new coal power plants, at an added cost of $12 billion a year.
What happens next?
The insurance industry, concerned about the future, has been an advocate for combatting or slowing climate change. Carriers have encouraged more responsible use of land, more stringent adherence to building codes, and better overall disaster-mitigation planning to avoid environmental harm.
The industry also offers specialized protection for those consumers who already are making strides in reducing carbon emissions, using sustainable energy, and conserving resources.
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That approach isn't entirely altruistic – the insurance industry's survival depends on lowering risks. But adopting climate change measures for business reasons isn't a bad thing, either. If other businesses follow such a model, it could mean mitigating the threat across the board.