Climate Change: The Next Economic Crisis Since the Great Recession
Scientist have been warning us about the threats of global warming for decades. With an abundance of information out there, fully understanding climate change and its potential impacts can be overwhelming. This video from National Geographic https://www.youtube.com/watch?v=EtW2rrLHs08 featuring Bill Nye, the Science Guy explains, in layman’s terms, the causes of climate change, how it affects our plant and why it is important for us all to be part of the solution by acting now to lessen its effects. There is no shortage of evidence out there that lays out the impacts of global warming from the disappearing coral reefs, increased sea level rise, the frequency of intense weather temperatures and storms as well as fires in Australia. As of more recently, we are starting to see evidence of the impact climate change will have on our economy.
According to “Climate Change’s Giant Impact on the Economy: 4 Key Issues” in The New York Times, climate change will obviously cause impacts far beyond anything we have seen during the modern age and we are at the beginning stages of realizing the possible effects it could have on our economy. They recognize there is a ripple effect of climate change but they do acknowledge it will be a major challenge of the 21st century economy we will have to address and the sooner, the better off we will be. Researchers are looking at the incremental changes, by a tenth of a degree, of global warming and are projecting how great of an impact it can have on our economy. In the article they outline several possible ways in which we could see global warming impact our economy. They go on to explain how agriculture, roads/infrastructure and energy will be impacted and in turn, how they will impact the economy. They acknowledge that certain events could have far greater impact on our economy, for instance, food shortages.
High temperatures and or droughts can cause long term damage to agriculture. It has the potential to damage farmland and crops causing a decrease in production resulting in food shortage. This is worse than what we may have experienced in other economic recessions where we have seen manufacturing and factories slow down but eventually, when the economy comes back, they restart and ramp up production. With faming/agriculture, it is a more permanent loss of production.
Increasing sea level rise and extreme weather events would cause severe damage to bridges and roads which would be costly to rebuild. Heat stress could cause pavement on roads to soften and deteriate because they are were not made to tolerate such high levels of heat. Bridges connected to highways that go over a body of water are at risk of being exposed to possible flooding caused by severe weather and sea level rise. The impact of severe weather would also require power grids to be rebuilt to sustain the stress of extreme conditions such as heat, cold or water.
Climate change can also affect the activity of other sectors of our economy. For instance, in the report “Key Economic Sectors and Services”. IPPC ARS Climate Change 2014: Impacts, Adaptations and Vulnerability they outline how the supply and demand of sectors such as energy, tourism, health care and insurance can also be impacted due to changes in temperature (up and down), sea level rise and extreme weather events like hurricanes and wildfires.
For example, when there is an increase in temperature, people will need more energy to cool their homes or business causing an increase in energy demand. The same would occur if we see extremely low temperatures causing the need for more heating.
Tourism resorts, and their guests, depend on particular weather at certain times but with climate change, weather can range anywhere from unexpected to extreme causing guests who usual plan their travel in advance and resorts who rely on their business, at a disadvantage. Climate change would affect the place, time, and nature of these activities.
As we are all experiencing right now with the pandemic COVID-19, climate change can also have an effect on the amount and severity of diseases and in turn, put a stress on the demand and supply of our health care system.
With intense weather comes disasters. These disasters will affect property values and insurance.
As insurance increases, premiums will also rise making insurance unaffordable for many.
The ability of health care facilities to properly care for the affected during disasters and for those with ongoing health issues requiring medication or treatment may be compromised by very large events that affect multiple health care facilities.
According to a study highlighted in the article “Climate Crisis Could Cause Economic Recession ‘like We’ve Never Seen Before’, Study Warns” in The Independent, they discuss how climate change puts a major burden on several sectors of our economy and financial markets are not necessarily prepared. For example oil refining on the Gulf Coast are exposed to the damages of storms and rising sea levels. In addition oil refineries that are located in northern California are at risk of coastal flooding which demonstrates how energy operations and companies are carrying the majority of the risk. As we saw in norther California when Pacific Gas and Electric had to shut its operations down due to the fires and weather conditions that could have ignited more fires. The study points out that these disruptions have the potential to disrupt the entire economic system locally and even in a more global way.
According to the article “Climate Change Could Blow Up the Economy. Banks Aren’t Ready” in The New York Times, the deadly brush fires in Australia, disappearing coral reefs, rising sea level and devastating storm have been identified as causes of climate change. In addition it is also being blamed for our next financial crisis according to the ECB, an umbrella organization for the world’s central banks. They recently issued an extensive report which was published by the Bank for International Settlements in Switzerland. You can review the entire report here https://www.bis.org/publ/othp31.pdf. The report identifies climate change as a key theme the banks will need to address for the coming future. In the report, Governor Francois Villeroy de Galhau stated “climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us”.
According to the article “Climate Change Could Blow Up the Economy. Banks Aren’t Ready” in The New York Times, the Banks for International Settlements in Switzerland reported that climate change could be the cause of the next major financial crisis. The main message of the article is that the financial industry is starting to understand that they too will be impacted by global warming. The governor of the Banque de Frances said “climate change poses unprecedent challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us”.
In closing, there is a lot of scientific evidence that points to the warming of our planet. We have seen the impacts of climate change on our planet firsthand more frequently and we are now starting to see the economic impacts as well. According to Morgan Stanley, the disasters caused by climate change have cost us $415 billion over the past three years from mostly hurricanes and wildfires. For example, Texas had an estimated loss of $125 billion from the damage caused by Hurricane Harvey in 2017 while five years prior, Hurricane Sandy caused roughly $71 billion dollars in damages. These are just a few indications that our economy and financial systems are at risk.
WORKS CITED
Arent, Douglas, et al. “Key Economic Sectors and Services”. IPPC ARS Climate Change 2014: Impacts, Adaptations and Vulnerability, www.ipcc.ch/site/assets/uploads/2018/02/WGIIAR5-Chap10_FINAL.pdf. Accessed 11 February. 2020.
Ewing, Jack. “Climate Change Could Blow Up the Economy. Banks Aren’t Ready”, The New York Times, 23 January 2020, www.nytimes.com/2020/01/23/business/climate-change-central-banks.html.
Irwin, Neil. “Climate Change’s Giant Impact on the Economy: 4 Key Issues.” The New York Times, January 17, 2019, www.nytimes.com/2019/01/17/upshot/how-to-think-about-the-costs-of- climatechange.html. Accessed 11 February. 2020.
Cockburn, Harry. “Climate Crisis Could Cause Economic Recession ‘like We’ve Never Seen Before’, Study Warns.” The Independent, Independent Digital News and Media, 18 Feb. 2020, www.independent.co.uk/environment/climate-change-crisis-economic-recession-weather-sea-level-a9341826.html. Accessed 20 February 2020.
