Climate change is already affecting our economy in these ways
It’s easier to assume that climate change has only been detrimental to developing nations — but they’re not the only ones. Developed nations’ economies have already been impacted.
You’re spending more on air conditioning
The Earth’s temperature has increased 1.4° Fahrenheit since 1880, says NASA’s Earth Observatory, with two-thirds of global warming occurring post 1975. As a result, people are blasting AC and paying higher energy bills.
We might take AC for granted in the U.S. but Richard Carson, an economics professor at the University of California, San Diego, says this makes a huge difference in survival for poorer nations.
“When it gets hotter, Americans basically will just spend more money and crank up their AC,” Carson tells Finance101. “And people in other countries — you can look at some cities in India and the temperatures really spiked there recently and basically several thousand people drop dead from the heat.”
Climate-induced natural disasters are costly
Increasingly damaging wildfires means California pays up. For the recent massive 2018 fires, the Golden State was predicted to take a hit of $400 billion in economic losses, according to AccuWeather in November 2018.
California has always been at risk for fires historically, but 15 of the 20 biggest California fires have happened since 2000. Data from the National Oceanic and Atmospheric Administration has shown that the hottest and driest summers on record have been within the last 20 years.
The farming industry has been reshaped by climate change
Climate change is forcing change on farmlands nationwide, says an article in Seeker. For example, when farmers are growing crops like corn and soybeans, extreme heat waves that can damage those crops, writes Seeker. In winter when farmers are growing wheat, cold snaps can kill the crops.
Carson also says that global warming’s impact on agriculture raises food and goods prices.
“Places, in general, are getting drier and hotter,” says Carson. “That’s having adverse impacts on agriculture, which impacts food prices. Some of it is cotton, so it impacts clothing prices and other things.”
Climate change has hurt monetary policy
The Earth’s changing climate is thought to be the cause of extreme weather disruptions which risk impeding the economy in the future, says Bloomberg. Various published papers have illustrated the current and future effects of climate on banking.
Forecasting the economy has become more difficult, says a Brookings Institute paper. We saw this instance come into play last year when Germany’s Rhine river’s low levels unexpectedly caused transport bottlenecks and slow growth, says Bloomberg.
How will climate change affect the economy in the future?
Long story short, experts don’t know for sure because there are so many factors that could change outcomes. Some papers have provided analysis of potential effects but a New York Times article list what might be central economic questions in upcoming decades. (Hint — they’re all climate-based ones!)
Trade with the rest of the world will become costly
Carson of UC San Diego notes that countries with a lack of resources for dealing with extreme weather will have decreased production. That’ll affect product prices.
“I have a graduate student who’s shown that lower-skilled workers doing repetitive tasks, tend to lose their jobs in Brazil when there’s temperature spikes,” says Carson. “That’s because it’s a physiological reaction — their productivity goes down…It’s something that people don’t usually think about, but when you think about how people’s bodies respond to heat, you just naturally slow down.”
The U.S. GDP could be reduced
Our economy is rocking it right now with a gross domestic product (GDP) of $80.738 trillion (as of 2017), according to the World Bank. That might not last for long if climate change has its way, says the Federal Reserve Bank of Richmond’s 2018 report. It warns that “rising temperatures could reduce overall growth of U.S. economic output by as much as one-third by 2100.”
Farming will become harder and grocery prices will rise
The agriculture industry is expected to be further disrupted by climate change, says the Fourth National Climate Assessment, published late 2018. Some ways it’s expected to change the industry: Increasing temperatures are predicted to cause “heat stress” for livestock, which in turn results in economic losses for producers. It’ll also change the availability and prices of agricultural products — something that directly affects consumers!
Carson from UC San Diego says that the wine industry has the potential to be extremely affected. Grapes for winemaking need to be grown at a certain temperature, so they are especially sensitive to changes in climate. Interestingly, global warming helped some countries that couldn’t produce wine able to do so. This includes Denmark, Southern England and even Tasmania.
Global warming weakens economies, therefore makes countries more susceptible to terrorism
So much so, that climate change has concerned some U.S. national security experts.
“I’m not making the case that climate is the direct cause, but it certainly is a significant indirect cause of the kind of strife we deal with, including cross-border migration and terrorism,” Missoula Current reported retired Vice Admiral Dennis McGinn telling the House Committee on Foreign Affairs in April 2019.
McGinn went on to explain that climate change has the potential to escalate armed conflict and spread regional conflict. This is already happening in other countries — jihadist terrorist organization Boko Haram has taken advantage of climate change-caused droughts in Africa to wreak havoc.
Questions we should be asking about climate change
We know that climate change will cause more changes in the economy but economists are not entirely certain how “because of the vagaries of human behavior and the remaining questions about how quickly the planet will respond to the buildup of greenhouse gases,” writes the New York Times.
However, the same article lists four questions to keep in mind while we explore the issue of climate change’s potential effect on the economy: #1) can we adapt to warmer climates? #2) how would climate change fuel inequality? #3) how should we value the future compared with the past? And #4) how permanent will the costs be?