Putting a price on climate change

Last month the Economist has published an article about our indifference in economic terms. It’s called “the cost of doing nothing”, and as the newspaper explains, it’s going to cost a lot. The study sponsored by Michael Bloomberg, a former New York mayor, and several other gazillionaires—including three former Treasury secretaries—has come up with new forecasts of the economic damage that climate change might do. Their study is notable for its wealth of detail and for concentrating on things you can see. This way, when it hurts our pockets, perhaps we can relate better to the dangers of Climate change.

This study that focus on the United States can be implemented globally, however it’s still a hard American pill to swallow. It looks at three areas where the weather makes the biggest difference: coastal property, farming and the effect of heat on work. It points out that, if the oceans go on rising at current rates, the sea level at New York city will rise by 27-49cm by 2050 and by 64-128cm in 2100. In Norfolk, Virginia—home to America’s largest naval base—the rise could be 134cm. Increases like that would put property now worth $66 billion-106 billion below sea level by 2050. The study also reckons that property damage from storm surges and other bad weather in coastal regions could reach $238 billion-507 billion in 2100. Between a fifth and two-fifths of that would come in the south-east. Coastal cities such as Miami are especially at risk from rising sea levels.

Inland, the big problem is the effect of heat and drought on farming. Drought in North Dakota in 2006, for example, wiped out 10% of the value of the state’s wheat crop. Such damage is likely to get worse. On current trends, by 2050 America’s most productive cereal-growing region, the Midwest, will have between nine and 28 days a year in which average daytime temperatures will be 35°C (95°F) or above; for the past 40 years, it has had, on average, just two such days each year. In even-more-sweltering Texas, Oklahoma and Kansas, the number of hot, hot days could rise from 39 to 67-99 a year by 2050. The heat could cut yields in the Midwest by a fifth, the study reckons—though that assumes farmers do not adapt by planting heat-tolerant crops, which of course they would. The problem is that, at the moment, new crop varieties cannot withstand such high heat without big yield reductions.

Steamy temperatures make people wilt, as well as crops. Previous studies have shown that, when the thermometer hits 37.8°C, the supply of labour in farming, construction and other outdoor jobs falls by an hour a day, compared with mild days at 24-27°C. The new study is more cautious: it reckons labour productivity among outdoor workers could fall 3% if there were 27-50 extra days of daytime temperatures over 35°C. That is still a lot. Moreover, high temperatures do not affect only outdoor workers. Another study found that a week’s worth of outside temperatures over 32°C cuts production in car plants by 8%.

So there you have it. It’s going to cost us not doing anything. And while this cost is well understood in economic terms, it is lacking understanding in human terms. What affect for example a rise in food prices have on the developed world, where people spend half or more of their daily salary on food? In one word – devastating!