As reported in Jones Day's Fall 2013 Climate Report, Risky Business, an initiative cochaired by hedge fund billionaire Tom Steyer, former U.S. Secretary of the Treasury Hank Paulson, and former New York City Mayor Michael Bloomberg, was launched to assess the economic risk to the United States associated with climate change.
In addition to the three well-known cochairs, the Risky Business
initiative includes influential business leaders, investors, and
elected officials. These include former U.S. Secretary of Housing
and Urban Development and former Mayor of San Antonio Henry
Cisneros, Executive Chairman of Cargill, Inc. Gregory Page, former
U.S. Secretary of the Treasury Robert E. Rubin, former Director of
the Office of Management and Budget George P. Shultz, President of
the University of Miami and former U.S. Secretary of Health and
Human Services Donna E. Shalala, former U.S. Senator Olympia Snowe,
and Dean Emeritus of the Bloomberg School of Public Health Dr.
Alfred Sommer.
Released in June 2014, The Economic Risks of Climate Change in the United
States divides the continental United States into six
regions and assesses the climate change risk factors for each,
along with those for Alaska and Hawaii. The Risky Business team
hopes to avoid the current political squabbles associated with
potential climate-change-driven actions by framing the debate in
terms of risk, insurance, and opportunity. The report considers
both "likely risks" and also "tail risks,"
defined in the report as risks less likely to occur but with
particularly severe consequences should they come to pass.
"This focus on 'tail risks' is not unique to climate
change. After all, households and businesses pay a premium for
insurance to protect themselves against those tail risks, such as
the possibility of flood or fire, that they deem
unacceptable." Id. at 11.
Northeast. In the Northeast region, the report
highlights the risks of rising sea levels and accompanying storm
surges. The analysis identifies a likely risk of climate-driven
rise in sea level of .9 to 1.6 feet near New York City by the
middle of this century and increases of 2.1 to 4.2 feet by
2100.
The findings also predict a 2.4 to 4.5 foot rise in the sea level
near Atlantic City by the end of this century, with Boston
experiencing a two-foot to four-foot rise over the same time
period.
The report also suggests that likely average annual property
damage caused by climate-change-driven hurricane activity in the
region will increase over current levels by $6 billion to $17
billion.
Southeast. In the Southeast region, the report
focuses on risks associated with increased heat and humidity,
stating it is likely that heat-related mortality will increase by
15 to 21 additional deaths per 100,000 people per year by the end
of the century.
The report also cites climate-change-driven heat increases as a
factor in decreased labor productivity, particularly in the
region's construction, mining, utilities, transportation,
agriculture, and manufacturing sectors.
Midwest. For the Midwest, the Risky Business
report identifies the impact of climate change on the region's
agriculture industry, largely due to significant increases in
extreme heat.
While the report gives credit to the proven ability of farmers to
innovate and adapt to challenges via creative farming methods and
new technology, it predicts that increases in heat and humidity
will make it increasingly difficult or impossible to work outside
during summer days. "[B]y the middle of the next century, [the
average Midwesterner] can expect to experience 20 full days in a
typical year of [Humid Heat Stroke Index] over 95ºF, during
which it will be functionally impossible to be outdoors."
Id. at 31.
Great Plains. In the Great Plains region, the
report highlights the impact of climate change on energy demands.
The report concludes that by 2050, energy increases due to air
conditioning demands will likely increase by 3.4 to 9.2 percent in
Texas alone. "Meeting higher peak demand will likely require
the construction of up to 95 GW of additional power generation
capacity over the next 5 to 25 years, the rough equivalent of 200
average-size coal or natural gas power plants." Id.
at 35.
Northwest. The report states there is a lower
risk of severe climate change impact in the Northwest than in the
other regions but still notes a 1-in-100 chance of an elevation in
sea level near Seattle of up to five feet by 2100, potentially
accompanied by a significant increase in the number of extremely
hot days.
Southwest. Finally, in the Southwest, the report
identifies significant risk due to increased heat and a rise in sea
levels. "Eighty-seven percent of all Californians live in
coastal counties, and 80 percent of the state's GDP is derived
from those counties." Id. at 38. In discussing the
already hot areas in the Southwest region, such as the Arizona
deserts, the report expects "one to two additional months of
days of 95ºF each year within the lifetime of babies being
born right now in this region." Id.
Advocating Change. The report concludes by
advocating changes by businesses, investors, and the public sector
to reduce the identified risks. The report hopes rational business
actors will adapt to the risks posed by climate change in the same
way they adapt to other risks. Simultaneously, the report presses
investors to consider the effects of climate change in their
investment strategies, which in turn will put additional pressure
on businesses to adapt.
About the same time Risky Business released its report, cochairman
Hank Paulson published an op-ed in The New York Times advocating for a
carbon tax to address climate change in the United
States. Similar to the Risky Business report, Mr. Paulson
suggests that a combination of government policies and private
sector action is the best way to address climate change risk.
"A tax on carbon emissions will unleash a wave of innovation
to develop technologies, lower the costs of clean energy and create
jobs as we and other nations develop new energy products and
infrastructure," he wrote.
Mr. Paulson further suggests that a carbon tax is essential in
demonstrating to developing countries, particularly China, that the
United States is serious about addressing climate change, thereby
encouraging the developing countries to do the same. However, it does not necessarily follow that a
self-imposed carbon tax in the United States will encourage action
in China any more than American standards of human rights and
intellectual property have influenced change in China.
Pressure to account for risks associated with climate change is increasing at many levels. While Congress does not appear likely to take any significant steps, several federal agencies, including the Environmental Protection Agency, are addressing the issue. As previously reported in The Climate Report, investor groups and the SEC are ramping up pressure for corporations to disclose climate risks. The prominent members of the Risky Business initiative are similarly leveraging their influence over government, the investment community, and businesses to encourage corporate risk managers and decision-makers to factor climate change risk into their decisions.
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