Greenhouse and Greenbacks: Considering the Economic Costs of Climate Change

The midterm elections proved that global warming isn’t the top worry of most Americans. Most of us are thinking about Iraq, health care, and the economy.

But global warming is an economic issue, not just an environmental one, and it could affect the American economy for many generations, including this one.

Considering economic consequences

The British government recently released a report that underscores how important it is for (industrialized) nations to come together to change the global warming trend. If this doesn’t happen soon, the report says, there could be "major disruptions to economic and social activity, later in this century and in the next, on a scale similar to those associated with great wars and the economic depression of the first half of the 20th century."

And emphasis should be put on "soon." Although it may seem as if these changes will take years to materialize, waiting to act will only intensify the effects of climate change, make the problem increasingly difficult, or even impossible, to deal with later.

The economics

The British report, authored by Sir Nicholas Stern, the head of Britain’s Government Economic Service, explains that widespread climate change would put a great burden on the global economy.

The report calls climate change "the greatest and widest-ranging market failure ever seen," since gas, electricity, and other energy prices don’t reflect their true costs (such as health and environmental costs). In other words, the price of oil doesn’t include the costs of cleaning up oil spills or the long-term effects of emissions although these effects are a part of the true cost.

Stern says that if we do nothing, the consequences could cost as much as nine trillion dollars a year. (The GDP of the U.S. last year was twelve and a half trillion dollars.)

What would cost all of that money? Higher property insurance premiums in places like Florida with lots of coastline, disease outbreaks, water shortages leading to lower crop yields, disaster cleanup, and crashes in the tourist industry for places like Australia, where the Great Barrier Reef is suffering the effects of warming.

The Science

Many of us already know the basics behind global warming. As more carbon dioxide (CO2) and greenhouse gasses are released into the atmosphere, more infrared radiation is trapped, causing rising temperatures.

Since the first studies were conducted in the late 1950s, the atmosphere's CO2 levels have been rising, from about 300 parts per million to 381 parts per million.

But what does this mean? The consequence is drastic environmental (and consequently, economic) changes such as melting glaciers. For example, the Himalayan glaciers are responsible for 40 percent of the world's drinking water and their disappearance could cause a water shortage for billions of people. (Even here in the United States, in Alaska's Glacier National Park, some glaciers have completely disappeared already.)

Further, global warming has caused an overall rise in temperature that not only produces dangerously hot record-highs in summer, but also warmer oceans. In his film, "An Inconvenient Truth," Al Gore explains how warmer oceans cause more violent storms: as water temperatures go up, wind velocity intensifies, and so does storm moisture condensation. Gore argues that, according to an MIT study, hurricanes and typhoons have increased in duration and intensity by about 50 percent since the 1970s. Gore attributes the power of Hurricane Katrina to this phenomenon, which he says is caused by global warming. Stern says "a 5-10% increase in hurricane wind speed, linked to rising sea temps, is predicted to approximately to double damage costs in the USA."

As Hurricane Katrina made clear, environmental damage has serious economic consequences. The devastating effects of warming are many, including flooding, drought, wildfires, and animal and plant extinction, even the rise of infectious diseases. Since vectors such as mosquitoes, ticks, algae, and other germ-carrying life forms increase and spread with warming temperatures, they are more likely to come into contact with people and cause disease.

The politics

As the Democratic Party’s presidential nominee in 2000, Al Gore is a political figure whose attention to this issue adds to its polarization. But more and more, people who used to doubt global warming are beginning to see it as a credible threat. Even President Bush, who questioned the validity of Gore’s claims in the 2000 presidential campaign, has conceded. He even spoke to the value of alternative energy in his 2006 State of the Union address.

Even so, the United States is on a different page than England, which is prepared to cut carbon emissions by 60 percent in the next 40 years.

Global warming is the world’s problem; it’s not just an issue for one or a few nations. However, just a handful of countries significantly contribute to the problem, with the United States being responsible for more greenhouse gas pollution than South America, the Middle East, Africa, Australia, Japan and Asia combined.

U.S. vehicles have lower fuel-efficiency standards than Japan, Europe, Australia, Canada, and even China, which is accused of too few environmental controls to balance its quickly-growing economy.

So why is the U.S. so far behind on fuel-efficiency standards? Congress has been hesitant to raise the standards; American auto manufacturers claim they’d lose money and jobs and auto safety would be compromised. For more on this, click here.

But now that we’ve voted in a new Congress, new legislation concerning emissions and alternative energy is likely. Nancy Pelosi, the new Speaker of the House come January, has promised to roll back oil subsidies in the first 100 legislative hours of the new congress. Democrats have also pledged to make the U.S. energy independent. The switch in political power provides Congress with a unique opportunity to change energy policy.

What do you think?

What do you think legislative changes to energy policy will cost us at the pump? Are you willing to pay more to go energy independent? Are you concerned about the cost to automakers if emissions standards are raised, or are you more concerned about further climate change?

Your input matters

Your representatives DO care what you think. Give your senators a piece of your mind! To find your reps, click here.

To explore our archive of past Jobs Issue updates, click here.

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Article Posted on: 11/19/2006