President Barak Obama is expected to unveil his administration's new strategy on climate change today. The strategy will target three major challenges: (1) how to reduce carbon emissions in the U.S., mostly from power plants; (2) how to protect the U.S. from damage due to climate change; and (3) how to work with other countries to negotiate a global plan for climate protection.
Many politicians and journalists will frame this issue in a misleading way. It will be positioned as a question of "promoting growth and jobs" versus "protecting the environment." Those who oppose action on climate will ask if we can really "afford" to take action on climate at a time that the economy is still in recovery. This framing is misleading because it implies that taking action to protect the climate will cost more than it saves. Nothing could be more wrong.
Stabilizing the climate by reducing carbon omissions saves the economy much more than it costs. Climate change is already reducing U.S. gross domestic product by 1.6 percent per year, and this will rise to 2 percent by 2030, according to a recent study from the international nonprofit humanitarian group DARA. Two percent of GDP may not seem like a lot, but it's the difference between a robust booming economy and a recession.
The business case for cutting carbon emissions is strong. Interestingly, much of the analysis comes from the insurance industry itself, no hotbed of environmentalist sentiment. Leading insurance companies like Swiss Re have been ringing alarms for several years now. For example, Peter Hoppe, head of Geo Risks Research for insurance giant Munich Re says numerous studies predict "a rise in summer drought periods in North American … and an increasing probability of severe cyclones relatively far north along the U.S. East Coast." These consequences cost billions of dollars in economic damage, lost growth and lost jobs. Frank Nutter, president of the Reinsurance Association of America, echoes the concern.
The damage from climate change doesn't stop at the coastline. The Midwest will experience crop damage and lower yields per acre due to wider temperature swings, droughts and severe storms that flood farms and fields. "Crop insurance losses from last year's drought alone cost every person in America $51" according to Mindy Luber, president of Ceres, which recently compiled a comprehensive tally of the likelihood of climate change-related damages. Declines in crop yield of over 10 percent are anticipated in some areas, due to higher temperatures. Already, vital aquifers that supply water to the Midwest and California's central value are shrinking due to decreased rainfall and increased pumping. The cost of electricity to pump water from hundreds of feet underground cuts into farmers' incomes and raises food costs.
The insurance industry in the United States is not yet a strong advocate for policy change but it will be if the federal government stops reimbursing farmers for crop losses and stops offering disaster relief for businesses in coastal flood zones. These federal insurance programs encourage people to farm and build in unsuitable areas, and they force the public to absorb what are essentially private risks. Both progressive Democrats and tea party Republicans want to scale back farm price support and crop insurance programs, calling on the agricultural industries to pay for their own risks rather than passing the bill to taxpayers.
The cost of ongoing military security adds to the business case for climate action. The Pentagon recently completed another study of the effects of climate change on America's security and military preparedness. The U.S. armed forces long ago accepted the scientific evidence on climate change and they predict large scale population migration and conflict as rising sea levels and dwindling fresh water threaten the Caribbean basin and south Asia. "Although the effects of climate change alone do not cause conflict, they act as accelerants of instability, which influences our operating environment roles and mission," says Katherine Hammack, assistant secretary of the Army for installations, energy and the environment. All that drives up the cost of defense, expanding the cost of government or forcing cuts in other programs.
Some of the savings from climate protection are indirect. One of the biggest would come from the U.S. reducing its energy needs by less than 15 percent, which would end our reliance on Mideast oil. Under that scenario, the U.S. could greatly reduce the nearly $200 billion in military costs we incur each year to keep oil from the Middle East flowing our way. In addition, once we no longer need to prop up Mideast regimes favorable to our energy policies, we will much less subject to terrorist threats emanating from those countries. Then, we can scale back some of our massive spending on homeland security.
Climate protection must be treated as an economic issue, not just an environmental issue. Current U.S. energy policy imposes costs and risks on both the private sector and on government that we can't afford and don't need to spend. A broad-based carbon tax is probably the best way to meet the challenge, sending a clear and simple signal to the market without complex and fine-grained regulation. Some prominent conservatives have recently lent their support to a carbon tax, and a new think tank, the R Street Institute, advances conservative solutions to climate change. But with Congress polarized and unable to negotiate, the president must do what he can with the tools that he has to address an enormous challenge facing our generation.
David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at@davidbrodwin.
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Corrected 6/25/13: An earlier version of this post incorrectly asserted that the Heritage Foundation endorsed a carbon tax.