Business and government start preparing for climate impacts

Today’s Senate hearing [2] isn’t just about the science of climate change. It’s also about the actions that need to be taken now to adapt to the reality of a changing climate. Businesses and governments each have a critical role to play in building resilient communities and economies.

Business-as-usual is already being interrupted by extreme heat [3], historic drought, record-setting wildfires, and flooding. Events from water shortages to floods are disrupting the supply chains for such companies as Honda, Toyota [4], Kraft, Nestle and MillerCoors [5]. By the end of 2011, the United States had recorded more billion-dollar disasters than it did during all of the 1980s, totaling about $55 billion in losses.

Actions taken today to make our nation more resilient to extreme weather will pay substantial near-term dividends and produce even greater long-term benefits. Failure to begin adapting now will mean the future costs of climate change in terms of damaged infrastructure, lost productivity, and loss of life will be even greater.

Fortunately, some business and government leaders are starting to address today’s impacts and anticipate the effects of tomorrow’s climatic changes.  The federal government, more than a dozen states [6] and many more localities are planning for building greater climate resilience into their programs and communities. For example:

• New York City Mayor Michael Bloomberg’s “PlaNYC” [7] is preparing to invest more than $1 billion on “climate resilience,” including constructing a network of tidal wetlands and an irregular, park-like coastline that would take some of the force out of storm-driven waves. The city estimates that $2.3 trillion [8] of private property is at risk to more potent storms.
• Earlier this year, insurance commissioners [9] in California, New York and Washington state announced new rules requiring companies to disclose how they intend to manage the risks to their business and customers from increasingly severe storms, wildfires, rising sea levels, and other consequences of climate change. Disclosure will be mandatory for companies writing policies worth more than $300 million nationwide.
• Massachusetts Water Authority [10] planners anticipated the impacts of sea level rise as far back as the 1980s. Concerned about disruptions to its wastewater treatment plant in Boston Harbor, MWA decided to elevate the entire plant by 1.9 feet to accommodate projected sea level changes through 2050.
• All federal agencies [11] are required under a 2009 executive order to assess the vulnerabilities of their programs and develop a plan for enhancing the resiliency of those most at risk to a changing climate.

Faced with immediate and material impacts from a changing climate, businesses are already developing a number of responses. Following our 2008 study on business approaches [12] to assessing physical climate risks, C2ES is again undertaking an in-depth examination of strategies companies are developing to understand risks and opportunities from a changing climate. Among the cases we’re examining are:

• New Orleans-based utility Entergy [13], which suffered $2 billion in losses from Hurricanes Katrina and Rita, has begun relocating important business operations to areas less vulnerable to severe weather. Entergy also worked with consulting firm McKinsey & Company and global reinsurer Swiss Re to develop the first comprehensive analysis of climate risks [14] and adaptation economics along the Gulf Coast.
• According to U.S. utility American Water [15], climate variability “introduces an additional level of uncertainty about our future water resources.” Investment projects include the construction of a $164 million water treatment plant in Kentucky to help ensure adequate water supply to a region challenged by drought and increased demand.
• Global mining company Rio Tinto [16]’s Energy & Climate Strategy group, recognizing the need for regionally-specific information on climate impacts, spent $600,000 to help develop high-resolution climate modeling information and detailed site assessments to gauge risks to key assets.

Adaptation planning can limit the damage caused by climate change and reduce the long-term costs of climate-related impacts that are expected to grow in number and intensity in the decades to come. Building greater resilience into our economy to minimize losses from extreme weather requires concerted efforts from government, industry and community leaders.

These examples are a good start, but as today’s hearing is likely to show, much more needs to be done.

Meg Crawford is Markets & Business Strategy Fellow at C2ES